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You can say, yeah, obviously. Follow NPR's pop culture happy hour wherever you get your podcasts. This is Planet Money from NPR. From months, Wesley Wade and his wife Giovanni ended their days the same way.
Coming together at the end of the night and just being like, how? How is this so hard? 100% almost every day, and it was mind-boggling. This is Wesley.
We had an Excel spreadsheet because I like using an Excel spreadsheet, but my wife likes using a piece of papers. We had two different things. We're keeping a list of all these things, right? The thing that they're trying to figure out is daycare for the two kids, Helena and Ella.
Both my kids are very fiery. It's a very fiery home that we're in. Ella is the baby. She is a very defiant child which we love over here.
Oh, I love defiant girls. It's very fun. It's very fun. Wesley is a mental health counselor and is getting his PhD.
And his wife is an attorney. They are both pretty good at researching. And they just keep thinking, how do other people do this? Yeah, I don't know how other people figured this out.
I was amazed at how complicated it was. Actually, I think my dissertation researched my little easier, to be honest with you. Like, I'm not even, that's not hyperbole. And this family is not in some small town.
They're not in a daycare desert. They're in Durham, North Carolina. It's a big university town. A lot of jobs.
A lot of people. It's just daycare information is really hard to come by. It is actually like a real flaw of the daycare market because if you don't have perfect information, you cannot make optimal decisions. And just generally, it is very costly just in terms of time to find out where daycares are around you and if they even have a spot for your kid.
So we're Googling. We're on wait lists at multiple places. My wife and I are divvying up our area geographically. We're coming back after dinner to say, what about this plan?
And we're spending all this extra time when we still have to cook dinner, maintain the house, give our kids love, spend time for ourselves. Some daycares do have actual websites and they're inquiring there too. But they kind of know those are all going to be awash. Most of those places are all going to be full, right?
Because those are easily findable. Easily findable. Easily findable. Daycares are not going to have a spot for your kid.
You got to look for the hidden ones. You know, the ones with names that don't even sound like they could be daycares like Jay's jungle and the blooming room. Those kind of hidden daycares. Those are the ones that will also not have a spot for your kid because there are no more spots anywhere.
There were places that we never considered for our first child or that we visited and we said never are we going to do that. Especially when it's your first child, you're like, oh, no, my baby is going to be in the most pristine care, right? And so there was places that we never would have went to when Helena was that age that we said, okay, if they're able, if they're open, if they can work because your options are limited. Even the places they definitely did not want to send their kids to were full.
Everyone had a waitlist six months nine months a whole year. So I actually ended up leaving my full time job just so I could be the flexible parent that can stay home because you guys could not find childcare in time. Yeah, I mean, I will say I was going to leave my full time job anyway, but I definitely left it about a year earlier than I had planned, right? A year earlier?
A year earlier. Yeah, so I think about all the stress. Wesley's plan was just to leave his job for a different job once he finishes PhD. His plan was not to leave the labor force altogether.
Wesley and his wife, they like to work. They want to work. We just we're working people. We enjoy our jobs.
Our jobs have an impact on the people that we serve. So like I want to be doing that work. So that's the hard part. Now usually in a heterosexial parenting situation, the person who ends up leaving the labor force to care for the kids is the woman, right?
But it was not going to go down like that in his home. Oh my God, you know it. Come on. Come on now.
Okay, think about what happened here. We're talking about a person who has the money, who wants to pay for a service, but can't all over the country. There are tons of people willing to pay for daycare and not getting it. They're being put on wait lists and wait lists are a classic sign that something isn't right in traditional economics.
Wait lists mean prices are too low. Hello and welcome to Planet Money. I'm Sarah Gonzalez and I'm Jeff Lowe. What the heck is going on with the daycare market?
Daycare is so scarce for parents. The pay for daycare workers is low and daycare owners can fairly stay open today on the show. No one's happy. The math isn't working out for anyone.
They are all trapped in this very weird, very broken market. If you ever shop around for daycare, at one point you will probably think I should really open up a daycare. They are charging parents so much money per kid. The median price in the US is $17,000 a year for an infant in a large county.
The Treasury Department says 60% of families can't even afford daycare. So daycare must be making bank, right? Well, they are not making bank. The at-home daycare is the big early childhood education centers.
This is not like a big money-making industry. Take any spot like this one in Iowa. So we call ourselves Bluffs Little Thinkers. Bluffs?
What's the deal with? Who's Sergeant Bluff? Sergeant Bluff is our town, like the suburb. Yeah.
Sergeant Bluff, Iowa, near Sioux City. So we call it Bluffs Little Thinkers. Yeah, but a lot of people just call it BLT for short. Kelsey Anderson is the director of BLT, Bluffs Little Thinkers.
They have babies from six weeks old to five years old. The six weeks old is the youngest that they can come for sure. No, no, no, no, no. And infant classes, like this one for the baby babies, this is where things are the most broken in the daycare market.
Be on ramp, getting those chubby little baby feet in the door. Child care for infants is the most expensive for parents and for daycare. Okay, let's talk about your books. What are your what are your what are your profits look like and your costs?
Yes. So I do have a printout here of the books where I could look so like anywhere between 40 to 55,000 for a deposit, like for the month. Oh, deposits are what parents pay you? Yes.
Yep. And then can you give me like a ballpark? Like how much money do you pay in payroll or in labor? Our payrolls monthly would definitely be over 30,000.
In a month where they're bringing in like 40,000, $33,000 is going to payroll. Our salaries are 83% of our budget per month. That is absolutely insane. All the other bills at Bluffs, Little Finkers are kind of peanuts in comparison.
Five percent goes to their loan payment. Four percent is operating expenses, cleaning supplies, snow removal, play kitchens, things like that. Three percent is utilities. Another three percent goes to groceries.
They do lunch for kids, milk snacks, and two percent is for their insurance and their building insurance and workers comp. And again, 83% goes to labor. And that's 100%. Kelsey says they spend almost everything they bring in.
Always. Always. And a lot of times we won't have anything left over. And this is pretty representative of the country.
And for thinking, well, at least daycare workers are getting paid well, right? Because most of the money is going to salaries? Well, they are not paid well. Kelsey pays $12 to $15 an hour.
And then what do you think of that? That pay? I mean, is that enough to really get by in Sergeant Bluff? It's not a livable wage.
It's absolutely not a livable wage in any way, shape or form. In Sergeant Bluff, Iowa, or in Durham, North Carolina, Los Angeles, California, you can make more money being a parking attendant, being a dog walker, working in retail. Yep. So Starbucks, Target, any fast food, Chick-fil-A, Best Buy Marshals, I mean, just anything that we have in our...
They all pay more? Oh, absolutely. Substantially more. Yep.
Like I saw a Chick-fil-A sign the other day that said starting at 1675. And some of those jobs come with benefits. But Kelsey says she can't pay as much as those stores, because she has more people to pay than they do. For Kelsey's 72 kids, she needs 25 people on staff.
This is one of the things that makes the daycare market so tricky. Daycareers have to hire way more people than other low wage industries, like fast food. Fast food? Labor is 25% of the total costs.
Estimates for daycare? It's like more than 70% of total costs. You need one teacher for every four infants, at least. That's what the federal government recommends, based on what child care experts recommend.
The safety of kids and the quality of care, get a little more dicey if you have more than four infants to one teacher. So you just need a lot of grown-ups to take care of babies and even toddlers. Except recently, some states, like Michigan and Iowa, have said, you know, maybe we don't need that many grown-ups. Yeah.
Yeah. And maybe they don't even need to be grown-ups at all. Iowa has decided that 16-year-olds can now be left alone to take care of 15 five-year-olds, like for after-school care. And Kelsey does have some 16-year-olds on staff.
They come in. They're full of energy. They're sitting down on the floor. They're playing legos.
They're singing songs. And that is great. But we wouldn't leave 16-year-olds alone. In fact, we don't really leave anyone alone.
I will also decide that classes can now have more toddlers for everyone teacher too. You know, so more parents can get a spot. But Kelsey says you won't be doing that either. Sure.
Could we maybe take some more kids? Yeah. But are our staff going to have even more on their plate in a low-paying job? Yes.
Kelsey says she just cannot make it harder to be a teacher because retention is already a problem in daycare. There's a lot of turnover. Nationally, it's really hard to fill vacancies. Something that keeps me up at night is watching a good quality employee that I have walk out the door for no other reason besides the fact that they strictly can not live on what we're paying them.
And I can't fault them for when they leave because of that reason. Okay. Normally, when you're having a hard time keeping workers, you just increase their pay and pass the cost onto the consumer, right? You'd increase tuition for parents.
Problem solved. But you can't do that easily in this market. It says Jessica Brown. She's an economics professor at the University of South Carolina's Business School.
And she's a mom. She just had a baby. Yeah. It's a baby's three weeks old.
Wait. He's three weeks old? Mm-hmm. I feel like I should not be talking to you.
You're like a child care economist. Yeah. You of all people should be like, no, we're drawing a line. I'm not good about that.
I understand completely. This is your second? Of course. Four.
I have to keep up with the latest in the child care market. You know, if I keep having kids, I keep in touch with the market. Jessica decided to steady the child care market when she was getting her PhD in economics at Princeton while looking for child care and not finding any. She was just like, what is going on with the supply?
If we had, you know, perfect markets, then the market should have done, and the supply should come up. But it's not. Theoretically, the supply problem should kind of solve itself. Take care of us.
We could just charge more to take care of each kid, and then more take care of what would open up. But that's not happening. And so there's something else going on, which is part of why I find it interesting. Here's what Jessica found out.
We'll start with why it's so hard to raise wages to attract workers. You know how take care of us have to have a certain number of teachers in each classroom? These are like, was, they have to hire a lot of people. There's no way around it.
So if they raise wages just a little bit for all those employees, consumers would really feel it. A lot more than in other industries. So if you raise wages from say $10 to $12 an hour in the fast food industry, if a hamburger was originally $2, then maybe it would go up to $2.10. Oh, so like nothing?
Yeah, it'd be very small. Whereas with childcare, if you raise the wages from $10 an hour to $12 an hour, if you were originally paying $2,000 a month for care, that would raise prices by probably about $250 a month. And like so what? Whether you do pay an extra $200 a month for care.
I mean, like obviously it's expensive, but like why don't take care centers to say like, yeah, we have to pay teachers more to keep them and to attract more teachers. So it's going to increase the cost of tuition. Well, if you raise prices by so much, you know, that's going to mean that some parents are going to not going to be able to afford care anymore. In cold, hard, econ land, you would say, oh well, some people won't be able to afford childcare.
Sorry, we'll have to quit their jobs and become a stay-at-home parent. Tough. Yeah, if daycare is reacting like giant corporations in any other industry, they would just ditch the lower income customers who couldn't afford daycare. But daycare's can't actually raise prices by too, too much, because it would drive away like a big chunk of their market.
Yeah, if the price of daycare goes past a certain point, some families will say, well, no, I'm not going to quit my job. So I'll just have to find a cheaper option, like my neighbor, who might just plot my kid in front of a TV all day. And other families will say, yeah, at these prices, I think I'm going to just hire a nanny instead of paying for daycare. You know, someone who will come to my house so convenient.
And this threat, this threat of outside options, the threat of nannies keeps a ceiling on what daycare's in charge. Nanny, man. Mary Poppins, who knows what's in that bag? And remember those wait lists, everyone is put on those lines that signal to us that something in this market isn't working.
Jessica says, it's because of these large staffs and the fact that daycares can't really raise prices. If prices were higher, there would be no wait lists. And we're like, no, I'm not going to wait in line for this thing. That's way too expensive.
But here is the interesting part. Because daycares can't raise prices, the wait list has kind of become unnecessary for them, because daycares cannot afford to have any vacancies. If a parent gets a job out of town and they pull their kids from the center, the child care facility is filled with the spots basically right away because they don't have the profit margin in order to be able to absorb that loss of revenue from that open spot. So they just need someone like always there.
Like, OK, pull from the wait list. Now we have no vacancies again. Exactly. Profit margins for daycares are typically less than 1%.
So without wait lists, they wouldn't be able to save business. And there's another weird feature of the daycare market. If you look at how much daycares charge, they usually don't charge that much more for the youngest kids, for the baby babies, as they do for the toddlers, which doesn't really make any sense, right? Because infants require so much more attention and teachers get a beat up, change their diapers.
So like, let's say you're paying $1,700 a month for a toddler and you're paying $2,000 a month for an infant. Jessica says, you are getting a deal on that baby. If we had what we would call perfect competition, you would expect that care for the infants would actually cost something more like $3,600 a month. But it only cost $2,000.
That doesn't make any sense, right? Daycares undercharging parents. But there's a reason why they do this. The infants are what we would call loss leaders.
They kind of get you in the door and then you stick around. The babies are loss leaders? Yeah. No.
The loss leader model is like when you get an introductory price for your cell phone or your cable. They don't make money off of you on the introductory price, but they do later. Because in childcare, even though you were probably underpaying for infant care, you were also probably overpaying as your kid gets older. Child care centers are making the most profit off of those oldest kids.
And so they're essentially using the older kids to cross subsidize the younger kids so they can afford to have both. So yeah, daycares are just kind of boxed in on what they can do. So is the daycare market just doomed? The con is to say there are some fixes that we can borrow from how we pay for college.
We're talking loans for babies depressing. That is after the break. I'm sticking around. All right.
So we tend to see childcare as this private problem, right? If parents can't afford it, that's their problem. But if parents, usually the women, have to leave their job because they can't find or afford daycare, that is not good for the economy as a whole. We want everybody who wants to work to be able to work.
And women have to take years off of work. They lose out on future earnings and society loses out on their contributions. And is that just about the women, workers and society is also about the kids, right? Jessica Brown, the childcare economy, says all of society benefits when really young kids get quality care.
Quality care early on affects you throughout your life. So higher quality care leads to people who have higher earnings later on. We also see that they have less health problems, which I think is really fascinating, that the higher quality care when you're in preschool can affect your health outcomes later on. Society gets all these benefits.
What economy is called positive externalities. And while there is a little bit of government assistance for childcare, for the most part, society, people without children and people who don't use childcare, they don't pay for the benefits they get. This is a real market failure. So society is basically getting something for free if the kids are in higher quality care.
And actually, technically, we do end up paying when we don't provide good child care. Just on the back end, when the kids grow up, they're making less money, they're paying less taxes, they need more government assistance, more health care. So society pays at some point. Yes.
Yeah, unfortunately, right. The key here is quality care, right? This is what leads to all of the benefits to society. But you can't always choose the highest quality care for your kid.
You choose the highest quality care that you can afford. And this brings us to another big market failure in the childcare industry. When parents have kids, they are often young. They're early in their careers.
You know, this is the time when they have the lowest income coming in. You're basically at your poorest when you have to pay for child care. And yet you're kind of stuck paying what you can afford right now when you're the poorest. And so it might be that it would have been worthwhile to spend more on child care than you could actually afford at the time.
I mean, like loans for childcare? Like loans for college but for childcare? Yes. But there isn't an actual market for daycare loans.
No, that's why the market failure is that you wouldn't be able to get a loan even if it were beneficial. The Treasury Department put out this big child care report where they mentioned the possibility of loans. Loans for childcare. That is like kind of the most American thing, right?
Other wealthy countries, they're like, we're just going to subsidize the heck out of child care. Make it really cheap and affordable for everybody. They have very, very good public facilities with great ratios and guaranteed slots and… For infants? So… …pre-pre-pre-pre-spool.
So the infant care problem is one that's more unique to the United States because we don't have as long maternity and paternity leave. Oh my goodness. So like other countries are like, no, when they're infants. They stay home.
They stay home and take care of them. Oh gosh. Cool. Cool, cool.
Oof. We get his youngest daughter into daycare. It's a huge sigh of relief. It's like, oh, we got her in somewhere.
But he does still see signs that things are not okay in this market. Like, there are obvious staffing shortages. When we get there to drop it off, if we get there like a little bit later, they'll say, oh, we're full. Hold on.
Let's call the front desk to see if Ella can go back into the infant room for now and tell someone else comes and we do something. That's why I'm always also trying to drop her off earlier. So I don't have to like, shop her around to the other rooms and stuff too. Yep.
But I try not to judge it that much because the people there are nice. And I know they're not getting paid as much as they should. So… Yeah. In the US, you just kind of have to make your piece with the daycare you can get.
Today's show was produced by Sam Yellow Horse Kessler. I'm a peasily-helped book. The show was mastered by Gilly Moon. Keith Romer edited this episode and Just Chang is our acting executive producer.
Special thanks also to Rashid Malik and Hayley Gibbs at the Center for American Progress for helping us understand this very weird market. I'm Chef Guo. And I'm Sarah Gonzalez. This is NPR.
Thanks for listening.