Family Law Prof Blog

Editor: Margaret Ryznar
Indiana University
Robert H. McKinney School of Law

Sunday, September 19, 2021

Treasury Department: America’s ‘Unworkable’ Child-care System Is Failing Families

From CNBC:

The Treasury Department has determined that the nation’s child-care system is “unworkable,” saying it is plagued by market failures that put quality care out of reach for many families.

In a report released Wednesday, Treasury details the struggle many parents face to afford child care, especially as bills pile up before their peak earning years.

Treasury is making the case for federal government support for paid family leave, universal preschool and significant tax credits for parents and dependent care as Democrats in Congress work to write a social-spending bill that could total $3.5 trillion.

The Treasury report found that the average family with a child younger than age 5 must devote 13% of its income on care, which is unaffordable for many families. That inability to pay is what economists call a “liquidity constraint”: Parents cannot spend more on child care than they earn on the job, and they cannot borrow from their future earnings to cover the cost. 

At the same time, leaving the labor force comes with penalties of its own. The report cites a study by Harvard economists Claudia Goldin and Larry Katz that found that an 18-month break from work was tied to a 41% decrease in earnings for women with MBAs.

Read more here

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