Child Care Expenses Push an Estimated 134,000 Families Into Poverty Each Year

by Kyle Ross & Kennedy Andara

October 31, 2024 – High-quality child care gives parents the flexibility to pursue work or additional education, but its costs are straining families. Since 1990, child care expenses have more than tripled, outpacing wages, groceries, and even housing. Child care is one of the most expensive items in family budgets. The median amount parents pay has reached $800 per month, increasing to $1,100 for those who require 20 hours or more of child care each week. These costs are typically around 50 percent to 70 percent of families’ total housing payments, often making them the top expense for households.

High child-care costs can have disastrous effects, particularly for lower-income families already struggling to make ends meet. Analysis from the Center for American Progress finds that the cost of care has significant impacts on the financial security of families, pushing many into lower income brackets or even into poverty. This can force families to turn to a safety net that is not equipped to withstand the consequences of the child-care crisis. While ensuring access to such assistance is essential, policies such as the Child Care for Working Families Act (CCWFA) that would expand access to affordable, high-quality child care have the potential to protect families from falling into poverty and strengthen the middle class.

Key findings on the child care affordability crisis

1. Among impoverished families who have children under age 6 and who pay for child care, 35 percent were pushed into poverty by these expenses, totaling about 134,000 families per year.
2. Each year, an average of around 446,000 middle-class families are pushed into a lower income quintile by child care costs.
3. The CCWFA could significantly reduce or eliminate these costs for the large majority of low- and middle-income families and could cut the median cost of care that families pay annually by two-thirds, from roughly $7,500 to $2,500.
4. The CCWFA could reduce child-care expenses for nearly 3.4 million families with young children each year, and nearly 5.4 million families who do not currently pay for care could be eligible for a full subsidy.

Of the more than 5.1 million families with young children that pay for child care each year, on average 2.2 million—or about 43 percent—pay unaffordable rates, defined by the U.S. Department of Health and Human Services (HHS) as more than 7 percent of income. Among families in the bottom quintile of the income distribution, 70 percent pay unaffordable rates for child care, meaning poorer families are more likely to struggle to find affordable options. In fact, families pushed into poverty from these expenses typically spend almost 28 percent of their income on child care.

To help plug the gaps in household budgets caused by unaffordable child care costs, families pushed into lower income brackets often turn to government safety net programs for assistance with other basic living expenses. Government transfer programs such as the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and federal rental assistance programs account for the expenses families incur from child care costs and deduct them from an applicant’s income. These deductions allow low-income applicants to factor in child care costs to lower their reported income, which increases the benefits they receive. For instance, for every $10 in child care costs that SNAP applicants claim, their SNAP benefits increase by $3.

However, the safety net system is not designed to bear the weight of the child care affordability crisis. Despite the vital lifeline that many programs provide low-income Americans, they often reach only a fraction of those eligible to receive assistance. Administrative burdens at the federal and state levels, such as strict eligibility standards, constant funding constraints, and complex application requirements, leave many families without help.

A 2023 study by the Urban Institute found that at an 18 percent participation rate, TANF had the lowest participation rate across seven safety net programs. Public and subsidized housing programs reach 25 percent of eligible families, yet the process of receiving benefits often takes years due in part to lengthy wait lists. SNAP has a comparatively high participation rate of 56 percent, but data show few applicants deduct child-care expenses from their income: Only 2 percent of families receiving SNAP benefits claim the dependent care deduction, despite 66 percent of participants having a child in the home. While recent efforts to address administrative burdens—including steps to streamline eligibility and the application process for housing assistance programs and SNAP—have made important progress toward making these programs easier to navigate, more can be done to ensure that families receive the support they need.

This article is adapted from a report by the  Center for American Progress Read the entire report here.