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Cato Podcast: Why Is Childcare So Expensive?
Guests: Ryan Bourne (host) and Chelsea Follett — Cato Institute
Ryan Bourne: Childcare is one of the most cited examples of America’s affordability squeeze. Here in Washington, D.C., full-time center-based infant care averages out at more than $26,000 per year. That’s the highest average in the nation. Now, while prices aren’t anywhere near as high as this in many U.S. states, childcare is still a big and growing expense. Nationwide, prices from 2020 to 2024 rose significantly faster than overall inflation. In fact, in 45 states plus the District of Columbia, the average annual price of childcare — if you have two children in a center — now exceeds average annual mortgage payments. Now, parents requiring childcare therefore feel very squeezed by these high prices. But workers in this industry also argue that they’re underpaid. Put those two groups together, and many politicians at both state and federal levels have now proposed vast new subsidies and tax credits to support families using childcare and to provide higher income to the industry. But is the real problem here too little government action? Or is this service made more expensive by misguided government intervention? I’m Ryan Bourne, Cato’s chair for the public understanding of economics, and today I’m joined by my colleague Chelsea Follett, a policy analyst, managing director of Human Progress, and the author of the Childcare and Child Costs chapter in Cato’s recent handbook on affordability. So, Chelsea, welcome to the podcast. Thank you so much for speaking with me. Now, Chelsea, you have a vested interest in this question of childcare affordability because you recently became a mother again, didn’t you?
Chelsea Follett: That’s correct. My husband and I recently welcomed another child into our family. We have four now, and I think we’re stopping — that’s quite enough. But we have seen firsthand how expensive childcare can be.
Ryan Bourne: I bet. It was particularly — I guess the center-based care option is not really there for you, given these high costs. Let’s try and unpack that a bit, because I think a lot of people experience this — trying to understand why childcare is so expensive to begin with. Because when a parent says, “Why does my childcare cost almost as much as my mortgage, or more than my mortgage?” — I think economics has a lot that it can tell us about why that is the case. So before we get into the policy stuff, why do we think childcare might be expensive, because of the nature of the industry?
Chelsea Follett: Well, childcare is a very labor-intensive thing, right? There are just some natural limitations — one human being can only watch so many children. Barring some sort of embodied AI robot nanny breakthrough, this is going to continue to be a very labor-intensive field for the foreseeable future, where labor costs dominate. Labor can account for something like 60 to 80% of operating costs for childcare centers, especially for infant care. It’s just very labor intensive.
Ryan Bourne: Yeah. And then, of course, you add to that as people get richer, they tend to want more high-quality care. A lot of parents these days expect their childcare not just to be a safe, loving environment for their kids, but also — whether they’re getting basically pre‑K and pre‑K education services. So you combine those two factors, and there’s good reason to expect in a market economy that childcare would be expensive. Now there’s another kind of dynamic here, isn’t there — parents see huge bills, but childcare workers often don’t feel like they’re getting particularly rich.
Chelsea Follett: A childcare worker — I think by my last calculations, on average across the country, earns $15.41 an hour, and on average, childcare professionals earn around $33,000 per year, according to Childcare Aware of America.
Ryan Bourne: So how can it be the case that childcare can be brutally expensive for parents, while childcare work remains relatively low paid? That seems a bit of a puzzle.
Chelsea Follett: Well, because it’s so labor intensive, again, there is a limit to how much you can improve through innovation. There’s a limit to the productivity gains that you’re going to see there. And it’s kind of a classic example of Baumol’s cost disease as well — this industry, when wages rise elsewhere in the economy to compete for workers, childcare wages do have to go up as well. It’s just difficult, by the nature of childcare, for this industry to be affordable, unfortunately.
Ryan Bourne: Yeah. So the level of productivity is quite low because of those natural constraints that you mentioned, but childcare wages tend to grow in line with many other competitive sectors in the economy. So over time, the relative price of childcare compared to other, you know, manufacturing industries or whatever tends to go up. So we have all these market-led costs, things that really governments can’t do much about — this is happening on all labor-intensive services to a certain extent — but there are many artificial costs that the government then imposes through regulation that raise childcare prices much higher than they need to be. So what sort of things are we talking about when we talk about these artificial impositions?
Chelsea Follett: That’s correct. Unfortunately, the supply of childcare is very constrained even as demand has grown dramatically. Over 66% of women with young children are in the labor force today, as opposed to only 34% of moms with young children in the labor force back in the mid-1970s, and supply has not been able to keep pace with this demand, in part because of the artificial constraints that government policies have imposed on this industry. It’s not just the natural constraints of how labor intensive it is. Things like mandatory staffing rules raise costs — for example, staff-to-child ratios, group size limits. These effectively require providers to hire more workers, increasing their operating costs still further, and that is passed on to parents. And even beyond that, there are other restrictions, which I think we’ll come to later in the podcast, on who can actually work in childcare — increasingly, a lot of occupational licensing, education requirements, and then further constraints on what the facilities have to offer, to meet security checks, to meet safety regulations, and things like that.
Ryan Bourne: But let’s start with one that I think many people will be instinctively sympathetic to as a regulation, which is the staff-child ratios, because who doesn’t want their child to get as much attention as possible? The problem is, if a rule says one adult can care for a smaller number of children than they would otherwise in a free market, it, of course, mechanically raises the labor cost of each child being cared for, each childcare slot, because the revenue potential for each worker is diminished. So what does the evidence say about how tighter ratios, when they’re government-imposed, affect childcare prices and childcare outcomes?
Chelsea Follett: So there’s actually very wide variation in these ratios, which does allow us to see the effects of the ratios on prices.
Ryan Bourne: You mean between states, or between countries, or both?
Chelsea Follett: Actually both. So let’s start with states — very wide variation. California and Michigan are at the most restrictive end of this spectrum, with only four toddlers allowed per staff member. Florida and Texas allow up to 11. Mississippi is the most permissive, with up to 12 toddlers per staff member. And accordingly, we see that in the state with the least restrictive child-to-staff ratio, toddler care costs about $7,250 annually. In the states with the most restrictive child-staff ratios, toddler care can cost an average of over $20,000 — more than 2.5 times as much. It’s the same if we look at infant care. Infant care in states that permit only three children per staffer have more than twice the cost of care as states that permit six children per staffer, with annual costs rising from $10,837 to $26,000.
Ryan Bourne: Very, very specific.
Chelsea Follett: Yes.
Ryan Bourne: He’s got the data.
Chelsea Follett: Yes, I do. And we see this sort of difference between countries too. In your native United Kingdom, the number of one-year-olds a staffer is allowed to watch is limited to only three. It’s actually also the most expensive childcare market in the OECD. And there’s a lot of variation — you can watch 11 to 15 children per staffer in Spain, depending on where in Spain you are. And in Sweden, child-staff ratios are actually not regulated, and yet Sweden is consistently among the world leaders in various global rankings for early childhood development.
Ryan Bourne: Yeah, no, I think that’s a really important point. And the point here is not that we’re not having this regulation means, in reality, people having 100 children per staff member. The reality is that parents care about the safety of their kids, right? So even in countries where the government doesn’t mandate this, what you would likely see is there would be new institutions form that rank childcare providers according to this type of thing. People would have an incentive to advertise how many kids they care for relative to each staff member. And so there are kind of natural ways that you get within-market regulation that provides parents with the safety that they need, and I think that’s definitely the case in countries like Sweden. And of course, the problem with these strict regulations is that as a labor-intensive service, childcare is something that can always be affected by unforeseen consequences, unforeseen circumstances. So, you know, you have a couple of staff members who catch a virus, and all of a sudden they can’t meet these minimum requirements — they have to effectively shut down for a period of time. Whereas actually, parents who trust the center, trust the institution, might be willing for a couple of days to tolerate an extra kid per staff member because they recognize the constraints they’re under. But when you don’t have that function, you have to plan for all these circumstances that you might not foresee, and so as a result, you have to have a latent supply of carers that raises your costs. So there’s all sorts of ways — and I think you laid out the correlations there pretty well. I guess somebody might come back and say, okay, but that’s not the only thing going on — you know, in California and states like that, wages are also much higher. So you get the Baumol effect, and maybe just people in California price this type of tight regulation more.
Chelsea Follett: So I think it’s also worth looking at some of the econometric analysis. There were some great papers in the late 2000s, start of the 2010s, that actually econometrically controlled for income levels. A great paper by Joseph Hotz and Mo Xiao found that tightening the staff-child ratio by one child reduces the number of childcare centers in a market by around 10%, without increasing employment at other centers. And, crucially, they found that supply reduction occurs wholly in lower-income areas, so these types of regulation tend to have very, very regressive effects.
Ryan Bourne: Absolutely.
Chelsea Follett: And if we look at a more recent study, like the 2022 Campbell systematic review by Delgado et al., they found extremely limited, high-quality evidence that these stricter ratios improve child outcomes. They found that there are surprisingly few studies on this, the research quality is quite low, and essentially it remains unknown if child-staff ratios and group size limits in early childhood education or care environments lead to improvement. And so they conclude that the research actually provides very little guidance on optimal adult-child ratios, and we just don’t have reliable research to say that these ratios have any effect on things like language acquisition, literacy outcomes — all of that is inconclusive, and their main takeaway is that we need more research.
Ryan Bourne: So it makes things less affordable for very, very unclear or murky benefits. Now, credential requirements have the same rhetorical appeal — we all want qualified people, competent people looking after our children.
Chelsea Follett: But formal credentials are not the same as what parents are looking for in terms of the warmth, the judgment, the reliability, and experience for caring for their kids, which can often be provided by people who’ve had their own kids and now their own kids have flown the nest, or are at school and don’t need hour-by-hour care. So, of course, if you set up licensing barriers or educational hoops to jump through, you’re going to restrict the supply of care further, particularly lower-cost options — perhaps people who would otherwise practice home daycare, people who would be willing to provide childcare at unusual times so that people on shift work could find childcare for their kids at the appropriate times.
Ryan Bourne: And those requirements vary pretty significantly across the country as well, right?
Chelsea Follett: Absolutely. And once again, unfortunately, we see that where there is more regulation, there are higher costs. The average annual cost of infant care is nearly twice as high in states that require center directors or center teachers to have an associate’s degree, as in states with no education requirements there. And states that require daycare directors to have a bachelor’s degree have an average cost of over $21,000 annually, compared with about $9,600 in states with no education requirements there — that’s an increase of more than twofold.
Ryan Bourne: It’s more than doubled because of these education requirements, even though, as you say, watching children is not something that, uh, most people instinctively know you need education in a formal environment for — experience is much more important here.
Chelsea Follett: And many very well-recommended and sought-after childcare workers and nannies do not have formal training. They may not have a bachelor’s degree, but they come at this with years of experience and more than enough know-how and warmth to help raise children.
Ryan Bourne: Yeah, whenever I read papers that attempt to ascertain quality of childcare, I think that it’s one of these industries where the quality can only really be judged by the parents, given every individual child has very, very different needs, very, very different levels of education and whatnot. And so I think it just doesn’t really make sense to try and objectively define a quality of childcare because you’re dealing with very, very different inputs to the process. It’s like trying to ascertain, you know, the value of a teacher — you can look at test scores or whatever, but it’s not always the best measurement of the actual quality that’s being provided, according to what parents want. But unfortunately, it’s not just regulations on childcare workers and their education — even beyond that, there’s been a lot of bureaucratic requirements you must now meet in terms of how you run or operate a center.
Chelsea Follett: Yes. These differ across states, but many states have quite extensive safety checks you have to go through. In a recent op-ed, you noted one particularly absurd requirement of an in-home daycare that shows how this has become a real compliance machine, didn’t you?
Ryan Bourne: Absolutely. And in-home daycare, where one of my children was once cared for — the lady who ran it mentioned to me that she’d actually been written up at one point for failing to include the last name of a child on a milk bottle. There is a regulation that says you have to write the full name of each child on each milk bottle, each food container. And that may sound reasonable, but if we’re talking about a small in-home daycare that only watches about 4 or 5 children, none of whom share the same name, and some of whom have very, very unique names, as was the case of this child, it just doesn’t improve safety to require that. And little requirements like that, again, may not sound unreasonable, but they add up in a sort of death-by-a-thousand-cuts way.
Chelsea Follett: When my husband and I were researching childcare facilities to try to find the best care for our children, we found that there is a website in the state of Virginia, where we live, where you can actually see the violations noted for each childcare center, from preschools to big daycare centers to little in-home daycares. And we found that every single one had a long list of violations. Usually the violation would be something like an outlet was uncovered, even though it was out of reach of the children and no one was in the classroom at the time, or a teacher left the preschool classroom briefly, even though it was still staffed by several other teachers, and that meant the preschool momentarily ran afoul of these strict child-to-staff ratio rules, and the inspector felt the need to note that. If every single childcare center is failing this test, then the issue cannot be the childcare centers — it is the test.
Ryan Bourne: I remember having a conversation with somebody from a regulatory institution called Ofsted in the United Kingdom, when I lived there, on childcare — Ofsted do inspections of all childcare facilities, including home-based daycare, similarly to how they do inspections of schools. And I said to him at one stage, “Okay, but all these hoops you’re requiring these childminders and child-carers to jump through — ordinary parents with many kids don’t have to jump through these hoops. So why can’t we trust parents’ judgment when they’re paying for a service from somebody they know and have got to know well, to look after their own children?” And he said to me — it really shocked me, his answer — he said to me, “Well, of course, we wouldn’t have the resources to inspect all parents’ homes.” And, as a freedom-loving libertarian, that was not the answer that I wanted to hear. And, you know, there are many other things, very well-meaning regulations that can have big cost impacts for providing childcare. I was recently reading in the Washington Post a guest op-ed by Alastair Chang, and he was talking about how he was trying to open a childcare center here in Washington, DC. Now, DC, for context, has more than 25,000 children under age three seeking childcare, but only about 12,200 licensed infant and toddler slots. And he talked about how, when setting up this center, he faced real conflicting agency guidance, lots of delays, had to wait months and months for a fire inspection, and of course, during that time, he’s paying rent on the premises. And he said that in many cases, those types of delays can cost $100,000 or more. So that’s a really prohibitive barrier to opening a new center if you’re having to wait all that time and get delays for something that, on the face of it, paying for somebody to look after your kids sounds like a relatively simple transaction.
Chelsea Follett: Absolutely. I’ve also read that op-ed, and actually that example you gave, where he noted that another childcare center operator told him that he had to wait nearly half a year just to get on the fire inspector’s calendar to schedule an inspection, while paying rent on that facility for that entire period of time, costing him over $100,000 in rent — that’s just an example of the sort of regulation that caused Alastair himself to give up. At the end of the op-ed, we find out he never did manage to open his childcare facility because the regulatory hurdles were just too great.
Ryan Bourne: And how many people like Alastair Chang try to open childcare centers but end up dissuaded by all of these regulations that make it practically impossible, thus limiting the supply of care?
Chelsea Follett: Yeah, and there’s a lot of potential supply, as I say, of people who’ve had children, perhaps been stay-at-home moms or dads, and now want to find a way of earning extra income and continuing to do something that they love, who then see this compliance culture and think, “Is this really something I need to be brought into my home to be regulated as if I’m providing a really unsafe service?” So I think policymakers are aware that the resultant effect of both these market dynamics and the regulations is that childcare is expensive, and they’re aware that this has downstream economic effects — it makes going to work or taking more hours less lucrative, particularly for second earners in homes. And so it warps people’s decisions about how much they’re going to work and their degree of attachment to the labor market, relative to a world in which these regulations didn’t exist. But it also affects the type of care that people use as well, because the formalization that these regulations create means it’s quite difficult to find care if you have unusual work schedules, if you have very, very different childcare needs to others. So having a very expensive formal market drives people to use illegal care, underground care, or else rely on close family members. So you have to be very careful, I think, when you see these studies talk about the impact of a regulation on the quality of childcare, because it’s not always clear there — including the populations who are displaced into the less formal sector, where I’m sure that many family members provide tender loving care, but there’s probably a lot of other people using people who they’d prefer not to, but they just can’t afford the formal market.
Ryan Bourne: Absolutely. And it is at odds with the regulators’ intent, isn’t it? If you are requiring a childcare center director to have a bachelor’s degree, and this makes care so expensive that it drives more families to not use formal care, and instead stay home with their children and exit the workforce, or rely on family members who don’t have a bachelor’s degree, maybe don’t have an associate’s degree — this is the exact situation that those regulators are trying, ostensibly, to prevent. So, aware of — or perhaps loosely aware of — some of these consequences, there are some policymakers now proposing quite drastic government intervention in the sector: huge tax credits, vast new subsidies to, in essence, provide an almost near-universal service for childcare. Elizabeth Warren and Alexandria Ocasio-Cortez want taxpayer-funded subsidies according to their plans — for families below 75% of their state’s median income, care would be fully subsidized, and everyone else would have costs capped at a maximum of 7% of their income. So they say that the consequence of this is that most families would pay no more than $10 a day for care, but that’s a financing plan — that’s not a plan to make childcare cheaper, is it?
Chelsea Follett: No, absolutely not. They are not doing anything to actually cut out the regulations that are partially responsible for the high cost of childcare — all they’re doing is subsidizing demand further, and unfortunately that can backfire very badly. And it’s not even just AOC and Democrats — we are seeing this mindset that we need to throw more taxpayer dollars at the issue and subsidize demand in many states, including red and purple ones. We’ve seen a lot of momentum toward the tri-share model, where costs are split between employers, employees, and the taxpayer, and while that’s less expensive at least than universal childcare, it still does rely on taxpayer funds.
Ryan Bourne: Yeah. So I think in terms of the economics of this, a subsidy, of course, if you benefit from it, it will lower your out-of-pocket price for the beneficiaries. But if that leaves the underlying cost of provision unchanged, or perhaps even higher, the cost is mainly being transferred to just other taxpayers, and to the extent that we’re all suffering from this affordability crunch, you’re kind of just displacing part of the problem elsewhere. Of course, there’s reasons to think, as you say, that subsidizing demand will actually increase the market price. One is that it requires a lot of extra centers, paying lots of people who are providing the extra care — people who currently don’t think it’s worth going into childcare — so that can raise the marginal costs of provision. Inevitably, you can’t target this purely at people who you think would benefit from care but currently aren’t using it, so you end up paying lots of people who are currently paying for their own care — so there’s a lot of wasteful cost in that sense. And as these centers have to expand their premises and things, if you’ve got all these regulatory strictures subsidizing demand at the same time that supply is relatively inelastic, that leads to higher prices, so anybody who doesn’t benefit from the subsidies then pays a higher price. And, of course, when the government subsidizes something, it always comes with other conditions attached — things that providers have to meet to be eligible for the subsidies. So one thing that the progressive left want to do is for childcare workers to be paid the same as, say, public school teachers. And because this is a really labor-intensive industry, as you said, you’re talking 60 to 80% of the cost of the center — arbitrarily raising the pay above the market rates for childcare workers is going to make it actually much more costly to provide childcare.
Chelsea Follett: Absolutely, and as you say, perhaps not even with any benefit to the parents trying to afford this. There was a study in 2018 by Luke Rogers on the effect of childcare tax credits, where he found that providers tended to increase their prices in response to those childcare tax credits, and concluded that it had an unintended effect of making childcare less affordable, actually, for low-income families. If we want a lasting impact on affordability, we need supply-side reform.
Ryan Bourne: So other subsidy programs are a bit more convoluted — you recently wrote a piece on Virginia’s employee childcare assistance program being proposed, which I think uses state matching funds for employer contributions. So why is it employer-linked to childcare assistance? Quite an awkward way to deal with this affordability problem.
Chelsea Follett: It introduces many distortions into the market. And if you want to see a great example of how tying a particular benefit to employment works out, just look at healthcare — our colleague Michael Cannon has written a lot about that. Doing the same thing with childcare doesn’t make any sense and will not improve affordability.
Ryan Bourne: So why is the justification for government doing this at all? Because when I listen to policymakers talking about the need for childcare subsidies, they’re often pushing very, very different arguments that don’t make a lot of sense to me as a matter of economics. For some people, it will be, getting more mothers and parents back into the labor market is a good thing, and therefore we should subsidize it. But there’s all sorts of populations out there — elderly populations, people with other weak labor market attachment — that we don’t provide vast subsidies to. So by that logic, we’d be subsidizing a whole bunch of other people beyond just parents with young kids. There’s other people that treat it like automatically sending a kid to a formal childcare center will be good for the kid’s development. Now we know that that’s not always true — it can be beneficial to people from very deprived backgrounds who have very dysfunctional home lives, but evidence from places which have universal childcare programs, like Quebec, actually shows that some of the consequences can be big behavioral problems when you’re getting a lot of people who would actually be better cared for at home being sent to daycare centers instead. And then you get the arguments, of course, that it’s just expensive, and inherently the market can’t deliver affordable childcare, so the government’s going to step in. The problem with all of those things is that those different reasons imply providing different types of programs, right? If you’re talking about getting people back into the labor market, well, it may be for some people who work night shifts, or have the possibility of night shifts, that their childcare would be better in the middle of the night — having somebody to just sit in their apartment or house and make sure that their kid doesn’t wake up in the middle of the night and need attention. That’s clearly not what is being provided by these formal childcare centers. If you’re worried about development, it may be that you find two hours per day or ten hours per week is the optimal amount of time for genuine educational provision, but this isn’t the same as linking formal childcare with people being at work. So there are also all these tensions that I think people gloss over all of the time. Do you have a sense of what’s really animating this, what the key reason is, or is it just that it attempts to tick boxes for all of the above?
Chelsea Follett: I think that you’ve hit the nail on the head — that there are a few different rationales motivating this, some of which do, unfortunately, verge on social engineering and trying to impose a one-size-fits-all structure on young children when different families have different preferences. Another rationale that you didn’t mention, but that I also think is sometimes at play for some of the government interference that raises costs, would be an attempt to help childcare workers and fears of exploitation. We see this with some of the regulations to the au pair program — under the Biden administration, they mandated higher wages for au pairs without making any corresponding adjustments to the allowable deduction for in-kind compensation, so room and board, even though those are a huge portion of the compensation for au pairs. And we saw something similar in Massachusetts, when at the beginning of 2020 it went into effect that they mandated hosts pay au pairs the state minimum wage, which resulted in effectively a 170% wage increase above the federally mandated au pair wages. Now, of course, the number of au pairs hired fell, according to research by our colleague Alex Nowrasteh, by about 18% each year following that policy implementation. And if you revoked the Biden administration au pair rule and relaxed these other limits that we see on the au pair program, that would be one way to arguably make childcare more affordable — but that’s just an example of another rationale, in that case trying to prevent worker exploitation.
Ryan Bourne: Yeah, it’s a funny market, isn’t it? Because in many ways, if you’re looking at the nanny or au pair options, you’re essentially trying to find somebody that you regard as a kind of auxiliary family member, and going through the process of interviewing people to try and ascertain their qualities to be a member of your household or your family is actually very, very difficult. So there’s asymmetric information challenges, which you sometimes hear people use as a justification for regulation. I think the big downside of all these regulations — and indeed, if the government stepped in and effectively took over the sector — is that this is clearly an industry that requires pluralism, requires different approaches, because every family has different wants and needs, not just on the timing of care, but the type of care produced, given the background and the behavior of their children. This is something that’s highly personalized, and attempts to kind of regiment it and provide a certain form of it to everybody universally, I think, is really misguided.
Chelsea Follett: Absolutely. There is a sort of paternalism to trying to control exactly how families raise their children, how people contract with each other when it comes to childcare. My own mother, who was born in Brazil, at one point worked as an au pair because she wanted to see the world, and she was able to do that briefly in France, and it was a positive experience for her. The idea that au pairs are inherently exploited, I think, sort of denies their agency. As you put it, different families have different needs, and some will prefer very experienced childcare workers who may have raised their own children but don’t have these formal credentials.
Ryan Bourne: So we’ve outlined why childcare is expensive and the bad things being advocated to change that. So let’s turn now to what can be done that would be potentially beneficial, or at least help make childcare more affordable in a way that doesn’t bring new dysfunction. So if Congress wanted to make childcare cheaper to provide, rather than merely more subsidized, what could it actually do?
Chelsea Follett: I’m very glad you asked. So this takes us to the childcare and child-raising chapter in the Cato Affordability Handbook, where we outline a number of things that could be done. First of all, you can expand the supply of childcare workers — you could do that by broadening the EB‑3 visa, treating this as a shortage occupation that is exempted from limits. And you could also very easily expand the supply of au pairs by just adding more flexibility into the au pair program, which right now is very specific about the fact that au pairs have to live with the host family. Why couldn’t au pairs live together in group housing? Why couldn’t they live elsewhere, or with another family member who lives nearby, or whatever?
Ryan Bourne: Absolutely, and there are strict age requirements when some other countries have much higher age limits for au pairs, and as you pointed out, some people at the end of their career, maybe who want to see the world, might want to do this as well — there’s no reason really to have any age limit at all to the au pair program in my mind. But it’s not just visas and the au pair program — Congress could also allow household employees, including nannies, to work as independent contractors. That would dramatically reduce costs for so many families, and hassle. I mean, when we hired a nanny, going through the process for the first time of setting up as a household employer, navigating in DC specifically — somebody living in a different state but working in your state — that was far more complex than I realized, just for a relatively simple transaction.
Chelsea Follett: Yes, DC definitely does not make anything easy when it comes to childcare. And on other federal government solutions to this — the Child Care and Development Block Grant, Child Care and Development Funds, requires providers receiving grant funds right now to meet group size limits, age-specific child-provider ratios, specific staff qualifications — all of that is being imposed, so Congress could amend these programs to sever that link between federal funds and these very restrictive childcare rules that a lot of research shows drive up costs. And they could similarly reform the Head Start degree mandates — same logic there. They could also remove federal barriers to remote and hybrid work, which would sort of indirectly help parents relying on childcare by reducing the coverage hours they need for pickup and drop-off windows, and so on.
Ryan Bourne: And presumably then at the state level, the obvious levers would be to relax some of these ratios, group size caps, credential mandates, home-based childcare restrictions, things like that?
Chelsea Follett: Absolutely. So much can be done at the state and local level, because that’s where you see a lot of these staff-to-child ratios, group size caps, exclusionary zoning. Simply making home-based childcare legal by right, to override that exclusionary zoning, would be a huge help, because people think of strict zoning regulations as purely a housing affordability issue, but it’s also a childcare affordability issue.
Ryan Bourne: I think this is a really important conversation, a really important sector, because it’s an area where I think the benefits of economic freedom are evident when you actually look at the evidence, but it’s also an area where there’s a drumbeat for an effective government takeover of the sector. So this is something that Cato has been vigilant on for a long time, and I’m glad that in the last couple of years you’ve been working on it intensely too. And I think that this affordability conversation is a really great hook to explain how government regulation inflates the cost of living much higher than it needs to be. That’s all we’ve got time for today. Thank you for listening to today’s Cato podcast. Once again, I’m Ryan Bourne, joined by Chelsea Follett. If you enjoyed today’s conversation, please subscribe and leave a review wherever you get your podcasts. To learn more about the ideas and research discussed in this episode, visit Cato.org. The Cato Podcast is a production of the Cato Institute, dedicated to advancing individual liberty, limited government, free markets, and peace. Join us next time for more insights and conversations on the issues shaping our world.
