Biden’s $15 minimum wage could hike child care costs by 21% on average
The $15 federal minimum wage increase proposed by Democrats will lead to higher child care costs for many families as child care providers pass on the costs of higher wages to parents, according to an analysis by Rachel Greszler, economics research fellow at the conservative-leaning Heritage Foundation.
Establishing a $15 minimum wage would hike child care costs by an average of 21% across the U.S., which translates to $3,728 per year for a family with two children, according to Greszler’s analysis. Families in lower-cost states like Louisiana, Oklahoma and Missisippi would see the biggest increase, Greszler wrote.
“With childcare consuming even more of family budgets — 40 percent or more in of the median household incomes in a lot of states — many families could be priced out of the childcare market completely,” Greszler wrote in a paper published Thursday. “In turn, the unintended consequences of a $15 minimum wage could force some parents to give up their jobs and live on lower household incomes, while causing others — particularly single parents — to turn to non-licensed, typically illegal, childcare.”
The analysis comes after months of data showing mothers are being edged out of the workforce as they face scarce or expensive child care options.
Greszler pointed out that the median wage for child care workers across the U.S. is $11.65 per hour, and the child care industry cannot cut costs by automating tasks or reducing their workforce like the retail or restaurant industries can.
“Using wage distribution data from the Bureau of Labor Statistics’ Occupational Employment Statistics, I estimate that a $15 minimum wage would require an average increase of 29 percent in the wages of childcare workers across the 50 states,” Greszler wrote. “This does not include additional Federal Insurance Contribution Act (FICA) taxes and other potential costs that employers would be required to pay along with higher wages.”
Greszler proposed alternative solutions to help families, including reducing regulations for child care providers and giving parents public child care dollars.
Democrats on the House Committee on Education and Labor approved a $15 federal minimum wage proposal included in President Biden’s coronavirus relief package on Wednesday. However, they could face an obstacle in the form of the Byrd rule, which says anything passed during budget reconciliation must have to do with the federal budget in some way.
Senate Majority Leader Chuck Schumer, D-N.Y., said he and Sen. Bernie Sanders, I-Vt., a longtime advocate for raising the federal minimum wage, are doing “everything we can” to make sure the proposal isn’t removed during the reconciliation process.
“Well, Sen. Sanders and I are working very closely together to overcome the Byrd bath and make sure we do everything we can to see that it survives the Byrd bath. We’ll see what happens. That’s the first step,” Schumer said during a press conference on Thursday.