Global Economics Change in consumer price indexes since Dec. 1990 CPI for child care and nursery school CPI for all items
180%
90%
0 12/1990
12/2014 DATA: BUREAU OF LABOR STATISTICS
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recession ended, hiring workers at less than half the pace of the overall economy. This has led to a classic supply-demand mismatch, where rising demand and a scarce supply are driving up costs faster than overall inflation and making child care a bigger burden for young parents. The costs of child care and nursery school rose at a 4.3 percent annual pace in June, compared with 0.1 percent for all consumer prices. Married couples who enrolled an infant at a child-care center last year spent from 7 percent to 15 percent of their total income on fulltime care, according to data from Child Care Aware of America, which provides information on finding child care for young parents. Sluggish wage gains have made those child-care bills look even bigger. “It’s taking up more and more of a family’s paycheck, because their paychecks haven’t been growing,” says Anna Carter, president of Childcare Services Association. As more of the 75 million millennials have children, child-care costs are likely to keep rising. This threatens to put a lid on the kind of consumer spending that makes up almost 70 percent of the U.S. economy. It may also limit labor force participation as young parents choose to stay home with their children rather than scraping by to afford day care. There’s evidence this is already happening. In 1999, 23 percent of mothers with kids younger than 18 didn’t work outside the home, according to U.S. Census Bureau figures compiled by the Pew Research Center. That figure rose to 29 percent by 2012. The number of stayat-home fathers almost doubled over the same period, to 2 million in 2012 from about 1.25 million in 1999, the data show. One way to fix the problem is for child-care businesses to expand faster,
but that’s difficult considering how little the industry pays. Median pay for childcare workers was $19,510 a year in 2012, barely half the median for all workers, say the latest data from the Bureau of Labor Statistics. That’s less than what janitors and meat slaughterers made that year. Child-care workers are increasingly expected to be better educated and have more training, making it harder for day-care centers to find enough qualified workers. All this has led to a “broken market,” says Marcy Whitebook, director and founder of the Center for the Study of Child Care Employment at the University of California at Berkeley. “We now have sort of 21st century expectations, and we still have, in some ways, a 20th century system,” where “everybody’s doing everything on a shoestring,” she says. “It’s probably a safer bet to open up a restaurant than a child-care center.” Child-care center managers also point to state subsidies that were axed during the downturn and haven’t returned. In Illinois, where parents spend an average of 16 percent of their income on full-time care, subsidies for child care were among the first cuts made as state legislators wrangled over a budget for the year that started July 1. Some young parents are opting for informal arrangements, sending their children to unlicensed day-care centers that charge less or tapping into the army of retiring baby boomer grandparents. Child care by relatives made up about 27 percent of all care given in 2011, States where the cost of full-time up from 21 percent infant care is now at in 1990, according least 10 percent to Census Bureau of the median family data analyzed by income Chris Herbst, an associate professor at the Arizona State University School of Public Affairs. “There’s nowhere else to go than to our parents,” says Dana Ramsey, chief operating officer of Childcare Network, which operates more than 200 centers in 11 states. Staying at home or relying on relatives isn’t always an option for parents. “We basically had to remake our entire budget around day care,” says Amber Sparks, 37, whose 3-month-old daughter started at a daycare center on Aug. 1 when Sparks returned to her job at a labor union in Washington, D.C. The center charges
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more than $2,100 a month, much more than what she and her husband had expected. Says Sparks: “I don’t think there’s any way we’d be able to afford a home, and pay for day care, and pay for student loans.” —Michelle Jamrisko, with Erin Roman The bottom line Child-care and nursery costs rose 4.3 percent annually in June, putting a strain on young parents’ incomes.
Small Business
A Breakout Year for Cuban Entrepreneurs Startups multiply as the economy opens more to private business “The aim is not to build capitalism … the idea is to preserve socialism”
Yovanni Cantillo started Ya, Cuba’s first fast-food drive-through, last year. Every six weeks since, he travels overseas to haul back suitcases full of soda cups with lids, thick straws for milkshakes, and small plastic cups for ketchup—items Cuba’s state-owned stores don’t carry. Julio Alvarez and Nidialys Acosta opened a garage to restore classic cars, but finding scrap metal, auto body paint, and the gas for welding is so hard that customers often bring their own parts and materials. With no such thing as a bank loan to finance their restaurant, Rafael Muñoz and Sasha Ramos persuaded Muñoz’s mother to trade her house for an abandoned cooking oil factory, and Ramos’s mother and father-in-law to invest. The partners brought blenders, sinks, hand dryers, and light fixtures from Miami and Panama. Artisans copied furniture from Italian design magazines using rebar, fiberglass, and other discarded materials. Cuba’s private sector may seem awkwardly DIY, but it’s the fastest-growing part of an otherwise moribund economy, fueling almost 10 percent of gross domestic product. President Raúl Castro says private business is part of Cuba’s new economic model. He has expanded
LISETTE POOLE/BLOOMBERG. DATA: CHILD CARE AWARE OF AMERICA
Child-Care Costs Outpace Inflation
