Rising Childcare Costs Strain the Workplace

A new study from the Department of Labor highlights the negative impacts of astronomically high childcare costs on both employees and employers. 

By the numbers: U.S. families spend between 9 and 16 percent of their median income on childcare for just one child. Annual costs rise to nearly $16,000 – more than the median cost for rent in some areas.  

Why it matters: Prohibitive childcare costs are forcing workers out of the workplace, either temporarily or permanently, creating ripple effects that negatively impact the labor market and the broader economy.

Childcare tax credits set to expire: The situation is further compounded by the impending expiration of federal childcare tax credits which support both parents and businesses that provide those benefits to employees. Congress faces a crucial decision on whether to extend these credits before they lapse in 2025. 

Employer childcare benefit offerings remain low: While the COVID-19 pandemic spurred an increase in childcare benefits offerings, a recent Mercer survey found that only a small share of employers offer them:

• More than half of the large employers surveyed do not offer any childcare benefits.

• Of those that offer childcare benefits, only 11% subsidize care services. 

• Meanwhile, 41% of surveyed workers said their compensation was not high enough to cover childcare costs. 

The bottom line: According to Mercer, the ability to attract, retain, and maintain productive employees increasingly hinges on providing robust childcare benefits. Addressing this challenge could be pivotal for both workforce stability and economic growth.