An interesting article in the Atlantic examines the rising cost of day care and provides a state-by-state comparison of the relative affordability of day care. Surprisingly, even the Atlantic author has to point the finger of such rising costs at government regulation. A snippet:
So who’s to blame for higher child-care costs? The government, I suspect.
Child care is a carefully regulated industry. States lay down rules about how many children each employee is allowed to watch over, the square footage centers need per child, and other minute details. And the stricter the regs, the higher the costs. If a center is required by law to have 25 square feet of space for every kid in a program, it can’t ever downsize its building when rents rise. If it has to hire a care giver for every two children, it can’t really achieve any economies of scale on labor to save money when other expenses go up.
The article also includes an infographic showing where states stack up in terms of average daycare costs as a percent of median household income for married couples. North Carolina sticks out as the most expensive in the Southeast, joining more expensive states like California, New York and Massachusetts.
The Atlantic article, however, looks only at the supply side of the equation to explain the expensive nature of day care. A few years ago I highlighted information from a state legislative task force examining day care in North Carolina. The information from the committee meeting shed light on the demand side of the day care equation as well. More than $1 billion of government money (state and federal) is being pumped into the state’s day care industry. The funding came in various forms, including day care subsidies and government-funded programs like Smart Start and More at Four (now NC Pre-K).
So thanks to heavy government intervention both restricting supply and inflating demand, basic economics tells us that prices will rise. Many North Carolinians brag about our state’s heavy “investments” in early childhood education programs – but the results are clear: day care is less affordable in NC than any other SE state.
Did you ever notice that whenever government gets involved to make things more “affordable,” that they inevitably become far more expensive (think: housing, college, day care, health care)?