Key Highlights
- The cost of child care is rising faster than inflation and is a significant expense for many American families.
- Federal programs aimed at low-income families are inadequate in addressing the high cost of child care.
- Free or lower-cost child care could significantly improve family budgets and economic stability.
- The impact of high child care costs is exacerbating income inequality, with higher earners more likely to pay for child care than lower-income families.
The Rising Cost of Child Care: A Barrier to Economic Stability
Across the United States, working parents are facing a growing burden as the cost of child care continues to rise at an alarming rate. According to the KPMG Parental Work Disruption Index, 1.34 million workers were affected by inadequate child care options each month in 2024, resulting in up to 1.44 billion lost potential work hours and a significant financial impact on families.
The annual cost of child care for children under six has risen significantly since 2020, with prices increasing by nearly 30%. In August 2025, child care prices were 5% higher than the previous year. This rapid increase in costs is outpacing inflation and making it increasingly difficult for families to afford necessary expenses.
Impact on Families and Economic Stability
The high cost of child care affects not only family budgets but also long-term financial well-being. For instance, households with incomes lower than $75,000 per year are more likely to reduce work hours or leave the workforce entirely to provide child care, while higher-income families can more easily afford paying for child care services.
Julie Kashen, Director of Women’s Economic Justice and a Senior Fellow at The Century Foundation, explains that “the high cost of child care is not just a financial burden but also a barrier to economic stability. It prevents parents from fully participating in the workforce, which impacts their earning potential and long-term financial security.” Studies show that expanding access to affordable child care could increase women’s lifetime earnings by approximately $94,000.
The Inadequacy of Existing Federal Programs
While there are federal programs aimed at assisting low-income families with child care expenses, they fall short in addressing the overall need. The Child Care Development Block Grant (CCDBG) is available to some low-income families but is chronically underfunded and serves only 11% of eligible children.
Ruth Friedman from The Century Foundation points out that “the federal government has attempted to strengthen existing programs, such as the Administration on Children and Families’ rule requiring states to ensure no family pays more than 7% of their income for child care. However, the Trump administration has threatened to roll back this progress.”
Additionally, the Child and Dependent Care Tax Credit (CDCTC) provides limited support and benefits higher-income families disproportionately. Even with recent changes, most families can expect an average credit of only about $1,030, which is far from covering the high cost of child care.
The Case for Free or Lower-Cost Child Care
To address these issues, many experts advocate for free or lower-cost child care. New Mexico recently became the first state to implement a universal free child care program, saving families up to $12,000 annually. Other states have taken steps in this direction as well.
According to Julie Kashen, “free or even subsidized child care could make a significant difference for many American families.
It would not only improve their economic stability but also allow children to benefit from the social and emotional advantages of quality early education.”
The implementation of such policies at the local and state levels is crucial, as it can have far-reaching impacts on family budgets, labor force participation, and overall economic growth. By investing in affordable child care, governments can support working families while fostering a more equitable society.
