Is there a market failure in child care? | Hacker News Reader

Is there a market failure in child care?

arnoldkling.substack.com

50 pointsjseliger122 comments

With nearly any of our social ills, the answer is housing.

- The people taking care of children at daycare make pennies; most of the revenue goes to a landlord. It's very expensive because you can't just move the daycare 1.5 hours out to the outskirts of town; you actually need to pay for real estate near where people live.

- Grandparents, extended family cannot afford to live near their working children.

- Anyone with a hint of upward mobility needs to move to an area where they can get their foot in the door of the financialized housing market. They move away from their friends and family, and then when they have kids they don't have a support network.

- 2x full time incomes are needed to afford rent where work is available, leaving no time for childcare. Nobody who works part time can afford to rent.

- It's impossible to make rent working part time in any city anywhere. Very difficult even with 1.5x income parents.

- Commutes are much longer, increasing the burden of childcare. Lack of housing supply near work -- because of policies that benefit existing property owners.

All of these have one answer: HOUSING SUPPLY. let people build more housing. That's it! Very simple!

Or even better, remote work.

Not enough, but it helps.

I mean lots of daycare is in-home daycare.

But if everyone has access to housing how will the poor landlords get their passive income?

Or alternatively, to add to the list, working parents cannot afford to live near grandparents. They bought in the 1980s.

> The people taking care of children at daycare make pennies; most of the revenue goes to a landlord.

I listened to the podcast recently (the one mentioned in the article) that went over the operating costs of preschools and daycares. Something like 85% of their revenue went straight to payroll, not "landlords."

As a parent of two young kids in daycare, this feels very disconnected from reality. The most glaring issue is the discussion of childcare providers as though they're totally fungible. Now, I have no idea how representative my experience is, but the parents I know are interested in things like: cost, location, holidays/time off (lots of places near me take 5-6 weeks off per year -- that's kind of a big deal for people who work full time), hours provided, whether food is provided, what the environment is like, policies around when sorta-sick kids can attend, the experience of the providers/teachers, being able to send siblings to the same place, parent community, safety record...I could go on. Some of these are luxuries, but many affect one's ability to work a full-time job (which is the point of daycare for a lot of people). My experience is that places that tick all these boxes have waitlists. Many other places don't. Despite there being lots of places with availability, parents around here still feel like it's hard to find daycare.

(There are other fallacies here, too -- like the idea that some centralized broker is an efficient solution. Monopolies efficient? And if you have a competitive market for the brokers, that seems to undermine a lot of the benefit, or at least make this idea much more complicated.)

There’s also the debate around a corporate daycare (Bright Horizons, Goddard, Primrose) and at home daycare.

I was a child of at home daycare by one woman who is literally my second mother (was present for all the big moments and was there emotionally for me). It also means it was a single point of failure; if Penny was sick, on vacation, then my parents were SOL.

A more corporate daycare gives you the reliable daycare but at the cost of your child being a number.

While I don't have children of my own, my ex-girlfriend used to manage a daycare center. The fees charged to parents were quite high, while the salaries of the teachers, including my girlfriend's, were surprisingly low. It appeared that the primary expense was the cost of renting the property. In my opinion, the government should provide financial support to these facilities, particularly in the form of reimbursements for education infrastructures.

This doesn't lower the costs, it just causes all taxpayers, including childfree adults, families with a stay at home parent, and families with older children, to subsidize the cost of childcare for those families where all adults are working full time. You could even hypothesize that this extra tax burden ends up being enough to force some stay at home parents get a job and put their children in childcare, creating a vicious cycle.

That's not obviously bad, but we should talk clear eyed about whether that's the right social contract to enter.

I worked with a daycare on a building project, and I saw how amazingly expensive childcare is. The teachers are paid what many would consider to be barely a living wage, but property costs and especially insurance were substantial. The owners did it our of their love of doing it, not because because of typical financial goals.

Yes, they could raise their rates, but if they did, many parents would have had to go elsewhere. It was a balancing act to charge enough for the quality they wanted to provide while also being able to be affordable for the community they served. Most teachers were younger, and did not last very long (two years at most).

My aunt runs a very well regarded (and fully licensed, insured, etc) childcare business out of a building she inherited and it's a subsistence living.

Complying with regulations, dietary restrictions, allergies, little special requests that all seem reasonable in isolation, replacing supplies, etc, etc. It's basically the opposite of a software business, it doesn't scale.

She could do better for herself by raising rates (she has parents coming to reserve spots pre-conception), but she can't bear the idea of pricing out hard working people.

There are some things that probably don't work as businesses, even with subsidies, and if we want another generation of kids we probably have to think outside the market box.

We have free school for older kids, and maybe we could just extend public schools to age zero, but what about subsidizing new parents to stay at home and actually bond as a family? Or cooperatives of parents to take care of each other's kids on a shift basis? It would be cool to see this kind of creative thinking.

Why wouldn't a landlord just raise rates for just a daycare then?

If support were to be given, I'd imagine you'd have to be very careful on how the laws were written.

In New Zealand, the government subsidises up to 20 hours of Early Childhood Education (basically preschool/daycare). However, daycare providers usually only allow you to take 6 hours of subsidized daycare a day, and charge an excessive sum for the 7th-8th hours, essentially double dipping. Most people will pay the extra hours because they work ~8 hours a day and need daycare for all or most of it.

Basically the subsidy doesn't really help parents, it just goes to the daycare's pockets (and subsequently, their landlord if they don't own their property).

An interesting factoid is that Nanny share, split 3 ways, costs the same, or less, than daycare. The only disadvantage of nanny shares is the unreliability, when one family drops out the other families have to work hard to fill the vacancy, which involves doing what amounts to personality interviews.

New daycares, at least in Seattle, also have huge costs associated with property. Basically the majority of existing home based daycares have been around for awhile, since land prices prohibit opening any new locations. E.g. buying a "house" for daycare would cost $4000 a month in mortgage payments at minimum, which sort of ruins the finances. Lots of exceptions and such of course to quibble over, but after spending over a year looking at daycares, very few new locations are opening.

Figure 4k a month, at 15 kids, is $266 of the expenses.

Labor is of course the main problem, but labor costs are high because living in cities is so expensive, and that is expensive largely because housing is expensive.

When touring daycares I like to talk to the child care providers one on one w/o management there, and I always ask how well they are treated. Universally they have said that the large chain locations treat workers badly, and that you also get what you pay for with the higher priced providers, workers who are paid better (but not great), are also treated better, stay around longer, and burn out less.

> GONZALEZ: You need one teacher for every four infants, at least.

Infant care is obscene. This is where long childcare leave can help, if parents both have 6 months off at 100% salary, that gets the kid through the first year, after which childcare becomes a lot more reasonable.

There is another huge drop off in complexity at 18 months, but I don't see a good way of getting families to that mark. Lots of daycares do 18m+ because the logistics are just way simpler.

> Suppose that the parents have two children who need child care. That is $540 per week. The parent salary has to be at least $540 per week to make the choice of child care economical. But that does not take into account taxes.

Even worse than that, it doesn’t take into account commutes, and the opportunity cost of not spending time with your own kids. If you make just enough money at work to pay for childcare, what the heck are you doing?

> If you make just enough money at work to pay for childcare, what the heck are you doing?

$540/40hrs = $13.5/hr. Any number of jobs pay this little.

That's take home pay. With taxes it's much higher.

so based on empirical observations I am sure there are a number of people who are making barely enough to support the child care cost quoted in the post I quoted. maybe I misinterpreted the post I responded to

then you also need to factor in tax rebates for childcare, which won't cover 100% but it will lessen the impact

LOL. I meant that rhetorically, not literally. I am suggesting that it is a bad life choice to work a job and then spend every penny paying someone else to take care of your kids for you.

I know you're being rhetorical, but often, just trying to avoid a gap in your resume. It sucks but there can be a greater long-term cost to trying to reenter the workforce after taking years off to raise kids.

I am just curious, is this a hypothetical or do you know of many people who actually made the explicit choice to break even working, just to have continuity of resume?

It smells a little like BS to me, both because it seems to be often repeated (so sounds like a talking point) but I can't imagine any parents I know to actually decide this way

I've worked with a couple of folks that have said this exact thing, yes. One was a lab tech and I'm pretty sure she was less-than-breaking-even with putting her two kids in daycare. So yeah, it's definitely a real thing.

I agree - but have seen many families have to make this choice, as having too big a gap in your CV (to look after their kids) will impact there employability down the line.

It is also hard to stay current and to retain confidence in your ability when you are out of the working world.

Don't get me wrong - stay at home parents have amazing skills and learn loads, but few employers see that as a benefit when you are looking to return to work. In the UK there is a movement called 'Pregnant then Screwed' which is trying to address this.

> I agree - but have seen many families have to make this choice, as having too big a gap in your CV (to look after their kids) will impact there employability down the line.

This is true, but does raise a couple of obvious points.

First, if there are implied future earnings returns from working with young child, those ought to be factored into the calculations for returns to work in the OP (with appropriate caveats about possible cashflow problems).

Secondly, should it be affecting future employability? The few career paths where absolute commitment to work and track record of continuous improvement and networking seem absolutely necessary signals (like trying to make partner at an accountancy or law firm) tend to pay pretty well anyway. Other career paths should - in theory at least - be less contingent on continuity, or even offer realistic opportunities to continue to work or use work related skills part time and remotely.

Very true - but even in 'low pressure' creative fields that I've worked in in the past, people would rather take a researcher who has just come off a job, than one who has spent 4 years looking after children. The assumption is that the 'current' person will be 'better'.

I think there is also a covert feeling that those with children (in particular women) will be less wedded to their role. People have been shocked when I've stayed home to look after our sick children, and my wife went into work.

This remains a gendered issue.

Children are not in daycare for their parents' entire lives. Once children reach kindergarten, many public school systems provide after-school care for working parents that is significantly cheaper than private daycare. Some provide before-school care as well, but usually schools time their starts to community work schedules.

If you make just enough to pay for childcare now and decide to, instead, leave your job to spend time with your children, you are giving up some number of years of professional job growth. When you return to the market, you will likely not have grown your skills and will most likely enter around the same pay level as when you left. If you stay in the market, you will have spent that money on childcare, but you will now most likely have grown your salary through wage increases and job transitions.

In addition, while you may be giving up some time with your children during their early years, they also gain substantial growth with their peers and outside influences which may help them as they grow older.

My wife and I made this choice with our children, and that was what the heck we were doing. Childcare was expensive, but we knew it had a time limit, and when our children finally entered public school, we were substantially better off than if one of us had left our jobs. We feel the experience for our children was great as well, considering they still speak fondly of their pre-K experiences.

> If you make just enough money at work to pay for childcare, what the heck are you doing?

Probably mitigating the cost of family health care between two earners (US centric, of course).

$540/week for 2 kids is a steal where I am. Local costs are >$600/wk for two kids near us, and I have friends in other metros that are closer to $800/wk. Nannies are more like $1k/wk no matter the family size.

Ha I misread that as 540 a week for 1 kid which is right in line with Seattle rates

Market failure? The demand for child care is a social and economic failure. Stay-at-home parents are no longer feasible for most families.

Is the situation where stay at home parents, in a two parent household, being unfeasible a majority of the time a market failure?

Without a doubt in my mind.

I think the choice to have children without ample time for child-care is a failure, but i'm not wholly convinced that it's the market that drove it completely -- more like it's driven by a poor decision making process by the parents.

Historically day-care has been a service used by very poor single parents so that they can maintain a work schedule, or the affluent that want some free time away from the kids. With that said, I can totally understand why there isn't a very good way to balance that market that's split between the 'well-off' and the desperate.

My point is, which unfortunately isn't a popular one, that the parents are ultimately at fault for creating a financial burden that they have difficulty (in this economy, at this time) coping with. There is no stork-drop, it's their fault -- and this expectation for affordable childcare , which I hope becomes a thing sooner rather than later for the sake of the kids , is born from an inability to cope with poor planning and impulse control, and comes off as entitlement after thousands of years of parents' raising kids without a third party involvement.

I think fewer and fewer people view the raising of children as a privilege, and it's shifting into a given.

That's a problem.

P.S. yes, I know third-party child-care isn't new, but the drive to provide it for every mother is.

> after thousands of years of parents' raising kids without a third party involvement.

historically, the extended family like grandparents, are the ones taking care of children while working age parents go out to actually work (the fields).

Historically, this works, because you tended to live with the grandparents, at least for a while - the household is multi-generation.

The recent "privilege" of buying your own separate home away from your own parents, before having children, is new. And if these people aren't rich enough to afford child care, it's because they've overstretched - they ought to really live with their parents imho (and make sacrifices like the old generations did).

Also, if you are in a place not divided by roads and have a critical mass of kids who can find each other, they are suddenly a lot less work. They tend to find each other and keep each other amused.

I suspect many modern parents may have never experienced this.

Many cultures had nuclear families by default including much of western and northern Europe. Especially after the plagues.

This comment is completely out of touch in true HN fashion. The author believes having kids has turned into “an entitlement” and looks down upon this.

More than ever two working parents is a necessity for many families. To place blame solely on the parents for these circumstances ignores the larger picture of where we want to be as a society. Of course choosing to have children has consequences, but parents in the US should be able to have a reasonable expectation for affordable childcare, especially in a society and economy that demands multiple working parents.

But of course instead we could just blame the parents for creating the current scenario of unaffordable childcare.

This is a pretty good distillation of the math. Child care has often been done on the backs of underpaid lower-class workers. Unlike most businesses, childcare doesn't scale well at all, and it's very hard to make the math work to pay the staff a living wage without it being prohibitively expensive.

Even in the example given, the $22.50/hour rate is just the break-even rate with child-care workers at the minimum wage. If you push them up to a living wage of 75k/yr, the listed cost doubles. Add again people wanting child care costs to not just be break-even but to make working feel worth it, and it probably doubles again.

It's just a very hard business with difficult scaling. It gets better after age 2, when you can increase your student/staff ratios, for what that's worth.

Which is precisely why government subsidies for child-care are necessary if we're going to structure society around nuclear families with both parents working.

The cost of labour alone is enough to explain eye watering child-care costs, which means you either a) push that cost back on the consumer, b) somehow drive down the cost of labour, or c) have the government subsidize the cost of labour to make the price affordable and the businesses sustainable.

We're doing (a) now and it's not sustainable, hence articles like these.

To achieve (b) you'd need government intervention, anyway, as the market is already optimizing for minimizing labour cost.

And thus you're left with (c), which is the path Canada has started going down recently:

https://www.canada.ca/en/employment-social-development/campa...

You'll notice that Québec is not on the map when they compare potential savings because we've had government subsidized daycare for over 25 years. The results have been increased participation of mothers in the workforce and increased GDP[1].

The same article explains that the ROI is about 47%, meaning that for every 100$ spent, the federal and provincial governments get 147$ back in increased productivity.

1. https://ici.radio-canada.ca/nouvelle/557405/garderie-subvent...

A few thoughts:

1. Waitlists are a scam. In NYC, it's ~$150 non-refundable just to apply, and daycares won't tell you how long their waitlist is (and per the article, are often over subscribed). I wish there was legislation that these are refundable, or capped at ~$20 or so.

2. The cost of daycare here is around $2500/kid. So with two kids, you're looking at $60k/year, which is $100k pre-tax. And so if you have two kids, work, and make less than $100k/year it makes sense to stop working. And really, the real number is probably closer to $140k/year, since who would work to just break even on childcare and not see your kids?

There are a number of people who will never admit this on a public forum, but they are taking their kid to some illegal immigrant in the ghetto and paying 1/3 of that.

When I was a child my daycare was the house of a person who lived in the neighborhood. I wonder how much this sort of thing is regulated away now.

They can regulate all they want, this is still a popular and often necessary option.

There are also a number of people who will never admit this on a public forum, but they prefer their paid job over watching their own children all day, sometimes even if it pays less.

I think people do work to break even or even worse. You only need childcare for 4 or 5 years until the kid is old enough to go to public kindergarten. If you are 25 and take a break from the workforce for 5 years you are going to obliterate your career. meanwhile if you had been working at say 25 in NYC at 100k/year and kept working w/ the support of childcare then by 30 you could be making 150 or 200k/year. If you had stopped working 5 years you would be lucky to find that same 100k/year job again. By 30 you still have about 35 years of your career left. I wouldn't want to stunt that growth early on.

Now THAT is a market failure. Create a company staffed with parents who have a gap in their resumes. Pay them slightly less than market rate. In theory, that should be very profitable. In practice there are too many confounding issues and I doubt this would be successful, although I do think the companies can do quite well by disregarding explainable gaps in one's resume.

> I do think the companies can do quite well by disregarding explainable gaps in one's resume.

i dont believe it is the gap, but more that a company would prefer to hire someone younger (and thus, cheaper?) if they both have the same experience.

skills deteriorate if not maintained

The hours of a public school day are generally about two hours shorter than the average workday, not accounting for commuting time. There is still a need for before and/or after school care for several years after after the child enrolls in school.

who would work to just break even on childcare

I've seen the argument made that even if childcare is cash flow negative it can be profitable if prevents an interruption in career progression and thereby allows for higher future earnings.

> And really, the real number is probably closer to $140k/year, since who would work to just break even on childcare and not see your kids?

Career progression paths tend to yield highly backloaded payoff.

That must be a NYC thing, none of the childcare options we looked at asked us to pay to be on a waitlist.

The Planet Money episode the article references makes a point about the waitlists and why it is not necessarily a scam or a market failure. The margins on these places are low. The financials really only make sense if the school is at full capacity all the time. For a school to survive in these conditions, a waitlist is necessary so that if children or families leave -- which happens all the time -- they can immediately backfill that money.

A point not made in the PM episode is that in markets with a lot of waitlists, charging for a position on the waitlist increases the likelihood that the families on the waitlist will be available when their turn comes. If waitlist membership is frictionless, then the daycare cannot count on that future backfill as strongly.

It’s a social failure that we put the cost of caring for very young children exclusively on the shoulders of their young parents. As a society, we collectively pay for the healthcare of old people as a shared burden spread across our whole lives. We do the same for care of children ages 6-18 via public schools.

You have kids age 1-6? Tough shit, pay up.

Markets are not oriented to solve problems for social and societal needs, that is supposed to be the government for the people's concern. If we as a society want this solved, and the government of the people for the people does not, this represents a failure of the social contract to be governed.

This is a classic case of Baumol's cost disease. There isn't really a way for productivity to increase in the child care sector, you're always going to need a similar ratio of workers to children, but those workers also need their wages to keep up with inflation. The way it plays out in the US is everyone loses: the employees are underpaid, the employers are low-margin, and it is still too expensive for families. Child care companies can't pay the workers a fair wage while remaining profitable and keeping prices low enough for families, so we end up in this awful equilibrium where it sucks for everyone.

Sounds like it's an industry that should be provided as a public service then (or at least subsidized), not something that a free market can sustain.

https://www.nytimes.com/2021/10/06/upshot/child-care-biden.h...

I agree, given what I laid out it's not something the market can provide

> Baumol's cost disease.

I don't think wages in the childcare industry are increasing noticeable relative to wages in other sectors. As a person mentioned elsewhere, other factors such as rental prices and insurance probably add more to the cost than wages.

Of course they aren't, like I said above the workers are way underpaid. The Baumol effect means that wages have risen more than the underlying increase in productivity, which like I said can't really increase in child care, you need X workers for Y kids, there's no productivity gains to be had.

And that's not on the workers themselves, it's just basic arithmetic.

Needing to increase the wages of the workers beyond any increase in productivity either means higher prices for parents or lower profits for the business. In this case we have both, which is why the market can't really sustain itself. Daycare companies have to give their workers some increase in wages over time, without getting more work out of them, but in order to charge parents even more than the already insane prices, they've held them down to some extent. So like I said, everyone loses.

I just think the term "Baumol's cost disease" may not be appropriate, as it seems much of the rise in wages in the childcare industry is due to minimum wage laws. I'm probably being overly pedantic.

If that is the case that min wage laws are a major cause then it is definitely a case of baumol, because the wages would be increasing beyond the underlying productivity due to external factors. We expect wages to rise with gains in productivity, but the sectors of the economy that don't have any gains will necessarily increase along with the ones that do, because of labor market competition, minimum wage laws, etc. It puts a strain on those industries, just like we are seeing in child care

Who is down-voting a simple description of the economic phenomenon that plagues the industry, a description noting that it doesn't work for anyone?

Generally here at HN, if you complain about downvotes, people downvote you more.

The karma points are more seriously taken as totally imaginary and not something to even really consider in discussion. Numbers on a screen aren't the thing HN really values.

At the risk of this seeming like self promotion, this is exactly the problem we're trying to solve at tiney.co

We believe the answer to the childcare supply crisis is home-based care. Our platform (which is regulated in the UK) exists to enable people to set up as a home-based childcare provider (in the UK these are called 'childminders', which is a somewhat derogatory name for a highly skilled professional educator!). We then make it easy to run the business through payments, invoicing, educational tools and training, marketing, etc.

We're working on the UK market first but we believe this is a global issue and have our eyes on other countries in the future.

If you'd be interested in chatting or learning more about what we do, you can reach me by email on edd@ on the above domain name :)

(And we're also hiring remote full stack engineers if you happen to be interested in joining the mission.)

The failure to me seems in outsourcing your child to a daycare, vs parents having flexible schedules to actually take care of your kid (either 1 with PT job or staying home FT, or both with flexible jobs). I understand this isn't popular in our culture these days, but I imagine it has many positive outcomes for the child and family.

Parents never did this when both of them worked.

Grandparents did this.

Unfortunately, these days, parents can't afford to keep living near the grandparents (because home prices have gone up too much, or because the grandparents are in a dead-end no-jobs town).

Your options are to fix the housing market (By which, I mean, utterly destroy the value of existing homes[1]), or to make it possible for a single breadwinner to feed a family again (again, this is largely driven by the cost of housing) or to make due with the status quo.

[1] That's going to be hugely popular among demographics that vote. /s

Grandparents are now paid out via violence against the children (aka taxes) once they grow up. Why would they participate in raising the kid when the unspoken quid-pro-quo is no longer present and their benefits are guaranteed? There used to be significant bilateral benefit.

I guess that's the state of the world today, where actual violence is rare enough that people start calling things that don't cause any bodily harm with the same term.

Question: if I stop paying my taxes will the sheriff come with guns and toss me out? How many people want to find out?

This happens with social security and other taxes too, just usually takes a bit longer and they wait until you owe a lot more. The violence is there, it's just under the polite veneer of pay up or get got.

Depends on the kind of taxes you pay. They can put a lien on your house, garnish your wages, etc. Eventually, sure they may put you in prison, but generally they aren't going to hurt you doing it unless you try to hurt them. You're just renaming coercive measures violence.

And this is super abused by older people that didn't even bother adding their own children to society. Childless and less expenses their whole life, then the same societal benefits provided in old age as provided to people that contributed to society via childrearing.

Also a lot of the grandparents are way older since they did college instead of kids at 20 thing. It makes a difference my parents are both close enough but other than 1 hour maybe a month is taxing for them to watch my demonspawn.

I’d love to do that but my software job is the thing keeping us afloat. And part time seems to not be a thing for devs

Pretty much. Parents in my neighborhood pooled together and made sure that one of them always had a day off to pick up the kids from school and home and feed them until the other parents got off work.

How many nine-month-olds were among that group?

None. This started after we started going to kindergarden. Before that my grandparents came over to fill in.

Working parents send their kids to daycare out of necessity, it’s not a matter of being popular. Two working parents is also a necessity for many economically. Not everybody has the income and thus the convenience of having a stay at home parent.

In your words, this is a failure of the parent, but I disagree.

The cost of childcare services per child has a fairly hard floor on it. Working class families tend to have more kids in the US. Thus, the total expenses of childcare approx nets out around the same for a working class family as for an upper-middle class family.

But the "higher class" family has a lot of extra income to be earned by having two parents working vs one. So its often bad economics for a poorer family to work two jobs and pay for regulated childcare. And good economics for a rich one.

And this is how it works out in reality too. I checked a bunch of census stats, and the percentage of children in childcare facilities in the US rises steadily with family income. (interestingly enough, the percentage of children watched by their grandparents also rises steadily with family income too)

It also has many positive outcomes for a kid to spend some time in a daycare with other kids its age, for some more so than others. Social capabilities, language capabilities, nourishment, ...

This doesn't match my experience. We've got two young kids. Both went to daycare from an early age (6 months or so). It's been great for everyone. I think there's pretty significant upside to the kids to spending time both with other kids and also with multiple different caregivers. It's also great for us adults to have interests/activities/ambitions (like, a career) outside of the kids. Not saying there are no downsides, but overall we're very happy with the decision.

I'm not saying you're saying this, but there's this fallacy/myth out there that if you don't want to spend 24 hours a day (or all waking hours of the day) with your child and responsible for their well-being, then you're a bad parent or damaging them or something. It's possible to love your kids, enjoy spending time with them, be a great parent, and also find it exhausting or even untenable to be responsible for them all the time.

There's also this idea floating around that people used to raise kids with an extended network of adult caregivers, and that that was good for everyone. That resonates with me. For people who don't have family around to help, daycare has sort of taken that place, for better and worse. (Daycare providers are not faceless service providers -- they become close members of your extended community!) The downsides of this are widely talked about. But I know folks who've had loads of family help ... with significant associated emotional burden.

Yep. As always, we need to keep in mind that our natural social unit is not the nuclear family, but the tribe. Even two parents trying to parent a single child without the help of the tribe is essentially beyond our evolved capabilities.

With all due respect, you sound like someone who doesn't have children. Most of the argumentation for "parents should stay at home and care for their kids" is based a different world to the one we now live in - a throwback to times where we lived in small communities and child raising was more a group effort with grandparents and relatives helping out.

Today 56% of the worlds population lives in cities. That means childcare is essential for socialising a child.

A child at home with a parent until kindergarten is probably going to spend the first 4 years of their life in a small apartment with one adult, bearing in mind that many young parents are generally not well off. This is not healthy situation for the child or the adult.

> A child at home with a parent until kindergarten is probably going to spend the first 4 years of their life in a small apartment with one adult

This is such a strange take. Do you really imagine you and the child will be locked up all day in your apartment? Most cities are not warzones or quarantine areas. Cities have playgrounds and parks, and the child will probably insist on going to one at the minimum daily. The local branch of the city library will have storytelling sessions at least once a week, likely more; and when the storyteller is done, there will be the shelves of early books your child will love to explore. Cities will have lots of kids of the same age group on your block, probably even in your apartment building; your child will inevitably play with them. There will be friends and relatives who will visit you and whom you will visit. Perhaps organized play dates with friends' kids who live further away. And some sort of local young family meetups, organized at the library or playground or via the local Facebook group. There will be parades, festivals, strolls through the historical center, beach days, museum visits, barbecues in the public park... Unless you make a deliberate effort to avoid all of that, your child will surely get socialized.

Another alternative: In the modern economy how many employers have allowed their employees to take their very young children to work? I know that some large companies have experimented with childcare facilities at the office, but why not allow parents to take care of their children on the job? Sure it's disruptive, but it should be manageable in many cases.

> This seems like a project an entrepreneur ought to try and take on.

In a market where there is an affordability crisis, why would we want to add a tech entrepreneur as a middle man who will want to take 30% off the top for "owning" the relationship between customer and provider (like DoorDash, etc)? You see a little of this with corporate day care centers (e.g. Bright Horizons), and these operations charge a substantial premium over independent providers. They just have a higher cost structure, and greater demands to make returns for their investors. In NYC, the cost of sending just one child to one of these is close to hiring a nanny.

I agree that it's probably not reasonable to call wait-lists a market failure when having excess capacity in the market would require rates to increase to a level the market is unable or unwilling to bare.

Lol.

Yes. The failure is treating child care like a market.

Is it not a service that can be provided by someone outside of the immediate family? Should those caregivers not be paid? If yes to both, that is a market. If you provide it as an entitlement, you still need some mechanism to know how many (coarsely put) units of child care to produce.

[*edit] for the down-voters, I'm curious what is your disagreement here?

The government can step in to fund areas that shouldn't be a free-for-all market. Parents struggling to pay for childcare is the government saying a parent's job is to stay at home if they can't cover childcare.

It's a big issue in the UK and likely to be key in the next election as prices have gone sky-high.

There's still a market there. There's demand which will be HIGHLY sensitive to the price government sets, and labor which is in many OECD economies in short supply.

I would guess that some people are disagreeing that this particular service is seen by most purchasers of it as a commodity.

Others are probably disagreeing because they're conflating "market" with "free market", and this sort of service has a bunch of constraints from all sides.

I don't know what to tell them. It is basically a commodity, especially for young children there isn't a lot of differentiation once health and safety concerns are taken care of as there isn't much "enrichment" a daycare can realistically supply for an infant or toddler. Moreover, any provider of a service like this will have to compete on the market for care-givers to do the labor.

You don't just take a punt on a childcare provider like you might with temporary accommodation on AirBnB.

From personal experience and those of other parents I know, it's a heavily researched, quite intensive process involving multiple visits to different providers.

An AirBnB for long-term childcare seems like a non-starter, perhaps beyond initial discovery and shallow research.

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Also, there are so many societal benefits to affordable child care for all. For example, more primary care givers returning to work, earning and therefore paying taxes etc.

Yeah my first thought reading this was… does this dude have kids? Because this isn’t how the parents I know think of it, and not how I think of it.

But I also have income that gives me choices— the option I chose is “employ a full time nanny.”

Curious if he is closer to right than we are.

As a markets guy this logic makes sense, but as a parent it misses enough context to not be useful.

First, the market for child care that we face as individuals is one largely of our chosing. In a macro sense, we make choices to live close or far from family, to be in a close knit community or not, etc.

In a micro sense, are we comfortable with an off the books nanny coming to the house, or dropping the kids off at some illegal community grandma's house every day?

In NYC, no poor person deals with the "$150 just to get on the waiting list" type of child care. The people who engage with that are people who chose to raise kids in the city and want a certain type of "formal" daycare. These people also make enough that the cost/benefit obviously makes sense to them.

These are also people who would never use a broker because they don't consider daycare a fungible good. It's not like sourcing a trading venue for your sovereign bonds - by the time you are playing this game, you have very specific expectations about the philosophy of education, setting, religious context, etc.

Meanwhile, the poor people already have grandma living in the house, she gets SSI so the daycare is subsidized. And if there's no grandma in your house, there's one next door who'll keep an eye on your kid too for a couple of bucks an hour.

This is a very interesting example of where religious communities outperform the secular. For example in NYC is not uncommon to meet Orthodox Jews with 10+ kids. The secular can't relate to what it's like to have to deal with child care for 10 kids. But in those communities, it's routine - your family and neighbors help you out and you get through it. The fact that as seculars we fail to achieve that for ourselves is an interesting signal in my opinion.

For anyone interested in the cost of child care and how broken the current systems are, there's been some great work happening in Texas to understand solutions which has been driven by research and feedback from childcare workers, childcare company owners, childcare advocacy groups, and parents: https://pn3policy.org/resources/workgroup-recommendations-to...

I'd recommend reading the linked briefs for a high level overview.

Costs are really out of control. My friends in a relatively low cost of living city (San Antonio, TX) are going to pay upwards of $1200/month for daycare for their soon to be 6 month old, once their family member providing childcare needs to return home. That's essentially an extra mortgage payment in this part of the state. There are also very long waiting lists, so long that my friends are encouraging families to get on waiting lists prior to conception!

This is all anecdotal, but I believe they did their research on this given their childcare needs.

I pay $1200/mo per kid in NC

That's a good price in most metros.

How about just a tax deduction for qualified childcare costs up to a certain amount?

Parents usually want to vet their child care and not just ship their child to whichever person is offering the lowest rates for the day.

You can fund a dependent care flexible spending account with pre-tax dollars up to $5000 per household currently. That will cover ~2 months of care where I live, but I guess it's better than nothing at all...

There is one: dependent care tax credit. Admittedly, it's not much, with a max of 3K per child (total max 6k), less if you make more money. There's also the regular child tax credit of 2K per child.

How is a backlog the sign of a market failure? If anything, this shows a responsible way to manage demand while still maintaining power over the transaction. It also serves as a subtle threat to parents: "Cooperate, or we will send you on your way and contact the next person on the waiting list".

Also: Didn't Nintendo set out to create these dynamics with their console launches? Don't they intentionally manage overhead by creating a waiting list?

Generally in economics, if there is a waitlist, then the business is not charging enough. Hence a failure.

The reasons for this failure are discussed by other people here.

One thing to keep in mind is that this is almost exclusively a US problem.

Nearly all other countries have significantly more time off for infant care. And as infant care is the most expensive part of daycare most other countries don't have such issues (toddlers subsidize infants in most daycares)

Childcare is never as good as time with a parent.

We sacrifice our time with our children for future career earnings to maximize lifetime income. People in this discussion throw around terms like GDP growth due to increased labour market participation from working moms...

It's ok just to accept what's happening. its not like you don't know what you're doing. Life is full of unpleasant tradeoffs.

I think you're overestimating how good parents some people are.

In Quebec they moved kindergarten down to 4 years old because they realised some kids are very "under-stimulated" at home and it sets them for failure for their whole academic career.

I live in one of those cities that regularly makes the best places to live lists. I’m not able to get a spot in a before or after school program for my children, regardless of price. The one child center that serves the school has already filled their slots for the fall.

Seems like this well educated, high income market is still organized around one parent not working full time or a grandparent living nearby.

I completely agree. There is an assumption of one or the other and not enough childcare supply to meet the true demand of two working parent communities.

We paid a lot of money for childcare when there was a (possibly illegal) daycare a few apartments down with a lady watching a bunch of kids. She only wanted $500 a month but we paid $2000 to an expensive one.

Imagine advocating for cut rate care for your own children. Considering I’m leaving my most priceless thing with strangers it isn’t crazy to me that it’s expensive.

A significant part of what you were paying out is liability insurance etc and not necessarily better care.

I don’t mean to say I want the illegal daycare outlawed. I’m sure the lady was fine. I just think it’s absurd that we expect daycare to be cheap when you are entrusting the most valuable thing in your entire life to strangers. People think this should be free?

> I just think it’s absurd that we expect daycare to be cheap when you are entrusting the most valuable thing in your entire life to strangers.

They aren't strangers if you take the time to get to know them, and their current customer families, beforehand.

And some nice fat corporate profits. The lady down at the corner might not be as illegal as you think. Many jurisdictions allow for at-home day care, usually capped at a certain number of kids per caregiver, and it's much lower than the head-count at the corporate ones.

Consider what you're actually getting for the price difference and where the extra money goes. Probably most of it doesn't actually go to the employees, so are you sure that paying more makes any real difference?

"Let us assume that the parents get neither utility nor disutility from spending time with their infants."

Umm...

The "market failure" is that daycare is a low-margin business that needs to service cash-strapped parents near where they live. The "market" that's been keeping wages stagnant while cost of living, especially cost of land, has been skyrocketing.

That policy wonks are laser-focused on the "market" is the problem. This is one aspect of the capitalism-fueled social collapse.

Hilarious to call it a market failure. If you deregulate childcare, something or another will appear at every price point. You may not like some of those solutions, but they'll exist.

In markets without regulations, disreputable daycare will straight up sell children. Doesn't quite qualify as "hilarious" in my book.

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