In this report, we focus specifically on two occupations in the care industry: early child care and education (“child care”) and home health care. The workers in these two occupations are overwhelmingly women and disproportionately Black, Hispanic, and Asian American/Pacific Islander (AAPI) women and immigrant women. Systemic racism, sexism, ableism, and xenophobia, in the form of labor market discrimination and occupational segregation, mean that these essential workers have little bargaining power, resulting in average wages half the amount of average wages for the workforce as a whole.

The 2020 pandemic and recession laid bare just how inefficient and cruel the existing care system is. It is unaffordable for many families—including the families of care workers themselves—while simultaneously stranding many care workers in poverty. Given the high-contact, personal nature of care work, child care and home health care workers were among the workers most impacted when public health concerns forced shut schools, day cares, and businesses. The impacts of the recession—including income loss and large shares of women having to leave the workforce to manage caregiving responsibilities at home—left care workers in even more financial insecurity and stress than they were already facing.

While policymakers and the administration have recognized the urgent need to pay care workers more equitable and sustainable wages, determining a fair wage standard presents some challenges. This report builds a framework for thinking about how to set higher wages for care workers. As noted above, we focus our analysis on workers within two occupations in the care industry: child care, also referred to as early child care and education (ECE), and home health care.

First, we discuss the historical and ongoing systems of oppression that have influenced the development of the care sector, and we provide an overview of who care workers are in terms of demographics. These are some of our key findings:

• The development of the care sector and disparities within the care sector are fundamentally intertwined with historical and current ableism, sexism, xenophobia, and racism. Globally and in the U.S., care work has been devalued as “women’s work” and is primarily performed by women who face discrimination across other identities, such as immigrant and/or Black and Hispanic women. The devaluation of care work itself, along with the additional layers of discrimination many care workers face, in turn influence and perpetuate low wages and poor conditions in this industry.
• The average wage for early care and education workers and home health care workers is $13.51 and $13.81, respectively—about half the economywide average hourly wage. For a full-time worker, this translates to less than $30,000 a year.
• Care workers are less likely to receive nonwage benefits than the workforce as a whole: Over half of workers overall have employer-sponsored health insurance, compared with one-fifth of child care workers and one-quarter of home health care workers. One-third of workers overall have retirement benefits compared with only about one in 10 child care workers and one in eight home health care workers.
• Child care workers are overwhelmingly women (94%) and disproportionately Black (15.6%, compared with 12.1% in the overall workforce) and Hispanic (23.6%, compared with 17.5% in the overall workforce).
• Similarly, home health care workers are also largely women (88.6%) and disproportionately Black (23.9%) and Hispanic (21.8%).
• More than one in five child care workers and roughly three in 10 home health care workers were born outside the U.S.

Building off existing literature on care work and pay penalties, we create and present a set of benchmarks for setting wages for child care and home health care workers. Key findings in our investigation of appropriate benchmarks include the following:

• A minimum standard for care workers is a wage that would allow them to support a young child on just their own wages in the least expensive metro area. We calculate this minimum living wage to be at least $21.11 per hour.
• A standard that reduces the penalty for doing care work; reduces the penalties care workers face because of gender, race/ethnicity, or on the basis of their citizenship status; and adds the premium they would receive if they were unionized, yields a wage starting point for home health care and child care workers of $22.26 and $21.90, respectively.
• Using our peer countries as models, not only for wage standards but also for standards of access to care, we find a wage benchmark for home health care workers of $25.95.
• Using other early educators as a model while reducing the pay penalties those early educators themselves face, we find child care workers should be paid at least $25.30.
• Higher wages must go hand in hand with other nonwage benefits such as paid leave, health insurance, and retirement benefits.

We conclude with an analysis of the economic costs incurred from the current care system and the economic benefits of paying higher wages:

• Higher wages would drastically improve care workers’ lives and financial security, allowing them to cover their costs (including the costs of care) more easily.
• Better pay translates into higher retention, lowered turnover, and increased possibility for recruitment, which all help employers as well as care workers, who bear the burden of short-staffing and constant change.
• Those receiving care, including people with disabilities, older adults, and children who are entrusted to care workers, would benefit from the stability of a more secure care workforce.
• Investing in early child care and education has been found to have a range of positive macroeconomic benefits, including a stimulus effect from increased spending by care workers; an increase in women’s labor force participation and parental earnings, as access to child care allows parents to reenter the workforce; increased earnings in adulthood for children who are in ECE programs, as well as intergenerational effects on their children; more jobs created; and a consistent positive impact on the economy.

Investing seriously and significantly in care infrastructure—in which higher wages for care workers is a key plank—would be transformative. Given that a public role already exists in this sector, the barriers to implementing this are not as steep as they would be otherwise. The foundation has already been laid. Given this foundation, policy action could have an especially positive and determinative effect on raising care wages.

Meaningful public involvement is not just a matter of more funding, but also of taking an active role to help enforce stronger labor protections and new wage standards. Many of our peer nations with better-functioning care sectors model a more comprehensive public role in which the state is involved in decisions about what care benefits will be made available to its residents in tandem with enforcing healthy working conditions and ensuring better compensation for care workers.

A greater public role in codifying and investing in higher care wages can make this sector and the U.S. economy as a whole fairer and more efficient. Raising care wages not only represents a critical opportunity, but it is also a long overdue moral responsibility. Care workers deserve to share in the economic security and happiness that their work helps to provide for millions of people.

Background on child care and home health care workers

Often called “the workforce behind the workforce,” care workers—whether those providing care to elderly or disabled adults or those providing early care and education to young children—are a vital pillar of our economy and society. Care workers are present in people’s lives every day and their work impacts nearly every person across the nation at one time or another. Care workers span many different occupations, have different qualifications, and have varied job responsibilities. While insufficient pay, benefits, and respect is pervasive across care jobs, it is important to recognize that the industry is not a monolith. This report focuses specifically on two vital care work professions: home health care and early child care and education.

Who are home health care workers?

Home health care workers can generally be split into two groups: those who are “agency-based”—paid through a Medicare-certified home health care agency, but working in clients’ homes—and those who are paid directly by clients (Wolfe et al. 2020). Over half of the funding for long-term direct care comes from Medicaid reimbursements (Campbell et al. 2021).

Home health care workers provide a range of personalized and client-specific supportive services to people with disabilities and elderly adults. Home health care is often the lynchpin that allows these clients to remain in their own homes and live as independently as possible, rather than having to move into a residential care facility (SEIU 775 and CAP 2021). Research has shown that home- and community-based care, of which home health care is a subset, also supports and alleviates the physical, emotional, and economic strain put on family caregivers (Women Effect Action Fund and NDWA 2021).

Home health care workers’ day-to-day work encompasses a wide range of physically demanding and deeply specialized tasks, including managing medication, grocery shopping, laundry, cooking, cleaning, helping clients with getting dressed or transported, and more. These are all life-enriching tasks that require strong communications skills as well as an intuitive awareness of client needs.

Who are child care workers?

We also examine early child care and education workers. Child care is funded through a range of sources, including government block grants such as the Child Care & Development Block Grant (CCDBG) program, Head Start, and Temporary Assistance for Needy Families (TANF), as well as financial payments from parents or other family members.

Like home health care work, early child care and education work is highly skilled and labor intensive. Child care work has long been devalued as just “looking after” children, when in reality, child care combines education with skill development and acquisition. As an early educator herself says, “We do more than teach, we build” (Boldin-Woods 2021). Child care workers are early educators who nurture, educate, foster developmental and language skills, and more.

The skills required to be successful early child care educators vary widely with the ages of those they are caring for, as each age group—from infant care through grade-school-aged children—requires different levels and methods of care. Care of very young children and infants can be physically and emotionally demanding.

Where does current funding come from?

The existing U.S. landscape for funding of care work is an interconnected web of different public funds combined with private pay, and the sources of funding vary widely by state and sector. Funding may come from means-tested public programs such as Medicaid or TANF, public universal benefits such as Medicare Advantage (for long-term care), private insurance, or private pay from parents and households (Campbell et al. 2021).

In some cases, the costs are borne more on one side: Estimates show that about 60% of child care costs are borne by parents and 40% are paid through various government sources (U.S. Treasury Department 2021; Oncken 2016). The funding system is especially complex given that within states there is much variation and recent experimentation with child care provision, from subsidy block grants to universal pre-K programs.

Separate measures of home- and community-based care show that 58% of these costs are funded through Medicaid (Campbell et al. 2021; Women Effect Action Fund and NDWA 2021). Exact breakdowns are hard to calculate, and it is likely many people use a mix of personal funds and funds from government programs such as Medicaid, the Child Tax Credit, TANF, and others. But the bureaucratic burden of applying for these funds, along with often unnecessarily stringent work and eligibility requirements, also means that many who should qualify for, and are in need of, these public funds do not receive them.

What is clear is that both child care and home health care have existing public funding pipelines and infrastructures. This preexisting public role means that there is strong potential for increasing the effectiveness of these systems through significant public investment (Gould and Blair 2020).

Public grant programs are one of the main ways households with lower incomes can access and afford child or elder care, so increasing funding for these programs (and thereby decreasing the cost burden from private, personal sources) is an equity issue. If we don’t make care more affordable through public investment, care will become increasingly unaffordable for these lower-income families (EPI 2020). Child care is also becoming increasingly unaffordable for middle-income families. And yet, despite being so expensive to access, the care industry is simultaneously unable to provide decent jobs to those doing this highly sought-after work. All of these concerns point to the need for increased government investment.

A strong public role can also ensure greater funding for enforcement of labor standards and working conditions. The care sector is notorious for workplace violations (as well as employee misclassification) leading to lowered or even stolen wages (Looman 2021).

Finally, it is important to note that higher government funding on its own does not always lead to equitable outcomes. Without safeguards and guidelines, states may misdirect or waste funds (Chappell 2020). Agencies must also enact provisions to ensure that federal funds actually reach the care workers themselves and not administrators or owners (CSCCE 2021).

The current economic situation of child care workers and home health care workers—a snapshot of low wages and benefits, poor working conditions, and little worker power—did not develop overnight or in a vacuum. Rather, the care landscape and resulting treatment of care workers is the result of a long history of devaluing care work and care workers.

Systems of oppression devalue care work and care workers

Care work allows humans to survive and thrive across generations. It encompasses tasks that can seldom be forgone or fulfilled without workers. Yet our societies and economic orders acutely undervalue care work and discredit how vital it is to our lives. This devaluation of care work is deeply rooted in ableism, sexism, xenophobia, and racism. We cannot remedy the precarity and immiserating wages associated with care work without acknowledging how these systems of discrimination shape the conditions of care work.

The gendered nature of care work

The undervaluation of care work—and of the people who predominantly shoulder care work—is a global phenomenon. Across the world, women do significantly more care work than men, both unpaid care work and in care occupations (Coffey et al. 2020; Addati et al. 2018; Connelly and Kongar 2017). Within the paid care sectors, women make up two-thirds of the workforce globally (Coffey et al. 2020). In the United States, the vast majority of care workers are women, as shown in Figure A. While women make up 46.9% of the entire workforce, they make up 88.6% of the home health care workforce and 94.0% of the child care workforce. On the whole, women are overrepresented twofold among care workers relative to their share in the overall U.S. workforce.

Figure A

There is an intrinsic connection between unpaid and paid care work. Care provision has historically been unpaid reproductive labor1 that women have done for generations, mostly within households, and without the dignity and valuation given to other work done in the productive structure of capitalist economies (Glenn 1992). Paid care work is the commodification of this work that has been traditionally treated as “women’s work” and given little to no status. Working conditions and low pay for paid care jobs reflect this, including the extent of scrutiny and suspicion regarding whether they are “skilled” jobs. Thus, care work in itself is treated as having little social value—and is therefore not well rewarded—despite how essential it is.

Through intense organizing efforts, advocates for care workers have sought to challenge these prevailing narratives and working conditions—and have made some headway (NDWA 2019). Unfortunately, workers in most care occupations still suffer from low wages, poor working conditions, and lack of dignity in the work they perform. However, the brunt of this is not equally felt. We see this when we further analyze the demographic breakdown of the care workforce below.

The gendered nature of care work is true for almost all occupations within the paid care industry: Care work is overwhelmingly performed by women. A select few care occupations, most notably doctors, break from these gendered and racialized trends, and these occupations have been able to secure prestige and higher pay, in part by limiting entry into these professions and setting strict education standards and licensing requirements. The ability for these handful of professions to attain and maintain leverage, along with the accompanying higher pay and prestige, are in themselves reflections of social hierarchies and power dynamics.

Historical racism and sexism underpin the composition of the care sector

Around the world, gender discrimination is compounded by discrimination based on other identities including race or ethnicity, class, and immigration status (Coffey et al. 2020). In the care workforce, we observe a concentration of workers who face discrimination across not just one, but across multiple identities: Not only is care work overwhelmingly performed by women in the U.S., but care work is also disproportionately performed by Black women and other women of color. And, as we discuss in the following section, many of these workers are immigrants (of varying statuses) as well.

The concentration of exploited groups in care occupations is part and parcel with the devaluation of care work as a profession. And the consequences of being subordinated across multiple identities reinforce and amplify one another and are reflected in the observed outcomes—low wages and poor working conditions—we see in the care industry.

Figure B expands on Figure A by disaggregating women into five groups by race and ethnicity: Hispanic women of any race, non-Hispanic white women, Black women, Asian American/Pacific Islander (AAPI) women, and women of another race. Compared with their shares in the workforce overall, Black, Hispanic, and AAPI women are far more likely to be home health care workers. In particular, Black women are more than four times as likely to be home health care workers relative to their shares in the workforce overall. Similarly, white, Black, and Hispanic women are overrepresented in the child care workforce.

Figure B

Care work being predominantly borne by women of color dates back to slavery (Glenn 2012). In the second half of the 19th century and onward, Black, Mexican American, and Chinese American women served as inexpensive sources of labor in a growing market for workers to do the in-household care work that formerly enslaved people used to do (Glenn 1985; 1992). In the 20th century, care work became increasingly commodified in jobs outside the household as well. The composition of the resulting workforce was formed along both gender and racial lines, specifically at their intersection. The racial- and gender-motivated maltreatment of these workers translated into lack of protection and abysmal pay in these roles.

This racial- and gender-based discrimination had significant long-term structural, legislative, and policy impacts. For example, domestic workers were excluded from most New Deal reforms and denied access to unemployment insurance and other social insurance benefits provided to other workers (Wolfe et al. 2020; Edwards 2020). Only in 1974 were some private household domestic service workers incorporated under the Fair Labor Standards Act and made eligible to receive the federal minimum wage (Derenoncourt and Montialoux 2021). Unfortunately, Labor Department regulations issued shortly thereafter explicitly exempted “companionship” workers—those who serve as paid companions for elderly or disabled persons (NELP 2015). After fierce lobbying and organizing efforts, the rules were eventually broadened to include most home health care workers (Connolly 2015). The low (or no) wages, abysmal working conditions, and lack of empowerment in this industry that we still observe today are deeply entrenched in our history and economic framework.

Xenophobia shapes care workforces globally

Immigrants are frequently more concentrated in care professions relative to their shares in a country’s population or workforce. For some immigrants, language barriers, racism, and immigration status limit their employment opportunities and constrain them to take care jobs that are ill-paid and afford them little dignity as workers.

Immigrant workers are frequently overqualified for the care jobs they perform. Many have levels of education and advanced qualifications that are much higher than the qualifications required for their current jobs (Global Ageing Network and LTSS Center 2018). But medical degrees obtained elsewhere are often discredited or dismissed in their current country of residence—so if they want to use their training and continue doing health care in some form, these lower-paid care jobs become their only option.

Immigrants are disproportionately likely to be domestic care workers—working in people’s homes—facing especially precarious job circumstances. Globally, one in five paid domestic workers are migrants (Coffey et al. 2020). In the U.S., more than one in five child care workers and roughly three in 10 home health care workers were born outside the U.S.—either naturalized U.S. citizens, permanent residents, undocumented immigrants, or temporary migrant workers employed through “nonimmigrant” visas. As detailed in Figure C, while women who are naturalized U.S. citizens account for just 4% of the workforce overall, they make up 13.9% and 9.8% of the home health care and child care workforces, respectively.

Figure C

This overrepresentation extends to noncitizens. There are a few “nonimmigrant” visas that allow U.S. employers to hire domestic workers or child care workers temporarily. These include a specific program under the B-1 business visitor visa, as well as A-3 and G-5 visas (Thrupkaew 2021). Perhaps the most well known is the State Department’s au pair program, which is part of the broader J-1 visa program for “cultural exchanges” (Costa 2019a).

In the United States, temporary work visa programs are employer-driven and rely on employer sponsorship (Costa and Martin 2018; Costa 2021). Workers on such visas typically have little power to negotiate for higher wages or better working conditions with their employers (Costa 2019b). These workers also often find it difficult to report abuses because of their dependency on their employer. The temporary work visas that facilitate employment of care workers have been associated with shocking scandals of worker abuse, exploitation, and forced labor (Kopplin 2017; ILRWG et al. 2018; Costa 2019a; Thrupkaew 2021).

In this way, the U.S. is not dissimilar to countries that are known to have particularly onerous immigration sponsorship programs, such as the kafala system found in Gulf Cooperation Council countries.2 In the kafala system, a worker’s immigration status is directly tied to their employer and they cannot seek another employment opportunity without their employer’s permission (Coffey et al. 2020; Addati et al. 2018). This makes domestic workers under such a system incredibly vulnerable and—as in the U.S.—discourages reporting of abuse.

All of this reinforces that a country’s immigration policies are a critical vehicle for securing a “high road” care economy and enforcing labor rights (Addati et al. 2018; Costa 2019b). Employer groups in the United States have prioritized new flows of temporary migrant workers to fill a range of occupations, including care work, and have recently litigated to remove the requirement that employers pay care workers on visas at least the state minimum wage (O’Neal 2021). Keeping immigration policy from being used by employer groups to degrade standards in the care industry is a near-term challenge that is worth highlighting.

Ableism further amplifies the devaluation of care work

Sexism, racism, and xenophobia are integrally tied to the devaluation of care work and of those who predominantly perform it. Ableism adds a further dimension to this devaluation by dehumanizing and devaluing two specific groups of people, namely disabled people and the elderly.

Altiraifi (2019, 3) defines ableism as “structural and interpersonal oppression experienced by people with disabilities or those presumed or determined to be disabled.” Relatedly, there is a social component to disability, in which “disability refers to a socially constructed system that categorizes, values, and ranks bodies and minds as normative or marginal” (Altiraifi 2019, 3). Thus, those who are dependent on care because of disability are not seen or treated as equal members of society and are marginalized based on how much they are viewed to contribute to the productive structure of the economy. Therefore, the labor rendered to provide the support and services they need is necessarily devalued. As a result, there is a close link between care workers and people with disabilities and older adults as subjects of an overlapping marginalization—and, indeed, for some care workers who are themselves disabled, this connection is even more profound (Chang 2017).

Ableist narratives and policies devalue and dehumanize people needing care in ways that are inextricably linked to the racialized systems of oppression that devalue care workers’ labor: The same ideologies that dehumanize and marginalize people with disabilities also exploit immigrant women of color and limit their options to precarious jobs (Chang 2017). Consequently, the fight for better working conditions and pay for care workers is inseparable from also centering and improving conditions for people with disabilities and older adults (Novack and Cokley 2020).

Wage benchmarks for care work

We’ve already established that care workers are undervalued and underpaid in the United States and across the world. Our objective in this section is to provide policymakers with a broad economic framework for thinking about how much care workers should be paid in the U.S. labor market. Using the research literature and microdata, we provide several considerations for setting pay standards for care workers, with specific estimates for home health care and child care workers. In Table 1, we present current wages and propose various benchmarks to reduce pay penalties and improve wages in these jobs. These benchmarks include the following:

• a minimum standard for a living wage for all workers;
• an estimated wage standard that (1) reduces wage penalties currently faced for performing care work; (2) reduces penalties associated with racial and gender discrimination; and (3) adds an estimated union wage premium for care workers;

• a standard for home health care workers based on international standards; and
• a standard for child care workers based on other early educators in the U.S. economy.

We also provide in this section a more detailed discussion for understanding the research basis and assumptions built into our benchmarks.

Table 1

We begin by identifying and defining the workers we are looking at. To ensure sufficient sample sizes for average wages (as for the demographic analysis presented earlier), we pool three years of data from the Bureau of Labor Statistics’ Current Population Survey, from 2018 to 2020 (EPI 2021a). We then identify home health care workers and child care workers by their respective relevant industries and occupations.3 Average wages are $13.81 for home health care workers and $13.51 for child care workers, in 2020 dollars.4 In contrast, the average worker wage economywide is $27.31 per hour.

Note that Table 1 proposes benchmarks for care worker wages only, not for total compensation or working standards. The reality is that, in addition to suffering from low wages, both child care and home health care workers are unlikely to receive nonwage benefits such as employer-sponsored health care coverage, pensions, or paid medical or family leave.

Figure D shows the shares of the workforce who have access to health insurance and pension coverage on the job (Flood et al. 2021). While just over half (52.2%) of all workers have an employer-sponsored health insurance plan that is at least partially paid for by their employer, only one-fifth (20.7%) of child care workers and one-quarter (25.8%) of home health care workers have that benefit.

Workers overall are less likely to have pension coverage (a pension plan or other retirement plan at work) than they are to have health insurance coverage: Just over one-third (35.0%) of the workforce has a workplace retirement plan. But an even smaller share of care workers have pension coverage: 10.2% of child care workers and 12.6% of home health care workers.

Figure D

In addition to setting higher wages for care workers, we must also work to ensure that they receive sufficient nonwage benefits, such as health coverage, a retirement plan, fair scheduling, and paid leave. Many child care and home health care workers, because they make such low wages and receive little to no additional employer support in terms of benefits, are forced to juggle multiple jobs and patch the gaps with public benefits programs such as Medicaid, housing assistance, energy assistance, Supplemental Nutrition Assistance (SNAP), Special Supplemental Nutrition for Women, Infants, and Children (WIC), or cash assistance/TANF (Cooper 2016).

Economywide wage standards

The first set of benchmarks we propose for care worker pay is based on the goal of improving economywide wage standards.

Raising the minimum wage

A starting place for all workers should be no less than $15 an hour. A minimum wage of $15 would finally increase the real purchasing power of low-wage workers above the minimum of 50 years ago (Cooper, Mokhiber, and Zipperer 2021).

Raising the minimum wage to $15 per hour would benefit over 19 million essential and front-line workers, raise wages for one in three Black workers and one in four Hispanic workers, and help lift millions out of poverty (Cooper, Mokhiber, and Zipperer 2021). Furthermore, more than half a million child care workers and nearly 2 million home health care workers would benefit from a $15 minimum wage (Wolfe and Zipperer 2021a; Wolfe and Zipperer 2021b).

Determining a living wage floor

While setting a higher economywide minimum wage is an important and necessary first step, it is not the final goal. A full-time, full-year worker making $15 an hour cannot support a family at a decent standard of living anywhere in this country. To better assess the true cost of living, EPI’s Family Budget Calculator estimates area-specific incomes needed to cover basic expenses like housing, food, transportation, health care, taxes, and other necessities (Gould, Mokhiber, and Bryant 2018; EPI 2018). The Brownsville/Harlingen metro area in Texas is the lowest-cost metro area to live in, according to EPI’s Family Budget Calculator (EPI 2018), but even in this lowest-cost metro area, a worker trying to make ends meet for themselves and one young child on just their own wages would have to earn a full-time hourly wage of at least $21.11 (EPI 2018).5 A worker living in any other metro area in the country would of course need an even higher wage—a far higher wage in some areas—to attain a decent standard of living.

Even apart from the basic moral obligation to pay a living wage for a day’s work, there are good reasons that care workers should be paid substantially more than $15 for the work they do. Care workers do vital and demanding work. This work should be assigned a monetary compensation value that is more commensurate with its value to society. Care workers should be also compensated at a level appropriate to the demands of the work. Finally, in order to meet growing needs—and not leave large shares of the population stranded without needed care—we will ultimately have to pay wages and benefits at a level that will attract sufficient numbers of workers to meet the demand.6

Reducing pay disparities

As discussed above, pay inequities experienced by care workers have multiple root causes. Care work itself has been historically undervalued. Given that care workers are predominantly women, and disproportionately people of color and immigrants, they are also impacted by historical and current sexism, racism, and xenophobia and associated gender and racial/ethnic wage gaps. Further, care workers, like millions of other workers in our economy, have faced lower wages because of their lack of bargaining power in the labor market. In our second set of benchmarks, we examine the penalties these workers face for the work they do and for who they are, and we present an alternative pay proposal that reduces these barriers to higher pay.

Measuring the care penalty

A wide body of economic research has identified and measured a care penalty—that is, the lower pay received by care workers after controlling for characteristics of care jobs, skills required, or qualifications.

One of the foundational studies in care penalty research found that care workers faced a 5–6% penalty compared with similar workers in other fields (England, Budig, and Folbre 2002). While this study makes a significant contribution to the field, there is good reason to believe that these 2002 estimates understate the penalty faced by care workers both then and today.7

The latest research from Budig, Hodges, and England (2019) on this topic finds a significantly larger care penalty than the 2002 study. In the 2019 study, the authors usefully separate out the various care occupations to isolate the differential effect of those that require specific credentials—an educational degree, coursework, and/or special certification/licensing—from those that do not require such credentials.8 The authors identify child care workers, nursing aides, and health aides among the low-education/high-licensing fields and find a 15% pay penalty among women and a 6% penalty among men in these fields.

A more recent study from the Economic Policy Institute—which controls for key demographic characteristics including gender, race/ethnicity, age, education, and census division—finds that home health care workers experience a wage gap of 27–36% relative to similar workers who are not in care jobs (Wolfe et al. 2020).

While the penalties vary widely across these studies, the common thread is that care workers face a penalty for choosing care work. After reviewing these and the broader care penalty literature,9 we ultimately chose to rely on Budig, Hodges, and England’s 2019 findings—which are in the middle of the range of estimates, and which are based on methodology that attempts to tease out a causal effect—to build our benchmark for a wage that reduces the care penalty.

Reducing care penalties

To build our next set of benchmarks, we first apply the care penalties found in Budig, Hodges, and England’s 2019 analysis. To that end, we reverse out their 15% pay penalty for women and the 6% pay penalty for men in each care sector. Because of the hugely disproportionate number of women in both care sectors (as shown in Figure A), this equates to an overall pay penalty of about 14%. Starting with current care worker wages and then reducing care penalties by 14%, we find a benchmark for care wages to be $15.74 and $15.47 for home health care workers and child care workers, respectively.

Reducing demographic penalties

However, the penalty care workers face in the labor market is not limited to the fact that care work is largely undervalued and underpaid. The care pay penalty also exists because the population who does the work is undervalued. To better understand and address this dynamic, we must look more closely at who care workers are and the historical and social discriminations they have faced and still face today.

By the mere fact of their demographic characteristics, namely their gender, race, ethnicity, and citizenship status, many care workers have faced historical and current barriers to employment and equal pay. These demographic penalties reduce the outside options care workers have in the labor market, thus reducing their bargaining power or leverage to receive higher pay in their respective care-working professions. The additional penalty these workers face in the labor market at large needs to be taken into account when determining just how much care workers need to be paid to mitigate these effects.

To measure those demographic penalties, we use a multivariate regression model to tease out a reasonable estimate of the penalties workers face in the labor market based on their gender, race/ethnicity, and citizenship status, controlling for typical human capital measures like education and experience, which tend to impact wages.10 Then, we apply those demographic penalties to the shares of the workforce represented by each of those groups.11 Because these workers’ outside options are limited due to historical and current labor market discrimination, a fair wage must address all of these penalties. Reducing these measured demographic penalties, on top of the care penalty reductions we calculated above, yields a new benchmark wage of $20.20 for home health care workers and $19.87 for child care workers.

Adding a union premium

Reducing the care penalty and the demographic penalties are two necessary steps to improving care worker pay. Another important step is to harness the bargaining power that results from increased unionization to boost wages and working conditions in these industries. While a strong public sector plays a crucial role in both funding and labor enforcement, unions are another critical intermediary in negotiating and bargaining for higher pay and benefits.

A recent New York Times article, featuring the stories of two home health care workers in two different states, finds that home health care workers can face very different working situations depending on the presence of unions in their state: Home health care workers in states with high levels of union membership have higher wages and are more likely to have paid time off, medical and dental insurance, retirement benefits, and more, while home health care workers in states with low levels of unionization have lower wages and few to no benefits (Schulte and Robertson 2021).

The union premium is the additional pay unionized workers—workers who are either union members or covered under a union contract—receive relative to the pay of nonunionized workers. We estimate the union premium in a regression framework controlling for other individual and job characteristics, such as the worker’s education and employment sector. On average, workers covered by a union are paid 10.2% more in hourly wages than their nonunionized counterparts (EPI 2021b). Our analysis also shows that, in addition to having higher wages, unionized workers are more likely to have better benefits such as paid leave and health care, both of which are particularly crucial during a global pandemic (Gould 2020).

If care workers had leverage over their pay similar to that found from being in a union, care workers could reap a similar increase in pay (McNicholas et al. 2020). Applying this premium to care workers’ wages, on top of the care work penalty and demographic penalty reductions estimated above, wages for home health care and child care workers would be $22.26 and $21.90, respectively.

Adopting international standards for home health care workers

Around the world, care work is incredibly gendered and mostly performed by women who face additional forms of systemic oppression across identities such as ethnicity or race, class, and immigration status (Coffey et al. 2020). Despite the fact that the undervaluation of care work and the resulting difficulties in securing a stable care workforce are global phenomena, the situation for U.S. workers is particularly dismal when compared with peer countries.

The involvement of the state in both funding care provision and overseeing its workforce is the through line among nations with better-functioning care sectors. In a detailed examination of care work and its workforce, the International Labour Organization (ILO) concludes that “public provision of care services tends to improve the working conditions and pay of care workers and unregulated private provision to worsen them, regardless of the income level of the country” (Addati et al. 2018, 166). The ILO identifies Denmark, Finland, Norway, the Netherlands, and Sweden as a cluster of nations with very high levels of employment in the care sector. These nations have a number of things in common that inform their stronger care workforces. Among them is a universal right to access care services.

Applying the EU average wage for home health care workers

These conditions translate to significant benefits for care workers. Finland, for example, has one of the highest median hourly wages among OECD countries for care workers in the long-term-care sector (OECD 2020, Fig. 1.6). Another useful earnings statistic is the average hourly wage in various care sectors as a share of the national average hourly wage across the economy. Across the current 27 European Union (EU) member states, nonresidential (i.e., caring for a client in their home rather than in a residential care facility) long-term-care workers are paid 80% of the average national hourly wage. Extrapolating to the U.S. context using average hourly wages in the U.S. labor market, home health care workers would be paid $21.85 per hour using this benchmark.

Applying the top European wages for home health care workers

Among 29 countries analyzed—the 27 EU member states, plus Norway and the United Kingdom—the Netherlands and Norway were tied for the highest wage ratio (relative to the average national wage) for social services workers in the nonresidential long-term-care sector (i.e., the home health care sector), at 95% (Dubois 2021). Applying this 95% ratio to the U.S. context, we arrive at a benchmark of $25.95 for home health care wages.

Adopting child care wage standards based on other teaching professions

Early child care and education workers must have many of the same skill sets and expertise as elementary and middle school teachers. These care workers have a vital influence on children’s cognitive, social, and emotional development (Penn State 2011). While they are sometimes seen as akin to babysitters, these early educators in fact perform a role similar to that of other teachers of young school-age children. Therefore, they should be paid as much as similarly educated teachers of elementary and middle school teachers (McLean et al. 2021).

Applying education-adjusted elementary/middle school teacher salaries to child care workers

We begin creating this benchmark by estimating average weekly earnings for elementary and middle school teachers by educational attainment (EPI 2021a).12 We apply these earnings to child care workers based on their own level of educational attainment and on the share of child care workers with each level of education in five categories: less than high school, high school, some college, college, and advanced degree.13 We then return to a measure of hourly wages and find that a more fair wage standard, using this benchmark, would pay the average early child care and education worker $21.22 an hour.14

Reducing the teacher penalty

Unfortunately, elementary and middle school teachers themselves face substantial wage penalties in the labor market compared with similarly credentialed workers in the economy overall (Allegretto and Mishel 2020). Setting child care wages modeled only on teacher wages perpetuates the pay disparities teachers face and embeds those disparities into the child care pay standard. Therefore, we attempt to remove this pay penalty when setting our final wage standard for child care workers by reversing out the teacher pay penalty of 19.2% to the education-adjusted elementary and middle school pay standard (Allegretto and Mishel 2020). Removing the teaching penalty yields a reasonable wage standard of $25.30 for child care workers.

Benefits of paying workers more for care provision and quality

Care workers are severely underpaid, and, as outlined above, they face multiple pay penalties. Paying care workers more is not only possible and long overdue, but it would result in far-ranging positive consequences for those they care for and the macroeconomy. Along with providing much-needed financial stability and economic security to care workers themselves, higher wages in the care sector would produce a range of positive benefits to people with disabilities, older adults, and children; employers and institutions; and the economy as a whole.

To put it simply, raising wage standards for care workers makes good economic sense. The existing low-wage care system is highly precarious and inefficient, not to mention extremely harmful to care workers themselves. The persistent low wages and lack of benefits mean that many care workers cannot afford to support themselves or their families, and many leave or change jobs as a result. This high turnover, in turn, damages the quality of care provided and imposes costs on employers (Ruffini 2020; Caven et al. 2021; Batt, Lee, and Lakhani 2014). And the churn in general hurts the macroeconomy.

Providing much-needed financial stability and economic security to care workers

The inefficiency and dysfunction of the care economy imposes steep costs—not the least of which is the cost to care workers in lost and low wages. Higher wages would transform the lives of the care workers who are the foundation of the current system. Both child care workers and home health care workers carry out deeply specialized and often physically and emotionally demanding labor for poverty-level wages and without fringe benefits or paths for advancement. These care workers are deeply committed to the people in their care and recognize the risk their absence would pose to the well-being of people with disabilities, older adults, and children. And yet the devaluation of care work—combined with the sexism, racism, and xenophobia many of these workers endure—make it less likely that care workers will be treated with the respect they deserve. In addition, given the isolating nature of the job and physical distance from co-workers, it is harder for care workers to build solidarity, strike, or use other traditional levers of worker power to increase their pay or labor standards.

Long hours and low wages mean that, in reality, millions of care workers cannot afford to cover their family’s basic needs, especially as costs and rents have skyrocketed (Gupta 2021; Gould 2015; Mazzara 2019). Out of financial and economic necessity, many are forced to leave the care sector for other industries, which may compensate them more equitably for their experience and labor. Increasing wages in the care sector would finally compensate and value care workers’ labor closer to the level it deserves, and it would provide much-needed economic security to these workers. Higher wages would allow more care workers to continue working in these demanding and critical jobs.

Strengthening the provision and quality of care

In addition to the costs to care workers, there are costs to those receiving care under the current system. The provision and quality of care would undoubtedly be strengthened with higher wages across the care sector and the resulting lower turnover. People with disabilities, older adults, and children who are entrusted to care workers for significant periods of time would thus strongly gain from the better pay. In addition, accessible care also provides parents or other family members, especially women, a means to work or reenter the workforce.

Broadly, the economic stability from a good-paying care job and the absence of financial distress translates into a more secure and less stressed workforce. In the case of child care, research has shown that stability in who is giving care, and interactions with experienced caregivers, are beneficial for babies’ and toddlers’ learning and growth in the crucial early years of development (Ludden 2016). Other research has found that high-quality early care has long-lasting effects (Abbott 2021).

In home health care, higher pay and reduced turnover would allow people with disabilities and older adults to build strong and trusting relationships with their caregivers. A recent economic study of the long-term residential care sector found that a 10% increase in the minimum wage resulted in higher earnings among workers in this sector, which translated into significant improvements in patient health and safety (Ruffini 2020).

Reducing costs associated with employee turnover

Higher wages and lower turnover are also beneficial to employers and third-party payers (Weller et al. 2020). Employers and institutions heavily bear the costs of turnover through spending on recruitment and training for new employees (Boushey and Glynn 2012). The cost savings from reduced turnover alone is estimated to be up to 40% of a position’s annual wage (Bahn and Cumming 2020).

A stable workforce and employees who want and are able to stay in their jobs creates stability for employers as well, which has powerful reputational and income effects (Washington State Department of Commerce 2019). Child care centers, for instance, operate on extremely thin margins and have high overhead costs, such as rent, safety regulations, mandated child-caregiver ratios, food, etc. (Workman and Jessen-Howard 2020; Oncken 2016). Saving on turnover would help centers meet these costs more easily, and higher pay might attract more applicants to open positions. It is important to note, though, that the cost savings from lower turnover—while helpful—is not sufficient to solve our child care challenges. Federal funding and public investment remain essential counterparts to helping employers meet costs and pay equitable wages.

Macroeconomic benefits

And finally, higher wages for care workers would have numerous macroeconomic benefits. A recent study of the nursing long-term-care industry found that raised wages prevented thousands of deaths, lowered the number of inspection violations, and reduced the cost of preventable care (Ruffini 2020). Estimations and simulations of large investments in care infrastructure have been shown to create millions of jobs (Palladino 2021). In addition, a better-paid care workforce can provide macroeconomic stimulus as workers spend more money on goods and services in the economy (Palladino and Lala 2021).

Estimates of the macroeconomic impact from investing in early child care and education vary, but they have overwhelmingly been shown to have a positive return. Heckman and others analyzed the Perry Preschool Program and found annual social rates of return between 7% and 10% (Heckman et al. 2010). A recent analysis of California ECE programs found that each dollar invested generated as much as $1.88 in increased economic activity, along with a range of other macroeconomic benefits such as increased labor force participation of women, increased parental earnings, and increased worker productivity (Powell, Thom et al. 2019). Karoly (2016) analyzed access to preschool and estimated a multiplier effect of $3–4. Abbott (2021) found that investing one dollar in high-quality pre-K would generate an additional $8.60 in economic benefits (Abbott 2021). A large part of these economic benefits takes the form of increased earnings for children later in life (CEA 2014). And finally, a recent study that followed up with participants of ECE programs later in life found that the benefits for both the original participants and their children were substantial (García et al. 2021).

In a prime example of the success of paying more, when hazard pay was raised (with benefits) during the pandemic, it was found to reduce economic hardship and improve retention (SEIU 775 and CAP 2021). These benefits should be extended, so that care work can have the protection and dignity needed to be desirable careers. The public role in both funding and in ensuring and enforcing these wage standards is key in making sure that funding is actually channeled into higher wages (Tung and Connolly 2015).

Conclusion

The pandemic recession shone a bright light on just how broken our care economy was and how much care workers were struggling. Our economic system, left to its own devices, has failed to recognize the worth of care work and maintain a well-functioning market (Jones 2020).

Care work is valuable (Coffey et al. 2020), demanding (Leberstein, Tung, and Connolly 2015), and requires specialized skills, given that workers are routinely making highly consequential decisions about and with people with disabilities, older adults, and children (NDWA 2019). Securing living wages, dignity of work, and safe working conditions for care workers is necessary for our collective survival. Better pay and work standards unambiguously improve the lives of workers themselves, but also strengthen the provision of care, secure a stable workforce, and reduce turnover (Weller et al. 2020; Ruffini 2020). These systemic improvements are essential given that demographic shifts will increase the need for care work in coming years.

Such an investment is also exactly what is needed as the economy recovers from the pandemic recession. When wages and conditions are better for care workers, care workers and their families are better off, employers and institutions are better off, and parents and others looking for caregiving for their families are better off. The macroeconomy benefits in turn as spending and productivity are boosted (Antonopoulos et al. 2010; Palladino and Lala 2021).

But improving conditions for care workers and ensuring access to quality care is not just about “return on investment” and protecting our interests; it is also a moral imperative to rectify long-standing systemic injustices. To address the wage suppression of care workers, we must first recognize that this suppression lies at the intersection of gender, racial justice, disability, and immigrant rights concerns (Chang 2017). The provision of care and the needs of people with disabilities, older adults, and children are not simply externalities to having a well-functioning and rewarded care economy. Rather, the intersectional concerns of those who are giving and receiving care should be at the very center of our discussions and policy choices.

By making deliberate policy choices to rectify historical and current harms—and grounding those policies in the experiences of the most marginalized of these workers (NDWA 2020), we ensure a shared prosperity for all (Bozarth, Western, and Jones 2020).

Notes

1. “Reproductive labor” refers to the labor that is necessary to sustain and nurture humans, both day to day and across generations. Per Glenn (1992), “Reproductive labor includes activities such as purchasing household goods, preparing and serving food, laundering and repairing clothing, maintaining furnishings and appliances, socializing children, providing care and emotional support for adults, and maintaining kin and community ties.”

2. United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain.

3. Because of changes to industry and occupation categories in 2020, we combined newly disaggregated codes in the latter year with their aggregated counterparts in the former years. Although these codes differed, the following list is for the more detailed codes found in the 2020 data: Home health care workers are identified in the CPS by the occupations Nursing, psychiatric, and home health aides; Personal and home care aides; Home health aides; Personal care aides; Nursing assistants; Orderlies; and Psychiatric aides; and by the industries Private households, Home health care services, and Individual and family services. Child care workers are defined by the Child care worker occupation.

4. While the prior demographic analysis and results rely on the sample from the monthly CPS, wage analysis requires use of the Current Population Survey Outgoing Rotation Group (CPS-ORG), again pooled from 2018 to 2020 and defined here as the “current” wage in 2020 dollars.

5. In San Francisco, California, it would take a full-time, full-year wage of about $54 dollars per hour for this family to make ends meet. We need a minimum federal standard to set a floor for care worker pay, but state and local governments should be allowed—and encouraged—to legislate higher minimums. EPI’s most recent family budget calculator figures have been updated to 2020 dollars for meaningful comparison.

6. Another reason for the public sector to step up is so that care is not only affordable but there is also less incentive for exploitative or illegal markets to meet the demand for care work (Reilly and Luscombe 2019).

7. England, Budig, and Folbre use a fixed-effects model based on job-switchers. It is possible that their reliance on job-switchers for identification may not provide reliable estimates for long-time workers within the care field. Use of the National Longitudinal Survey of Youth (NLSY) up to data year 1993 also means that their sample does not allow measurement of the penalty among older workers nor does it fully account for the demographic characteristics of workers in caring fields in the economy today.

8. The authors use a fixed-effects model on the most recent data with later years of the NLSY. They identify the care penalty from occupational switchers and find a care premium in occupations such as doctors and other high-education/high-licensing fields. They also find that low pay of care workers cannot be explained by human capital differences and that care workers do not enjoy increasing pay with more experience as workers in other sectors do.

9. Others studies include Folbre and Smith 2017, which examines the pay penalties in the care sector for high-contact workers versus managers; Howes, Leana, and Smith 2012, which compares credentialed nurses with often-less-trained home health care workers; and Findlay, Findlay, and Stewart 2009, which focuses on the evaluation of caring skills themselves and gender differences in pay in the industry. Findlay, Findlay, and Stewart find that the skills are underestimated, notably because the gendered construction of caring skills contaminates their proper evaluation. Using longitudinal pairs combining CPS-ORG and O*NET data, Hirsch and Manzella (2015) find a larger care penalty for men than women. Similar to the other fixed-effects models, their identification strategy relies on job switchers and looks at the extent of caring across many caring professions, but their inclusion of skills and requirements imputed from the O*NET attempts to provide more similar comparables.

10. Specifically, we construct a log wage regression using a fully interacted model with gender and race/ethnicity and citizenship status controls. In additional to the demographic coefficients of interest, we control for age, age squared, educational attainment, and geographic division. These variables typically measure human capital returns to experience (loosely represented by age and age squared), skills (roughly characterized by formal educational attainment in five categories), and differences in the cost of living (measured using nine geographic divisions across the country).

11. The statistically significant coefficients on each gender-race/ethnicity-citizenship status interaction term are then applied proportionately to the shares of each demographic group found in the relevant care occupation. For example, the coefficient on the demographic interaction for Black women born in the U.S. yields a pay penalty of 34.3% compared with white U.S.-born men in the labor market at large. This pay penalty is weighted by 0.187 and 0.117, respectively, representing the shares of home health care workers and child care workers who are Black U.S.-born women. The weighted sum using the shares of each demographic group in each caring profession creates a total demographic pay penalty.

12. We estimate weekly as opposed to hourly wages here because of the difficulty of measuring teacher work hours within a week as well as over the year (Allegretto and Mishel 2020).

13. For child care workers with a college or advanced degree, we apply elementary and middle school wages according to their shares in the child care profession. For child care workers with educational attainment lower than a college degree, we apply the overall weekly earnings ratio of that level of educational attainment to the one required.

14. The final step involves applying the actual ratio of weekly to hourly earnings of child care workers to the imputed weekly value to back out a better standard for hourly child care wages.

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Reilly, Katie, and Belinda Luscombe. 2019. “The Childcare Crisis: Why Affordable Childcare Is out of Reach for So Many People.” Time, October 18, 2019.

Ruffini, Krista. 2020. Worker Earnings, Service Quality, and Firm Profitability: Evidence from Nursing Homes and Minimum Wage Reforms. Washington Center for Equitable Growth, June 4, 2020.

Schulte, Brigid, and Cassandra Robertson. 2021. “Mother and Daughter Do the Same Job. Why Does One Make $9 More an Hour?” New York Times, May 10, 2021.

SEIU 775 and the Center for American Progress (CAP). 2021. Higher Home Care Wages Reduce Economic Hardship and Improve Recruitment and Retention in One of the Country’s Fastest-Growing Jobs. June 2021.

Thrupkaew, Noy. 2021. “Sri Yatun’s Escape.” Washington Post, October 6, 2021.

Tung, Irene, and Caitlin Connolly. 2015. Upholding Labor Standards in Home Care: How to Build Employer Accountability into America’s Fastest Growing Jobs. National Employment Law Project, December 2015.

U.S. Treasury Department. 2021. The Economics of Child Care Supply in the United States. September 2021.

Washington State Department of Commerce. 2019. The Mounting Costs of Child Care: Impacts of Child Care Affordability and Access to Washington’s Employers and Economy. U.S. Chamber of Commerce Foundation, September 2019.

Weller, Christian, Beth Almeida, March Cohen, and Robyn Stone. 2020. Making Care Work Pay. LeadingAge LTSS Center @UMass Boston, September 2020.

Wolfe, Julia, Jori Kandra, Lora Engdahl, and Heidi Shierholz. 2020. Domestic Workers Chartbook: A Comprehensive Look at the Demographics, Wages, Benefits, and Poverty Rates of the Professionals Who Care for Our Family Members and Clean Our Homes. Economic Policy Institute, May 2020.

Wolfe, Julia, and Ben Zipperer. 2021a. More Than Half a Million Child Care Workers Would Benefit from a $15 Minimum Wage in 2025. Economic Policy Institute, June 2021.

Wolfe, Julia, and Ben Zipperer. 2021b. The Raise the Wage Act Would Support Essential Care Workers: Nearly 2 Million Direct Care Workers Who Provide Long-Term Services and Supports Would Benefit from a $15 Minimum Wage in 2025. Economic Policy Institute, September 2021.

Women Effect Action Fund and National Domestic Workers Alliance (NDWA). 2021. Invest in the American Care Infrastructure (fact sheet). Domesticworkers.org, June 2021.

Workman, Simon, and Steven Jessen-Howard. 2020. The True Cost of Providing Safe Child Care During the Coronavirus Pandemic. Center for American Progress, September 2020.

Summary

More than two in five child care workers would have higher pay if there were a $15 national minimum wage in 2025, as called for by the 2021 Raise the Wage Act. Of the child care workers who would get a raise, more than nine in 10 are women.

This report finds that after a $15 minimum wage in 2025:

• As many as 560,000 child care workers would have higher take-home pay.

• The vast majority (95.4%) of child care workers who would get a raise are women, and 36.2% are Black or Hispanic.

• Among those child care workers who get a raise, average annual pay for year-round workers would rise by $2,900 (in 2021 dollars). The year-round earnings of Black or Hispanic child care workers would increase by $3,200 and $3,100, respectively.

• Child care worker pay increases would be concentrated at the bottom of the wage distribution and would significantly reduce inequality in this profession. If the Raise the Wage Act passed, the 10th-percentile child care worker hourly wage in 2025 would be 41.8% higher than it would be without the act.

• Wages would rise for 43.5% of child care workers nationally. In the following states, more than two out of every three child care workers would have higher take-home pay: Alabama (72.3%), Arkansas (69.1%), Iowa (72.8%), Kansas (76.3%), Kentucky (78.8%), Louisiana (72.0%), Mississippi (69.0%), Nebraska (68.9%), New Mexico (69.1%), Oklahoma (73.0%), Texas (70.0%), Utah (75.2%), and Wisconsin (67.1%).

Quality child care is essential to our economy

During the COVID-19 pandemic, working parents struggled to navigate day care and school closures; essential child care workers faced risks on the job and lost income; and child care centers faced increasing costs to meet additional safety standards (Workman and Jessen-Howard 2020). These difficulties highlight the vast social benefits that quality child care provides to both children and their families.

And yet child care work is—and has been—deeply undervalued. Domestic workers (many of whom provide child care) were originally excluded from the federal minimum wage when it was first established in the 1930s, as a direct result of racism against the Black women who made up most of that workforce (Wolfe et al. 2020; ILO 2021).

In this report, we show how raising the minimum wage would benefit these essential workers.

The Raise the Wage Act would make a big difference for child care workers

The 2021 Raise the Wage Act would increase the federal minimum wage to $15 in 2025 and disproportionately benefit workers in child care. Table 1 shows the projected effects of the policy in 2025 relative to “business as usual” wherein the federal minimum wage remains at its current level of $7.25 per hour. The Raise the Wage Act would increase the pay of 32 million workers; these “affected” workers make up 21.2% of the overall wage and salary workforce. Because they are paid particularly low wages, child care workers are much more likely to be affected by the policy. Wages would rise for more than 560,000, or 43.5% of, child care workers.

Table 1

Throughout this report, “child care workers” refers to workers in the “Child care” or “Pre-K and kindergarten teachers” occupation classifications (from the Bureau of Labor Statistics’ American Community Survey), excluding those who work in the “Elementary and secondary schools” industry. Since pre-K and kindergarten teachers are in a combined occupation category, the industry restriction is needed to exclude kindergarten teachers. While this also excludes pre-K teachers who work in elementary schools, it still provides a more comprehensive look at the universe of child care workers and pre-K teachers than if we just looked at workers in “Child care” occupations.

Table 1 also displays the effects of the Raise the Wage Act of 2021 on two alternative definitions of child care workers that do not include the industry restriction: (1) only those workers in the “Child care” category (that is, not including pre-K workers from the “Pre-K and kindergarten” category), and (2) all workers that appear in either the “Child care” or the “Pre-K and kindergarten teacher” occupation category (i.e., not excluding kindergarten teachers).

Women and Black workers are more likely to benefit

Many of the child care workers who would benefit from the Raise the Wage Act are women and people of color. Table 2 and Figure A show that, among child care workers, women and Black workers are particularly likely to see their pay rise. Nearly half (48.5%) of Black child care workers would benefit from the Raise the Wage Act—a higher share than other race/ethnicity groups. Women child care workers are also more likely to benefit than their peers who are men (43.8% would see a raise compared with 38.3%). Coupled with the fact that women make up the vast majority of child care workers, this means 95.4% of affected child care workers are women.

Table 2

Figure A

Table 3 shows that child care workers affected by the Raise the Wage Act would receive, on average, an annual pay increase of $2,900 (in 2021 dollars) if they worked year-round (52 weeks per year). Black or Hispanic child care workers would see slightly larger pay increases: The average annual earnings for these workers would rise by $3,200 and $3,100, respectively, if they worked year-round. These higher increases reflect the degree to which these workers were underpaid even relative to other child care workers.

Table 3

Figure B shows that pay increases for child care workers are concentrated in the bottom half of their occupations’ hourly wage distributions. For instance, without the Raise the Wage Act, the 10th percentile of the child care worker wage distribution would be just $10.58 in 2025. However, with the act, it would be 41.8% higher at $15. The 20th-percentile wage would be 19.8% higher in 2025 under the Raise the Wage Act.

Figure B

Child care workers in some states would benefit disproportionately

While nationally, on average, 43.5% of child care workers would benefit from the Raise the Wage Act, the benefits vary widely by state. Some states already have higher minimum wage standards; therefore, the national average understates the benefits of the Raise the Wage Act in low-minimum-wage states.

Figure C shows state-specific totals and shares of child care workers who would have higher pay as a result of the policy. More than two out of every three child care workers would have higher take-home pay in Alabama (72.3%), Arkansas (69.1%), Iowa (72.8%), Kansas (76.3%), Kentucky (78.8%), Louisiana (72.0%), Mississippi (69.0%), Nebraska (68.9%), New Mexico (69.1%), Oklahoma (73.0%), Texas (70.0%), Utah (75.2%), and Wisconsin (67.1%).

Southern states tend to have particularly high shares of child care workers who would benefit from the RTWA, since only three Southern states have a minimum wage higher than $7.25 (Arkansas, Florida, and West Virginia). In fact, the five states that would not have a minimum wage at all if it were not for the federal minimum wage are all in the South (EPI 2021).

Figure C

Low wages are not a ‘solution’ to the affordability problem

Low wages for child care workers have for too long been treated as a “solution” to help make child care affordable. This has failed on every count. Despite the low wages of child care workers, these services remain unaffordable for many low- and middle-income families. Meanwhile, low wages leave child care workers economically vulnerable and compromise the quality of care children receive.

These low wages also reinforce existing racial and gender inequality, since both Black child care workers and women are particularly likely to see their wages increase under the RTWA. Child care workers deserve to be paid a wage that better reflects the value of their work and allows them to care for their own families.

Raising the federal minimum wage to $15 by 2025 is an important first step, and policymakers must also address the affordability issue in tandem with raising the minimum wage, investing in this critical infrastructure to lower the costs for families (Mitchell, Narefsky, and Dade 2020; Gould et al. 2020).

Methodology

The estimates come from our analysis of the Raise the Wage Act of 2021 using the Economic Policy Institute Minimum Wage Simulation Model. The results in this memorandum are the projected effects of the policy in 2025. The model incorporates all already-scheduled state and local minimum wage increases through 2025. A description of the detailed methodology is available in Cooper, Mokhiber, and Zipperer 2019.

The total workforce used in these estimates includes all wage and salary workers with valid wage values, excluding the self-employed and those working abroad. “Child care workers” and “Pre-K and kindergarten teachers” are defined by the 2018 ACS occupation codes 4600 and 2300, respectively. “Elementary and secondary schools” is defined by the 2017 ACS industry code 7860.

References

Cooper, David, Zane Mokhiber, and Ben Zipperer. 2019. Minimum Wage Simulation Model Technical Methodology. Economic Policy Institute, February 2019.

Economic Policy Institute (EPI). 2021. Minimum Wage Tracker. Accessed May 17, 2021.

Gould, Elise, Marcy Whitebook, Zane Mokhiber, and Lea J.E. Austin. 2020. A Values-Based Early Care and Education System Would Benefit Children, Parents, and Teachers. Economic Policy Institute, January 2020.

International Labour Organization (ILO). 2021. ILO Minimum Wage Policy Guide. Accessed May 17, 2020.

Mitchell, Estelle, Laura Narefsky, and Annie Dade. 2020. The Care Minimum: The Case for Raising the Minimum Wage and Investing in Child Care Together. National Women’s Law Center, October 2020.

Wolfe, Julia, Jori Kandra, Lora Engdahl, and Heidi Shierholz. 2020. Domestic Workers Chartbook: A Comprehensive Look at the Demographics, Wages, Benefits, and Poverty Rates of the Professionals Who Care for Our Family Members and Clean Our Homes. Economic Policy Institute, 2020.

Workman, Simon, and Steven Jessen-Howard. 2020. The True Cost of Providing Safe Child Care During the Coronavirus Pandemic. Center for American Progress, September 2020.

In this post, we highlight—in very broad strokes—what is needed to build an economy that generates faster, more sustainable, and more equitably distributed growth. We then identify where the administration has made progress in the first 100 days and where more forceful action is needed.

Building an economy that works for everyone requires the following:

• Pursuing a “go-for-growth” approach to macroeconomics that aims for labor markets where jobs are plentiful and employers have to work hard (including offering higher wages) to attract workers, so-called “high-pressure” labor markets.
• Crafting and enforcing fairer rules for markets, particularly through labor market institutions and standards that provide workers a more level playing field when bargaining with employers for better pay and working conditions.
• Constructing deeper and more protective social insurance systems that use a larger public role in providing unemployment benefits, health coverage, and retirement income security— including long-term care for older adults and people with disabilities.
• Undertaking ambitious public investments in both people and physical capital, including physical infrastructure, early child care and education, higher education, and green investments.
• Reforming taxes in a way that helps finance the needed fiscal spending in this program, curbs growing inequality, and discourages the economic “bads” of greenhouse gas emissions and financial speculation.

Below, we expand on these points and assess the Biden-Harris administration’s progress in the first 100 days. The brief summary is:

• A comprehensive $1.9 trillion relief and recovery bill—the American Rescue Plan (ARP)—has passed that will secure a go-for-growth approach to macroeconomics for most of its first term—a very large accomplishment.
• One proposed plan—the American Jobs Plan (AJP)—calls for investments in traditional infrastructure, green investments, and long-term care—all financed with progressive taxes. But this plan has not yet passed, and the labor standards included in it have no real enforceable mechanism yet.
• Another plan just released today—the American Families Plan (AFP)—proposes large investments in children and higher education and is financed by progressive taxes on capital incomes accruing to the richest households.
• Decent first steps in improving administration of unemployment insurance (UI) and affordability of health care have been made in the ARP and AFP, but concrete plans for permanently deepening crucial social insurance programs are yet to be done.
• Tough-minded but realistic strategies to pass transformative policies like the Protecting the Right to Organize (PRO) Act and Raise the Wage (RTW) Act remain to be formulated.

“Go-for-growth” macroeconomics

The first 100 days of the Biden-Harris administration deserve very high marks on this front. In the face of loud voices declaring that their plans for macroeconomic rescue would lead to economic “overheating” (inflation and interest rate spikes), the administration held firm and secured passage of the American Rescue Plan (ARP). If measures to suppress the coronavirus work and it is safe to return much closer to economic normality in coming months, the ARP will drive rapid and large reductions in unemployment. This is in stark contrast with the too-small efforts at fiscal rescue following the Great Recession of 2008.

A go-for-growth approach to macroeconomics can never be secured forever with one piece of legislation—it requires consistent monitoring of macroeconomic trends and requires an evidence-based Federal Reserve to buy into it. But the ARP is a great start, and the Fed has so far been admirably supportive. The benefits of high-pressure labor markets are large, and they accrue disproportionately to workers facing historic discrimination in labor markets, making them a powerful tool for fostering both economic and racial equality. This solid macroeconomic approach is a superb first achievement for the administration.

Crafting and enforcing fairer markets—especially through labor standards and institutions

The two most important changes to labor standards and institutions currently being proposed are the Protecting the Right to Organize (PRO) Act and the Raise the Wage Act (RTW). The PRO Act is a comprehensive reform of labor law which would significantly improve the prospects of U.S. workers trying to organize unions in the face of growing employer hostility and abusive union-busting tactics. The RTW Act would raise the federal minimum wage to $15 per hour by 2025 and index it thereafter to growth in typical workers’ wages. Combined, these two pieces of legislation would rebuild two of the most important bulwarks to wage growth for the large majority of U.S. workers. Further, collective bargaining and large expansions of the federal minimum wage have in the past been two of the most powerful measures we’ve ever seen for fostering greater equality by both race and income class.

The Biden administration has admirably expressed support for both measures. The fact that the Biden administration has issued an executive order establishing a White House Task Force on Worker Organizing and Empowerment is particularly welcome, as is their Statement of Administration Policy (SAP) in support of the PRO Act. (In contrast, the Obama administration never issued a SAP in support of the labor law reform effort made in its first term.)

But the U.S. Senate remains the principal roadblock to both the PRO Act and the RTW Act. A serious strategy is needed to move these vital pieces of legislation past this roadblock, and the White House is the most obvious place for such a strategy to originate. In particular, the Senate filibuster imposing an implicit 60-vote threshold on most legislation means that a significant modification of Senate norms is likely needed to pass these bills. Either filibuster reform is needed, or the budget reconciliation process (which provides an end run around the filibuster for budget-related legislation) needs to be stretched further than it has been in the past, even in the face of unfriendly opinions from the Senate parliamentarian.

Much of the progressive agenda can pass through budget reconciliation if 50 votes can be found in the Senate. Under current Senate norms (and that’s all they are—norms—which have been broken repeatedly by Republican-run Senates), the PRO and RTW Acts could not be passed with 50 votes. If the current Biden administration ends with no progress on these fronts, the upward march of inequality in the U.S. is near guaranteed to continue. Rhetorical support from the administration is a good first start on these vital bills—but more is needed, and soon.

While labor standards that apply economywide, like the PRO and RTW Acts, are the really transformational changes to the economy’s rules, there are smaller measures in the labor standards space that could still help groups of workers in nontrivial ways that remain to be secured. For example, in a following section, we discuss the administration’s proposals for ambitious public investments which, if enacted, would be important steps down a path toward broadly shared prosperity. One key way to make these investments even more impactful in supporting high-quality jobs would be to make sure that the labor standards associated with them are strong. Much like their rhetorical support of the PRO and RTW Acts, the Biden administration has called for strong project-specific labor standards to accompany the investments in the American Jobs Plan (AJP), but a legislative and regulatory strategy to ensure they do is yet to come forth and is crucial.

The administration also yesterday issued an executive order requiring federal contractors to pay a minimum wage of $15 per hour. This is a very welcome step and will increase the earnings of up to 390,000 low-wage workers on federal contracts. We encourage the administration to go further to help ensure that the estimated two million total jobs held by federal contract workers are good jobs. This would include steps like ending practices that allow low-road contractors to win bids that are so low they are inconsistent with decent pay and working conditions, and banning federal government contractors from requiring contract workers to sign forced arbitration and class action waivers.

More generous and accessible social insurance

During the COVID-19 pandemic, huge but temporary changes were made to the U.S. unemployment insurance (UI) system to make it more protective and generous to jobless workers. But decades of disinvestment in state-run UI systems meant that this aid was fraught with administrative problems and took too long to reach millions. Worse, the more generous aid “turned off” for months due to congressional inaction. While the ARP extended the more generous pandemic UI provisions through September of this year, no structural reform has happened yet. Going forward, a comprehensive reform of UI that makes it more generous, more automatically responsive to economic conditions, and easier to access should be a key priority. The American Family Plan (AFP) provides money for states to invest in their delivery systems and calls for more fundamental reform, but it does not contain policy specifics, so more work on this front is needed.

The job losses spurred by the pandemic also cost millions access to health insurance they received through their employer-based plans. Moving to a U.S. health system with a much larger public role is needed to provide real economic security to jobless Americans. A larger public role would also greatly increase economic flexibility and opportunities for workers and for aspiring business owners. The ARP included a welcome and large increase in subsidies provided for health insurance purchased in the marketplace exchanges created by the Affordable Care Act (ACA), and the proposed American Family Plan (AFP) would make more generous subsidies permanent. Encouraging Medicaid expansion into states that have not yet adopted the ACA provisions on this and allowing a lower age of eligibility for Medicare (including perhaps a “buy-in”) are other key priorities that the administration and Congress should take up in coming months.

Finally, the pandemic has highlighted that the primary constraint keeping people who would otherwise like to work out of paid labor markets is caregiving responsibilities. Public investment in early child care and education (which we discuss below) could help families meet many of these caregiving responsibilities, but expansions of public caregiving for older adults and those with disabilities that is proposed in the administration’s American Jobs Plan (AJP) could also help many. These investments would allow everybody—not just the rich—to afford decent care for loved ones who are elderly or have disabilities and would improve the job quality of caregiving jobs.

Both the vital services provided by the increased caregiving spending as well as the boosts to job quality of caregiving employment will provide disproportionate benefits to women. In particular, women bear a hugely disproportionate burden in providing unpaid eldercare, and women (and particularly women of color) make up a very large majority of paid care workers. Given the large and progressive benefits of this expansion of public caregiving spending, it is encouraging to see these investments included in the AJP proposal.

Ambitious public investments

The U.S. clearly could benefit from large public investments in traditional infrastructure, but large investments in decarbonization strategies and in people are also needed.

The case for traditional infrastructure is well understood. The case for a large public role in financing and directing green investments is even more vital. Until the price of emitting greenhouse gases (GHGs) is raised significantly by policy (like a carbon tax or direct regulations), private investment in GHG mitigation (like building weatherization or installing solar panels) will remain far below efficient levels.

This green investment is optimally financed directly through the public sector, and most of it should be financed with debt, even if the economy has largely recovered. After all, our children and grandchildren will be far better off inheriting an economy with a higher debt ratio but lower stock of GHGs in the atmosphere than inheriting an economy with low debt but higher temperatures.

With regards to investment in people, besides the expansions in care investments for older adults and those with disabilities highlighted above, early child care and education and higher education could be made much more affordable and higher quality for U.S. families. This would not only benefit the receiving families directly, but would also have large spillover effects in building a more productive economy overall. Further, anything that improves the resources available to poorer families with children has been shown to have large effects down the road in boosting their productivity as adults. This includes direct provision of health and nutrition assistance, but also cash. Finally, since these investments also call for higher pay and better training for the early child care and education workforce, they will provide disproportionate benefits to women (and disproportionately women of color), who make up the large majority of workers in this sector currently.

The American Jobs Plan (AJP) includes many of the investments in traditional infrastructure and green investments, while the American Family Plan (AFP) has excellent provisions to make both early child care and education as well as higher education more affordable for families. The AFP also extends the large increases in the Child Tax Credit included in the ARP until 2025. These are big steps in the right direction.

Tax reform for the common good

Much of the spending proposed so far by the Biden administration—particularly those meant for macroeconomic stabilization and one-time investments—can and should be financed with debt, not taxes. But expansions of permanent programs should be mostly financed with more revenue. The U.S. can certainly afford this—we are among the most lightly taxed rich nations in the world. The first tranches of increased tax revenue to finance permanent spending expansions should be raised from high-income households, either through increases in the progressivity of the tax code or through greater and more progressively targeted tax enforcement. Other areas of tax reform should aim to correct economic “bads” like GHG emissions and financial speculation.

So far, the Biden administration’s proposed taxes are clearly progressive. The AJP includes increases in taxes paid out of corporate income (essentially repealing large chunks of the most egregious bits of the Tax Cuts and Jobs Act (TCJA) from 2017), and the AFP is said to include tax increases on capital gains accruing to the highest-income households. This includes the elimination of an egregious loophole (“step-up basis”) that allows large intergenerational transfers of wealth to happen untaxed. All these taxes affect high-income households while barely touching low- and middle-income households.

The administration has also made several welcome and concrete steps in moving toward greater tax enforcement, particularly on high-income households and corporations. This includes a multilateral effort to crack down on abusive tax havens.

Taxes on economic “bads” like GHG emissions and financial speculation have not yet been mentioned. We hope further progress on these fronts is made.

Conclusion

The administration deserves praise for what has happened so far and much of what they have proposed. And normally one would want to cut a little slack for strategies yet formed on passing key bills. After all, it has only been 100 days. But the economic challenges facing U.S. families are huge and time is ticking. As hard as it is to believe, every 100 days going forward into 2022 need to be just as productive as the first in meeting these challenges.

As we have shown in our more than a decade and a half of work on the topic, there has been a long-trending erosion of teacher wages and compensation relative to other college graduates.1 Simply put, teachers are paid less (in wages and compensation) than other college-educated workers with similar experience and other characteristics, and this financial penalty discourages college students from entering the teaching profession and makes it difficult for school districts to keep current teachers in the classroom.

Teacher compensation is not just an issue of staffing: Effective teachers are the most important school-based determinant of student educational performance. To promote children’s success in school, schools must retain credentialed teachers and ensure that teaching remains an attractive career option for college-bound students. Our previous report (Allegretto and Mishel 2019) explains in more detail why providing teachers with a decent middle-class living commensurate with other professionals with similar education is not simply a matter of fairness but necessary to enhance student and economic performance.

We provide this update to our long-standing series on the teacher wage and compensation penalty as the U.S. continues to struggle with the COVID-19 pandemic and the economic consequences. While the data in this paper are through 2019 and thus predate the pandemic, our analysis may provide useful insights as schools struggle to reopen. As a country we have yet to make the necessary investments, and pass the needed policies and procedures (e.g., universal mask requirements and testing, tracing, and isolating protocols) that would allow us to achieve some semblance of normalcy. Teachers and other school staff will continue the business of educating students in these trying times. They and their unions will play a critical role in moving forward in an effective and safe environment.

Key findings

• The teacher wage penalty has grown substantially since the mid-1990s. The teacher wage penalty is how much less, in percentage terms, public school teachers are paid in weekly wages relative to other college-educated workers (after accounting for factors known to affect earnings such as education, experience, and state residence). The regression-adjusted teaching wage penalty was 6.0% in 1996. In 2019, the penalty was 19.2%, reflecting a 2.8 percentage-point improvement compared with a penalty of 22.0% a year earlier.
• The teacher wage penalty declined in the wake of recent teacher strikes but only time and more data will reveal whether teachers’ actions led to a decline and a turning point. The lessening of the teaching penalty from 22.0% in 2018 to 19.2% in 2019 may reflect pay raises enacted in the wake of widespread strikes and other actions by teachers in 2018 and 2019, particularly in some of the states where teacher pay lagged the most. Unfortunately, the data we have to date are not sufficient to allow us to identify the geographic locus of the improvements in teacher wages and benefits and any association with the recent wave of teacher protests and strikes. Only time will tell if this single data point marks a turning point in teacher pay.

• The wage premium that women teachers experienced in the 1960s and 1970s has been replaced by a significant wage penalty. As noted in our previous research, women teachers enjoyed a 14.7% wage premium in 1960, meaning they were paid 14.7% more than comparably educated and experienced women in other occupations. In 2019, women teachers were earning 13.2% less in weekly wages than their nonteaching counterparts were—a 27.9 percentage-point swing over the last six decades.
• The wage penalty for men in teaching is much larger than it is for women in the profession, and it too has worsened considerably. The teacher wage penalty for men was 16.6% in 1979. In 2019, male teachers earned 30.2% less than similar male college graduates who chose a different profession. This explains, to a large degree, why only one in four teachers are men.

• While teacher wage penalties have worsened over time, some of the increase may be attributable to a tradeoff school districts make between pay and benefits. In other words, school districts may not be giving teachers raises but are instead offering stable or slightly better benefits, such that benefits make up a larger share of the overall compensation package for teachers than for other professionals. In 2019, nonwage benefits made up a greater share of total compensation for teachers (29.3%) than for other professionals (21.4%). In 2004, nonwage benefits share of compensation was 20.7% for teachers and 18.7% for other professionals.
• The benefits advantage of teachers has not been enough to offset the growing wage penalty. The teacher total compensation penalty was 10.2% in 2019 (composed of a 19.2% wage penalty offset by a 9.0% benefits advantage). The bottom line is that the teacher total compensation penalty grew by 7.5 percentage points from 1993 to 2019.

• The teacher wage penalty exceeds 20% in 21 states and in the District of Columbia. Teacher weekly wage penalties for each state, computed using pooled 2014–2019 data, range from 2.0% in Wyoming to 32.7% in Virginia. In 21 states and the District of Columbia teachers are paid less than 80 cents on the dollar earned by similar college-educated workers.

The analyses

In our analyses, we use two sources of data, both from the Bureau of Labor Statistics (BLS). For our wage analysis, we use Current Population Survey Outgoing Rotation Groups (CPS-ORG) data. Our wage sample is restricted to full-time workers (working at least 35 hours per week), 18 to 64 years old, with at least a bachelor’s degree. The education restriction is made because teachers today need at least a bachelor’s degree to teach. We compare wages of public school teachers (elementary, middle, and secondary) with other college graduates using regression-adjusted estimates. Since there are no CPS surveys that provide data on both benefits and wages for teachers and other college graduates, our benefits analysis uses National Compensation Survey data from BLS’s Employer Costs for Employee Compensation (ECEC) program to compare teachers’ benefits with benefits of professionals overall. Specifically, we pull data on employer costs per hour worked for detailed categories of compensation for “Primary, secondary, and special education school teachers” and “civilian professionals”—the broadest category available that corresponds with all college graduates.

We present results in three sections. We begin by presenting estimates of the national teacher weekly wage penalty using standard regression techniques to control for systematic differences in the age, education, state of residence, and other factors known to affect wage rates. Second, we present similarly constructed estimates of relative teacher earnings for each state. Finally, we factor in nonwage benefits to estimate a total compensation penalty that includes wages and benefits at the national level (which is not possible for each state).

Appendix A in our previous report (Allegretto and Mishel 2019), available online, provides a comprehensive discussion of the data and methodologies that produce our teacher weekly wage and total compensation penalties. Following are just a few salient aspects to mention. First, in our wage penalty analyses, our sample of workers is limited to those who respond with wage information (i.e. we exclude those with imputed wage data) because BLS’s method of imputing earnings overstates teacher earnings. Second, our measure of wages is weekly wages and therefore avoids comparisons of weekly hours worked or length of the work year (i.e. the “summers off” issue for teachers) between teachers and other college graduates. In Allegretto and Mishel 2019 we provide evidence that teachers work weekly hours similar to other professionals. Third, we make adjustments to the wage data to account for the fact that the CPS “top-codes” weekly earnings—assigning all earners above a particular threshold a week a weekly wage exactly at that threshold. Done to protect confidentiality, this top code hasn’t been updated for inflation since 1998 and, as a result, a growing share of workers are assigned this weekly earnings value, which has generated a growing understatement of college graduate wages.

Teacher relative weekly wage trends: Regression-adjusted estimates

An apples-to-apples comparison of earnings between teachers and nonteacher college graduates requires us to control for any systematic differences in factors that typically affect pay, including a worker’s age, formal education (B.A., M.A., professional degree, and Ph.D.), marital status, race/ethnicity, and state of residence. To do this, we use standard regression techniques to calculate the weekly wages of public school teachers relative to other college graduates.2 We do this for all teachers, and separately for women and men.

We present relative wages as percentage differences from the perspective of teachers, i.e., how much less (or more) teachers earn in weekly wages relative to other college graduates. We find a weekly wage penalty for teachers when the regression estimates suggest that teachers, all else equal, are paid less than other college graduates, which appears as a negative number in Figure A. Figure A reports results for all teachers, and by gender. For all teachers, the penalty grew from 7.1% in 1979 to a record 22.0% in 2018 before improving to 19.2% in 2019. The estimated 19.2% teacher weekly wage penalty in 2019 means that, on average, teachers earned just 80.8 cents on the dollar compared with what similar college graduates earned working in other professions—and much less than the relative 92.9 cents on the dollar that teachers earned in 1979.

Figure A

Teacher wage differentials vary greatly by gender. As illustrated in Figure A, the teacher penalty currently stands at 13.2% for women—a 2.7 percentage point lessening of the penalty compared with 2018. The teaching profession was relatively good for women in 1979, when they had a weekly wage premium of 6.5%.

In earlier work using decennial Census data, we found a 14.7% wage premium for women teachers in 1960 that fell to 10.4% in 1970 and to 2.9% in 1980 (Allegretto, Corcoran, and Mishel 2008, p. 7).3 Of course, falling relative wages for female teachers coincided with slowly expanding opportunities for women to work in other fields—an important concept to keep in mind. The earlier work combined with the results in Figure A demonstrates a sizable, long-term trend in the relative erosion of earnings for women teachers.

The teacher wage penalty has always been largest for men in the teaching profession—the men’s weekly wage penalty was 16.6% in 1979 and grew to a record 31.8% in 2018. The penalty fell to 30.2% in 2019, still representing an extreme contrast in earnings. The shrinking of the wage penalties for women and, less so, for men in 2019 should not necessarily be taken as a reversal of trends. As Figure A illustrates, earlier instances of improvements in relative teacher wages have been short-lived and followed by worsening relative teacher earnings. This time may be different, however, as attitudes toward teachers and their pay have changed and teachers themselves are strongly pushing for improvements (see, for example, Phi Delta Kappan 2018; Vargas 2020).4

The larger teacher wage penalty for men reflects that teaching has been a predominantly female profession. Men in predominantly female professions often earn substantially less than men earn in male-dominated professions (Corcoran, Evans, and Schwab 2004). Because of gender discrimination that historically limited occupational options for educated women, these women became a captive labor pool with few opportunities and less leverage to secure higher wages. Thus, the wages for teachers have remained below those in male-dominated professions.

The large wage penalty that men face in the teaching profession goes a long way toward explaining why the gender makeup of the profession has not changed much over the past few decades. Today, roughly three-fourths of teachers are women, which is about what it was in 1960.5

Teacher weekly wage penalties by state

To this point, our focus has been on public school teacher wage penalties, on average, for the United States. Here we present regression-adjusted teacher wage penalties by state. To analyze teacher earnings by state, we pool together six years of CPS data from 2014 through 2019. Again we compare samples of public school teachers with samples of nonteacher college graduates within each state.

In Figure B we present state outcomes in a bar chart, ranked from the largest wage penalty to the smallest (Figure C presents the data in an interactive map). Teacher weekly wage penalties in 21 states and D.C. are greater than 20%. Of the eight states with the largest wage penalties, four (those italicized) were where massive walkouts took place in 2018: Virginia (32.7%) had the largest penalty, followed by Arizona (31.8%), New Mexico (29.5%), Oklahoma (29.0%), Colorado (28.8%), Washington (28.1%), Oregon (27.3%) and North Carolina (25.3%).6 The teaching penalty also exceeded 25% in Georgia (25.1%).

Figure B

Figure C

In no state, on average, does the relative wage of teachers surpass that of other college graduates. Wyoming, Rhode Island, and New Jersey have the smallest wage penalties—at 2.0, 2.1, and 3.1%, respectively.

Several of the states where teacher protests occurred in 2018–2019 continue to have some of the largest teacher wage disadvantages. In order to have a sample large enough to produce estimates separately for every state, we pooled together six consecutive years of data. This approach makes it impossible for us to determine, in a meaningful way, how the strikes affected wages since teacher activism exploded in 2018 and 2019—especially as many of the actions were at the city level. As a result, for now, we can only note that the teacher earnings gap did narrow at the national level in 2019 and that teacher mobilizations in 2018 and 2019 were concentrated in the states that continue to have some of the largest teacher pay penalties.7

Adding benefits to the picture

Our analysis thus far has focused entirely on teachers’ weekly wages relative to those of other comparable college graduates. Yet benefits such as pensions and health insurance are an increasingly important component of the total compensation package. Teachers do enjoy more attractive benefits packages than other professionals; thus, our measure of relative teacher wages overstates the teacher disadvantage in total compensation.8

Table 1 provides the basic information necessary to compare benefits packages of primary, secondary, and special education public school teachers with benefits packages of comparable workers (specifically, workers in professional occupations).9 This table draws on the BLS Employer Costs for Employee Compensation (ECEC) series. “Benefits” in our analysis refers to the employer costs for health and life insurance, retirement plans, and payroll taxes (i.e., Social Security, unemployment insurance, and workers’ compensation). The remaining components of compensation are “W-2 wages,” a wage measure that corresponds to the wages captured in the CPS data used above; W-2 wages are the wages reported to employees and to the Internal Revenue Service. W-2 wages include “direct wages,” defined by the BLS as “regular payments from the employer to the employee as compensation for straight-time hourly work, or for any salaried work performed” and other wage items including “supplemental pay.” Supplemental pay includes premium pay for overtime, bonus pay, profit-sharing, and “paid leave.”10

Table 1

The first pair of columns in Table 1 under “W-2 wage share of compensation” present the share of W-2 wages in total compensation for professionals in all occupations and for state and local K–12 public school teachers. The W-2 wage share of compensation and the benefits share of compensation sum to one. These W-2 shares allow us to examine how important wages are relative to benefits in the total compensation package. In 2019, for example, teacher W-2 wages made up 70.7% of their total compensation. Professionals have less benefits per dollar of compensation, with 78.6 cents going to wages for every dollar of compensation (implying that 21.4 cents go to benefits). Therefore, for every dollar of W-2 wages, public school teachers do receive more in benefits. One reason health and pension costs are higher for teachers is that teacher health benefits are provided for a full year while teacher salaries are for less than a full year.

The columns under “Public school teachers” in Table 1 provide the information for our calculations. The “Wage penalty” column reports the teacher wage penalty from Figure B, followed by the “Benefits advantage” that teachers have; combining these two figures gives us an estimate for the teacher total compensation penalty, shown in the last column. In other words, the benefits advantage offsets the estimated relative wage disadvantage with respect to teachers.

The growth in the benefits advantage means that the relatively better benefits that teachers have somewhat offset the worsening wage picture for teachers. The benefits advantage for teachers in 2019 was 9.0%, significantly higher than the 2.4% teacher benefits advantage in 1993. The total teacher compensation penalty was 10.2% in 2019—an improvement over the previous year’s 13.7% penalty though 7.5 percentage points worse than the 2.7% compensation penalty for 1993.

Final thoughts

We have been sounding the alarm about the relative erosion of teacher earnings and total compensation for 16 years. Embedded in the worsening teacher wage penalty is the opportunity cost of choosing a career in teaching. As wages and compensation of teachers fall further behind that of other professionals it becomes harder to attract students to and retain teachers in the profession. These inequities must be addressed if we are to ensure that the brightest, most highly skilled professionals are at the head of each and every classroom, and to retain experienced teachers in the mix.11

Great challenges lay ahead as schools across the country open either virtually, in-person, or with a mix (Garcia and Weiss 2020). Even if schools had their budgets from last year, it would be more than a strain to invest in the supplies, protocols, and personnel needed to effectively and safely open up amid the pandemic. State and local revenue shortfalls due to the COVID-19-led recession have already materialized and public education employment has collapsed. As EPI economist Elise Gould (2020) pointed out, K–12 employment saw huge declines in April and May due to pandemic-induced shortfalls in revenue. In August, after a bit of a recent rebound, employment in K–12 education is down by 5.7%, or 462,100 jobs from February 2020 levels—at a time when schools are in need of more personnel. Importantly, this sector never fully recovered the jobs lost over the Great Recession—before the pandemic-induced job losses, there was a shortfall of over 300,000 local public education jobs if we take into account the growth in student enrollment (Gould 2020), thus we would add another approximately 300,000 to the recent 462,100 shortfall to capture the true breadth of the crisis.12

A return to the prepandemic economy is far off. It is not clear how much more cutting will be necessary as state legislators balance their budgets. It is only with the help of the U.S. Congress that we can remedy the draconian cuts. The money in relief packages, such as the CARES Act, has not been near enough. The federal government can borrow at zero interest and should do so to provide upwards of one trillion dollars to state and local governments (Bivens and Cooper 2020).

In the last recession and recovery, reduced spending for K–12 schools and the corresponding cutbacks in teacher salaries were conscious policy choices and were frequently done to accommodate tax cuts for corporations and the rich.13 It is critically important that these policy errors not be made again. Instead, state and local governments will need federal support to maintain and improve the resources that schools require, especially as adjustments to a COVID-19 environment add further expenses.

About the authors

Sylvia A. Allegretto is an economist and co-chair of the Center on Wage and Employment Dynamics, which is housed at the Institute for Research on Labor and Employment at the University of California, Berkeley. She is also a research associate of the Economic Policy Institute and is co-author of many EPI publications, including past editions of The State of Working America, How Does Teacher Pay Compare? and The Teaching Penalty: Teacher Pay Losing Ground. She has a Ph.D. in economics from the University of Colorado, Boulder.

Lawrence Mishel is a distinguished fellow and former president of the Economic Policy Institute. He is the co-author of all 12 editions of The State of Working America. His articles have appeared in a variety of academic and nonacademic journals. His areas of research include labor economics, wage and income distribution, industrial relations, productivity growth, and the economics of education. He has a Ph.D. in economics from the University of Wisconsin at Madison.

Acknowledgments

We thank Melat Kassa and Daniel Perez for excellent research assistance.

Endnotes

1. See How Does Teacher Pay Compare (Allegretto, Corcoran, and Mishel 2004); The Teacher Penalty (Allegretto, Corcoran, and Mishel 2008); and updated briefs (Allegretto, Corcoran, and Mishel 2011; Allegretto and Tojerow 2014; Allegretto and Mishel 2016, 2018, 2019).

2. The wage model includes controls for both public school teacher and private school teacher. The weekly wage penalty estimates are based on the coefficient on the public school teacher indicator.

3. In the 2008 analysis, the wage premium reflects a comparison of annual earnings of public school teachers with those of similarly educated workers, using a regression approach as in this paper.

4. In 2018, Phi Delta Kappan’s (PDK’s) annual poll of public attitudes toward public schools found that “Two-thirds [of Americans] say teacher salaries are too low, a new high in data since the first PDK poll in 1969.” It also found that “78% of public school parents say they would support teachers in their community if they went on strike for more pay.” In 2020, Theresa Vargas’s column in the Washington Post posited that the coronavirus pandemic was fueling a new appreciation for teachers across the country.

5. The 1960 share comes from Allegretto, Corcoran, and Mishel 2008 and is based on U.S. Census Bureau (Public-Use Microdata Samples, or PUMS) available at https://usa.ipums.org/usa/index.shtml; the current share comes from authors’ analysis of the CPS data set used for this 2020 report.

6. For more on teacher walkouts and strikes in 2018 see BLS 2019; Ballotpedia 2020; Romero, Healy, and Turkewitz 2018. Public school teachers in North Carolina and Oregon were also among those involved in the major work stoppages in 2019, according to BLS 2020.

7. BLS’s work stoppages reports present major work stoppages for educators at the municipal and state levels; see BLS 2019 and 2020.

8. We draw heavily on our prior work analyzing the “benefits bias”—which we now label the “benefits advantage” (see Allegretto, Corcoran, and Mishel 2004, 2008).

9. The ECEC provides compensation data for a narrower category of “primary, secondary, and special education school teachers” and for a broader category of “teachers.” We analyze the narrower category, which closely matches the definition of teachers in our CPS-ORG data, using data limited to state and local public-sector workers. The inclusion of kindergarten and special education teachers in the benefits analysis does not produce any more substantial differences than if they were excluded (as they are in the CPS sample used to estimate the wage penalty). Greater methodological detail is provided in Appendix A of Allegretto and Mishel 2019.

10. For details, see Appendix A of Allegretto and Mishel 2019.

11. See the reports in EPI’s “Teacher Shortage” series, at https://www.epi.org/research/teacher-shortages/, for discussions of pay inequities and other factors that dissuade professionals from entering or staying in the teaching profession.

12. Authors’ analysis of data from the Current Employment Statistics public data series. Additional shortfall estimate reflects the 43,300 shortfall in February 2020 from 2008 levels and the 261,100 more teachers needed to meet increases in student enrollment.

13. See for example Williams and Johnson 2013. Also Cooper (2020) explains how overall cuts in state and local public-sector budgets was a conscious choice over the alternative that many states did not take, which was to raise taxes; as Cooper notes, jurisdictions that did not cut public-sector workers fared better in the last recovery. For a summary of how K–12 education spending plummeted after the Great Recession, see Bivens 2017, Figure E.

References

Allegretto, Sylvia A., Sean P. Corcoran, and Lawrence Mishel. 2004. How Does Teacher Pay Compare? Methodological Challenges and Answers. Washington, D.C.: Economic Policy Institute.

Allegretto, Sylvia A., Sean P. Corcoran, and Lawrence Mishel. 2008. The Teaching Penalty: Teacher Pay Losing Ground. Washington, D.C.: Economic Policy Institute.

Allegretto, Sylvia A., Sean P. Corcoran, and Lawrence Mishel. 2011. The Teaching Penalty: An Update Through 2010. Economic Policy Institute Issue Brief no. 298, March 2011.

Allegretto, Sylvia A., and Lawrence Mishel. 2016. The Teacher Pay Gap Is Wider Than Ever: Teachers’ Pay Continues to Fall Further Behind Pay of Comparable Workers. Economic Policy Institute, August 2016.

Allegretto, Sylvia A., and Lawrence Mishel. 2018. The Teacher Pay Penalty Has Hit a New High: Trends in the Teacher Wage and Compensation Gaps Through 2017. Economic Policy Institute, September 2018.

Allegretto, Sylvia A., and Lawrence Mishel. 2019. The Teacher Weekly Wage Penalty Hit 21.4 Percent in 2018, A Record High. Economic Policy Institute, April 2019.

Allegretto, Sylvia A., and Ilan Tojerow. 2014. “Teacher Staffing and Pay Differences: Public and Private Schools.” Monthly Labor Review (U.S. Department of Labor, Bureau of Labor Statistics), September 2014.

Ballotpedia. 2020. “Statewide Public Education strikes, 2018” (web page), accessed September 10, 2020.

Bivens, Josh. 2017. Recommendations for States Facing Budget Shortfalls: Focus on Connecticut. Economic Policy Institute, May 2017.

Bivens, Josh, and David Cooper. 2020. “Without Federal Aid to State and Local Governments, 5.3 Million Workers Will Likely Lose Their Jobs by the End of 2021.” Working Economics Blog (Economic Policy Institute), June 10, 2020.

Bureau of Labor Statistics (BLS). 2019. “Major Work Stoppages in 2018” (news release). February 2019.

Bureau of Labor Statistics (BLS). 2020. “Major Work Stoppages in 2019” (news release) and “Work Stoppages Involving 1,000 or More Workers, 1993–2019” (related table), February 2020.

Bureau of Labor Statistics Employer Costs for Employee Compensation (BLS-ECEC). 2020. Employer Costs for Employee Compensation Historical Listing: National Compensation Survey, March 2004–March 2020.

Cooper, David. 2020. “Without Federal Aid, Many State and Local Governments Could Make the Same Budget Cuts that Hampered the Last Economic Recovery.” Working Economics Blog (Economic Policy Institute), May 27, 2020.

Corcoran, Sean P., William N. Evans, and Robert M. Schwab. 2004. “Women, the Labor Market, and the Declining Relative Quality of Teachers.” Journal of Policy Analysis and Management 23, no. 2: 449–470.

Economic Policy Institute (EPI). 2020. Current Population Survey Outgoing Rotation Group microdata for 1979–2019 from the Bureau of Labor Statistics, accessed via EPI Current Population Survey Extracts, Version 1.0.2 (2020), https://microdata.epi.org.

Economic Policy Institute (EPI). 2019. Methodology for Measuring Wages and Benefits. Last updated February 21, 2019.

Garcia, Emma, and Elaine Weiss. 2020. COVID-19 and Student Performance, Equity, and U.S. Education Policy: Lessons from Pre-pandemic Research to Inform Relief, Recovery, and Rebuilding. September 2020.

Gould, Elise. 2020. “Public Education Job Losses in April Are Already Greater Than in All of the Great Recession.” Working Economics Blog (Economic Policy Institute), June 3, 2020.

Phi Delta Kappan. 2018. The 50th Annual PDK Poll of the Public’s Attitude Toward the Public Schools: A Supplement to Kappan Magazine, September 2018.

Romero, Simon, Jack Healy, and Julie Turkewitz. 2018. “Teachers in Arizona and Colorado Walk Out Over Education Funding.” New York Times, April 26, 2020.

Shierholz, Heidi, and Margaret Poydock. Continued Surge in Strike Activity Signals Worker Dissatisfaction with Wage Growth. Economic Policy Institute, February 2020.

Williams, Erica, and Nicholas Johnson. 2013. ALEC Tax and Budget Proposals Would Slash Public Services and Jeopardize Economic Growth. Center on Budget and Policy Priorities. February 2020.

Vargas, Theresa. 2020. “The One Undoubtable Positive to Come of the Coronavirus: A New Appreciation of Teachers.” Washington Post, March 18, 2020.

Key takeaways:

• Today, the Biden campaign released a plan calling for $775 billion of investments in child and elder care over the next decade, a large increase over current levels.
• Based on our research, such an investment would support 3 million new jobs and substantially help stem the erosion of women’s labor force participation in the United States relative to our advanced country peers.
• These public investments would provide support that makes child and elder care more affordable for families while also providing a needed boost to the pay and training of the care workforce.

It has been apparent for years that the United States could benefit enormously from a large public investment in care work—including early child care education and elder care. A substantial investment in children would lead to a more productive workforce in the future, spurring large income gains. Investments in seniors would ensure that a decent and dignified retirement is available to all, a commitment that the United States has so far failed to sustain.

Crucially, both sorts of investment would greatly expand the opportunities for working-age adults to seek paid employment. It is well documented by now that the employment rate of prime-age (between 25 and 54 years old) U.S. adults (particularly women) has stagnated relative to our advanced country peers, and it is equally as well documented that the failure to invest in child and elder care is a key reason why.

This morning, the Biden campaign released a plan calling for a broad set of investments in child and elder care. Their plan would invest $775 billion over the next decade, a large increase over current levels. Such an investment would substantially help stem the erosion of women’s labor force participation in the United States relative to our advanced country peers. In 1990, for example, women’s prime-age labor force participation in the United States ranked 7th of 24 among the advanced economies with available data from the Organisation for Economic Co-operation and Development (OECD). By 2000, the United States had slipped to 16th of 35 OECD countries, while in 2019 our ranking was 30th of 35.

In an earlier paper, we noted that closing the gap in women’s labor force participation between the United States and its advanced country peers would lead to a gain of almost 5 million jobs. If an ambitious policy proposal—like the one proposed by the Biden campaign—could just halve that gap, then this would boost labor supply by roughly 2.5 million jobs.

In our earlier paper, we estimated the gains caused by a similar (but actually smaller) package of investments on just the child care and education side. These public investments would provide support that make this care and education more affordable for families while also providing a needed boost to the pay and training of the care workforce—a workforce that is dedicated but grievously underpaid relative to the importance of their work.

We found these policies would boost labor supply by nearly 2 million by themselves, drawing on work from Blau and Kahn (2013). Given that the Biden plan includes more generous child care and education subsidies as compared with the plan we evaluated, and given that it also includes substantial investments in elder care, we anticipate that the full labor supply boost caused by their plan could be closer to 3 million.

The potential labor supply gains by providing greater support for elder care are utterly enormous. For example, it has been shown that U.S. families provide nearly 34 billion hours of unpaid, personal work every year to provide care for older relatives. Any investment that allowed a nontrivial fraction of this work to be performed by professional care workers instead of unpaid family members would open up opportunities for these family members to search for jobs themselves.

It should be noted that many Republican policymakers are currently claiming they care deeply about the importance of spurring labor supply. This concern is the justification they often give for paring back the enhanced unemployment insurance (UI) benefits provided in the CARES Act passed in response to the economic shock of the coronavirus epidemic. But their stated concerns about the labor supply effects of these UI enhancements should not be taken seriously.

For one, in the near term, the number of jobs created in the U.S. economy will be entirely driven by labor demand, not supply. Evidence of this can be seen in the historically large job growth of the past two months, precisely when the extra $600 in weekly UI benefits was still available. In these past two months, even as enhanced UI benefits were available, an increase in labor demand (following the historic job losses of previous months) spurred historically rapid job growth (with 7.5 million jobs created in just two months), demonstrating conclusively that the constraint on job growth in this time was demand, not supply.

For another, boosting labor supply by impoverishing workers and chasing them back into any job that will take them in a depressed economy over the coming months would counteract the need to keep them safe and able to turn down work that might lead them to becoming vectors of spreading the virus. Given the recent explosion of new cases and virus spread, this is a real concern.

The appropriate time to worry about U.S. labor supply being a binding constraint on growth is in the long run after the virus is fully under control and the economy’s demand shortfall is in the past. And the way to boost labor supply in an effective and humane way is not to make the safety net as stingy as possible, but instead to make public investments that broaden the range of opportunities available for working-age adults. The Biden campaign’s commitment to making these investments is most welcome.

We are releasing this chartbook in the midst of the coronavirus pandemic—a crisis that has highlighted the importance of keeping our homes clean, the skills and patience required to provide child care, and the urgency of caring for elderly, sick, and disabled Americans.

Here are just a few key findings:

• The vast majority (91.5%) of domestic workers are women and just over half (52.4%) are black, Hispanic, or Asian American/Pacific Islander women.
• Though most (64.9% of) domestic workers are U.S.-born, they are more likely than other workers to have been born outside the U.S. and they tend to be older than other workers.
• The typical (median) domestic worker is paid $12.01 per hour, much less than other workers (who are paid $19.97 per hour). Even when compared with demographically similar workers, domestic workers on average are paid just 74 cents for every dollar that their peers make.
• Domestic workers are three times as likely to be living in poverty as other workers, and almost three times as likely to either be in poverty or be above the poverty line but still without sufficient income to make ends meet.
• Fewer than one in 10 domestic workers are covered by an employer-provided retirement plan and just one in five receives health insurance coverage through their job.

Jump to the charts

Jump to the data tables

The coronavirus crisis has laid bare the ways in which this work is undervalued and this workforce is underprotected. As their employers take steps to practice social distancing, many domestic workers have been left without work—and without any indication that they would get their jobs back. 1 At the same time, many domestic workers who are still on the front lines of the pandemic, caring for the sick and keeping homes clean, may lack the protective equipment they need. Although the pandemic serves as the backdrop for this chartbook, only data from before the pandemic was available at the time of our analysis. That means that the charts and data tables here provide a snapshot of domestic workers in the pre-coronavirus period.

In addition to caring for children and helping households stay clean, domestic workers support older people and people with disabilities or illnesses by providing hands-on health care, running errands, making meals, and cleaning homes, allowing their clients to live as independently as possible in their own homes. These services are incredibly valuable to those who receive them and to the other workers who would otherwise be spending their time on this important work. Given continued gender disparities in home responsibilities for unpaid care work, working women in particular are affected by the existence of the domestic workforce.

Although domestic work is vital to everyday life, this chartbook shows that domestic workers face low pay, rarely receive benefits, and have less access to full-time work than other workers. Because they work in private homes, they are outside of public view and isolated from other workers, leaving them particularly vulnerable to exploitation.2 And many groups of domestic workers are explicitly left out of many federal labor and employment protections—a policy decision dating back to the New Deal, when majority-black domestic and farmworkers were excluded from landmark federal labor laws as a concession to racist Southern lawmakers.3

Specifically, domestic workers are excluded from the National Labor Relations Act, enacted in 1935 to guarantee employees the right to form labor unions—or engage in other forms of collective action—to organize for better working conditions. And “live-in” workers are excluded from the overtime protections in the Fair Labor Standards Act, enacted in 1938.

The exclusions for domestic workers carried through to subsequent worker protection statutes. The Occupational Safety and Health Act does not apply to “individuals who, in their own residences, privately employ persons for the purpose of performing…what are commonly regarded as ordinary domestic household tasks, such as house cleaning, cooking, and caring for children.”4 Federal anti-discrimination laws, such as the Civil Rights Act, the Americans with Disabilities Act, and the Age Discrimination in Employment Act, all generally cover only employers with multiple employees, meaning many domestic workers are excluded from these protections. This exclusion is also part of the Family and Medical Leave Act.

A critical first step to providing domestic workers with the same protections as other workers is passing a National Domestic Workers Bill of Rights. In addition to extending basic wage and hour protections to domestic workers, such a measure would include key provisions establishing fair scheduling (i.e, no unexpected shift cancelations or changes without warning or compensation), transparent employment contracts, and access to health care and retirement benefits for domestic workers. Nine states (California, Connecticut, Hawaii, Illinois, Massachusetts, Nevada, New Mexico, New York, and Oregon) and the city of Seattle have already passed Domestic Workers Bills of Rights, and other states and localities should follow suit.

Home care aides make up the majority of the nation's 2.2 million domestic workers: Employment in domestic worker occupations, 2019

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here are 2.2 million domestic workers in the United States and more than half are agency-based home care aides. Domestic workers do the vital work of cleaning homes, tending to children, and providing daily living and health assistance to people who are elderly, are convalescing from illness, or have disabilities. The data from this chart are also available in Table 1, at the end of the chartbook.

It is highly likely that this 2.2 million estimate is an undercount of domestic workers. First, a significant proportion of domestic workers are paid “under the table,” which makes individuals who participate in surveys less likely to report these jobs. Second, the share of domestic workers who were born outside of the United States is higher than the share of workers overall who are not U.S.-born, and it is believed that immigrants are underrepresented in national surveys.5

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Women make up the vast majority of domestic workers: Share of workers who are women or men, for domestic workers, for all other workers, and by domestic worker occupation, 2019

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More than nine in 10 domestic workers (91.5%) are women—a gender imbalance that is even more pronounced for house cleaners (95.5% women) and child care providers (roughly 97% women). By comparison, women make up just under half (46.3%) of the rest of the workforce. While men are somewhat more likely to be home care aides than house cleaners or child care providers, they still account for less than 15% of home care aides.

See Table 2 at the end of the chartbook for a demographic breakdown of domestic workers by gender, race/ethnicity, nativity, education, and age. We have also provided supplemental tables with demographic breakdowns of domestic workers in each state and in selected metropolitan areas.

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Black and Hispanic workers make up a disproportionate share of domestic workers: Share of workers who are of a given race or ethnicity, for domestic workers, for all other workers, and by domestic worker occupation, 2019

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Well over half (57.1%) of domestic workers are black, Hispanic, or Asian American/Pacific Islander (AAPI). In contrast, black, Hispanic, and AAPI workers make up 36.0% of the rest of the workforce. House cleaners constitute the domestic worker occupation with the highest share of Hispanic workers (61.5%), while agency-based home care aides constitute the domestic worker occupation with the highest share of black, non-Hispanic workers (30.3%).

See Table 2 for a demographic breakdown of domestic workers by gender, race/ethnicity, nativity, education, and age. We have also provided supplemental tables with demographic breakdowns of domestic workers in each state and in selected metropolitan areas.

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Black and Hispanic women make up a disproportionate share of domestic workers: The share of domestic workers who are black, Hispanic, or AAPI women, 2019

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While women of all races and ethnicities are overrepresented in the domestic employee workforce, this overrepresentation is particularly pronounced for Hispanic and black women. A majority (52.4%) of domestic workers are black, Hispanic, or AAPI women—over a quarter (27.2%) are Hispanic women and nearly one in five (19.7%) are black women. Most house cleaners are Hispanic women (58.9%) and more than a quarter (27.2%) of agency-based home care aides are black women.

See Table 3 for a detailed demographic breakdown showing the race/ethnicity and nativity of domestic workers by gender.

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Domestic workers are more likely than other workers to have been born outside the U.S.: Share of workers with given nativity status, for domestic workers, for all other workers, and by domestic worker occupation, 2019

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More than a third (35.1%) of domestic workers were born outside of the U.S., compared with just 17.1% of the rest of the workforce. One in five is a foreign-born noncitizen (20.3%), while about one in seven is a U.S. citizen who was born in a different country (14.8%). While noncitizens are overrepresented in all domestic worker occupations, they are particularly overrepresented in the house cleaner workforce, making up half (50.8%) of house cleaners.

See Table 2 for a demographic breakdown of domestic workers by gender, race/ethnicity, nativity, education, and age. Table 3 provides even more detail, showing the race/ethnicity and nativity of domestic workers by gender. We have also provided supplemental tables with demographic breakdowns of domestic workers in each state and in selected metropolitan areas.

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Domestic workers tend to be older than other workers: Share of workers by age group, for domestic workers, for all other workers, and by domestic worker occupation, 2019

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Two in five domestic workers are age 50 or older, while just one-third of all other workers are at least 50 years old. Home care aides who aren’t agency-based are the domestic worker occupation with the highest median age (51). The exception to the tendency of domestic workers to skew older is the occupation of nannies, whose median age is 26. Over one-third of nannies are younger than 23 years old, compared with 8.3% of nondomestic workers who are under 23.

These data suggest that domestic work is often an important source of income for older workers. The reliance of some older workers on income from domestic occupations is particularly relevant during the coronavirus pandemic—older workers have a greater risk of severe illness from the virus—and underscores the need to provide domestic workers with access to paid sick leave and adequate protective equipment.

See Table 2 for more detailed age categories and the median ages of domestic workers. We have also provided supplemental tables with demographic breakdowns of domestic workers in each state and in selected metropolitan areas.

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How many domestic workers are employed in your state?: Number of domestic workers working in each state, by occupation and compared with all workers, 2019

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This map is color-coded to show which states have the most domestic workers. You can click on a state to display how many domestic workers total are employed there, and how many are employed in each domestic worker occupation, and compare these with the number of workers in all other occupations. You can access the map data from Table 4, which also shows employment counts by region. Employment counts for selected metropolitan areas are available in Table 5.

We have also provided supplemental tables with demographic breakdowns and median hourly wages of domestic workers in each region and state and in selected metropolitan areas.

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There is a wide and persistent gap between domestic workers’ wages and wages of all other workers: Median real hourly wages of domestic workers, by occupation, versus other workers, 2005–2019

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There is a large “domestic worker wage gap”—a wide gulf between the median hourly wage of domestic workers and the median hourly wage of all other workers. The wage gap for domestic workers is not only large, but it is also persistent. Like other typical workers, domestic workers have seen stagnant wages for decades (since well before 2005, which is the starting point in this chart because it is the first year for which data are available for the domestic worker occupations defined in our analyses). For an in-depth look at the sluggish wage growth of the last 40 years, see EPI’s report State of Working America Wages 2019.6

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The pay gap for domestic workers is widest for nannies: Median real hourly wages, domestic workers (all and by occupation) versus other workers, 2019

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The typical domestic worker is paid $12.01 per hour, including overtime, tips, and commissions—39.8% less than the typical nondomestic worker, who is paid $19.97. This wide gap between domestic workers’ wages and the wages of all other workers is consistent across domestic worker occupations.

Table 6 shows the median hourly wages of domestic workers, all other workers, and domestic workers by occupation broken out by gender, race/ethnicity, nativity, education, and age. We have also provided supplemental tables with median hourly wages of domestic workers by demographic group for each region and state and for selected metropolitan areas.

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Domestic workers who are male, U.S.-born, AAPI, college-educated, or ages 50 and older have the biggest wage gaps relative to their peers in other professions: Median real hourly wages, domestic workers versus other workers, 2019

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W
ithin every demographic category that we analyze, domestic workers are typically paid less than their peers. Male domestic workers face a larger wage gap relative to other men ($8.77, or 40.6%) than do female domestic workers ($6.27, or 34.4%; not shown). Asian American/Pacific Islander domestic workers, older domestic workers, and domestic workers with at least a bachelor’s degree also face particularly large within-group wage gaps.

Table 6 shows the median hourly wages of all domestic workers versus all other workers, and by domestic worker occupation, broken out by gender, race/ethnicity, nativity, education, and age.

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Even when controlling for demographics and education, domestic workers are paid less than similar workers: Average domestic worker hourly wages as a share of wages paid to demographically similar workers in other professions, 2019

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E
ven when we control for demographics and educational background using regressions, domestic workers face a big pay gap: The average domestic worker is paid 74 cents for every dollar that a similar worker would make in another occupation—or 26% less. Home care aides who are not agency-based face the largest wage gap: Their wages are two-thirds the wages of demographically similar workers—a third less. Although the regression-adjusted wage gap is smaller for nannies and house cleaners, they are still paid only about 80 cents for every dollar that a similar worker would make in another occupation.

Table 7 shows regression-adjusted hourly wage gaps for all domestic workers and for each domestic worker occupation, broken out by gender, race/ethnicity, nativity, education, and age.

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Domestic workers are more likely to work part time and more than twice as likely to work part time because they can't get full-time hours: Share of workers who work full and part time, for domestic workers, for all other workers, and by domestic worker occupation, 2019

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I
n addition to having lower hourly wages, domestic workers tend to work fewer hours than other workers. Nearly half of domestic workers work part time, compared with less than a quarter of all other workers. Much of this difference is at least somewhat “voluntary,” with domestic workers being more likely than other workers to have a part-time job because they want a part-time schedule (or need a part-time schedule to handle child care or other responsibilities). But domestic workers are also more than twice as likely as other workers to want a full-time job but to have to settle for a part-time job because they can’t get full-time hours. The greater likelihood of wanting but being unable to get full-time work is particularly acute for house cleaners, 15% of whom work part time but would like a full-time job. The greater incidence of part-time work among domestic workers is reflected in their average weekly hours on the job (not shown). While workers in other occupations put in just under 40 hours a week on average, domestic workers spend an average of 33.4 hours on the job each week.

Table 8 displays the data from this chart, as well as the average weekly hours of domestic workers.

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Domestic workers are paid less in a year than other workers: Median annual earnings, domestic workers versus other workers, 2018

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T
he combination of lower average hours and much lower median wages (shown in Table 8 and Figure 9) results in substantially lower annual earnings for domestic workers relative to other workers. The typical domestic worker’s annual earnings are just two-fifths of a typical worker’s in another occupation. While typical agency-based home care aides have higher annual earnings than domestic workers in other occupations, they still are paid just half of what workers outside the domestic workforce are paid in a year.

Table 9 shows the median annual earnings of all domestic workers, domestic worker occupations, and all other workers, broken out by gender, race/ethnicity, nativity, education, and age.

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Even when controlling for demographics and education, domestic workers are paid less in a year than similar workers: Average domestic worker annual earnings as a share of earnings paid to demographically similar workers in other professions, 2018

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E
ven when we control for demographics and educational background using a regression, domestic workers face a big pay gap as a result of lower hourly wages and fewer hours: The average domestic worker is paid less than half of what a similar worker would make in another profession on an annual basis. Nannies face the largest gap: Their annual earnings are less than one-third the earnings of a demographically similar worker. Although the regression-adjusted earnings gap is smaller for agency-based home care aides, they are still paid 42.8% less annually than a similar worker would be paid in another occupation.

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Domestic workers are three times as likely to be in poverty and almost three times as likely to lack enough income to make ends meet: Poverty rates and twice-poverty rates of domestic workers versus other workers, 2018

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D
omestic workers are much more likely than other workers to be living in poverty, regardless of occupation. They are also much more likely to have incomes that fall below the twice-poverty threshold, which is considered by many researchers a better cutoff for whether a family has enough income to make ends meet. The majority of house cleaners are struggling to make ends meet (their “twice-poverty” rate is 54.8%) and more than a quarter (25.4%) have incomes that put them below the official poverty threshold. Workers who provide child care in their own homes have somewhat lower poverty rates than other domestic workers, although a third of them (32.4%) still do not have enough income to make ends meet—about twice the share of the nondomestic workforce living below the twice-poverty line. Domestic workers who are not U.S. citizens and those without a high school diploma face particularly high poverty rates, as do black and Hispanic domestic workers. (These data are shown at the end of the chartbook in Table 10 and Table 11, which provide poverty and twice-poverty rates for domestic workers and all other workers broken out by gender, race/ethnicity, nativity, education, and age.)

Poverty researchers generally do not consider the poverty rate to be a good measure of the share of families who cannot make ends meet in part because the poverty thresholds were set in the 1960s and have not evolved to reflect changing shares of spending on various necessities by low-income families. That is why “twice poverty” is often used as a cutoff for whether a family is able to make ends meet.

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Even when controlling for demographics and education, domestic workers are more likely to live below the poverty line than similar workers: Percentage-point difference between the poverty rate of domestic workers and that of demographically similar workers in other occupations, 2018

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E
ven when we compare domestic workers exclusively with workers in other professions who are demographically similar, domestic workers are still much more likely to be living in poverty. House cleaners on average have a poverty rate that is 14.0 percentage points higher than the poverty rate of similar workers. Along with agency-based home care aides, house cleaners also have twice-poverty rates that are nearly 20 percentage points higher than you would expect these rates to be if these workers were employed in nondomestic occupations. (The twice-poverty rate is the share of workers whose family income falls below the twice-poverty threshold, considered by many researchers a better cutoff for whether a family has enough income to make ends meet.)

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Domestic workers are less likely to have health or retirement benefits: Employer-provided health insurance and retirement coverage rates, domestic workers versus other workers, 2018

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ust under one in five domestic workers has employer-provided health insurance, a shockingly low coverage rate compared with the near-majority of other workers who receive health insurance through their job. Coverage rates are less than 10% for house cleaners and workers who provide child care in their own home. Even agency-based home care aides, the domestic worker occupation with the highest employer-provided health insurance coverage rate, are barely half as likely to be covered as nondomestic workers.

The coverage rates for employer-provided retirement plans are even more dismal—fewer than one in 10 domestic workers are covered. By comparison, about a third of other workers benefit from their employer contributing to their retirement savings.

See Table 12 and Table 13 for variations in employer-provided health insurance and retirement coverage rates for domestic and all other workers by gender, race/ethnicity, nativity, education, and age.

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Even when controlling for demographics and education, domestic workers are less likely to have benefits than similar workers: Percentage-point gap between the coverage rates of domestic workers and those of demographically similar workers in other occupations, 2018

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The glaring gaps in health insurance and retirement coverage rates are evident even when we compare domestic workers with demographically similar workers. The share of domestic workers with employer-provided health insurance is 21.4 percentage points lower than the share of all other workers with such coverage. And the share of domestic workers with employer-provided retirement plans is 17.1 percentage points lower than the share of all other workers with such coverage. Agency-based home care aides are more likely than other domestic workers to have employer-provided benefits, but the gap between these workers and nondomestic workers remains enormous even after controlling for demographic characteristics.

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Employment in domestic worker occupations is growing faster than the rest of the workforce: Projected employment change, domestic workers versus other workers, 2018–2028

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Employment in domestic worker occupations is projected to grow more than three times as fast as employment in other occupations over a decade—22.9% compared with 6.9%. This trend is driven by the expected large increase (45.4%) in agency-based home care aides, who make up about half of the domestic employee workforce.

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Table 1

Table 2

Table 3

Table 4

Table 5

Table 6

Table 7

Table 8

Table 9

Table 10

Table 11

Table 12

Table 13

Technical notes about data and definitions

The figures and tables in this chartbook use data from the Current Population Survey (CPS), a monthly survey of households in the United States sponsored jointly by the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS). Our CPS basic and Outgoing Rotation Group microdata are pulled from the Economic Policy Institute Current Population Survey Extracts, Version 1.0.2 (2020), https://microdata.epi.org.

In our analyses of hourly wages, we use data from the CPS’s Outgoing Rotation Group (ORG), a CPS subgroup of employed adults asked to answer a detailed set of questions about their earnings from work. Our analyses of annual earnings, benefits, and poverty rates come from the CPS’s Annual Social and Economic Supplement (ASEC). To ensure adequate sample sizes for these detailed analyses, we pool several years of CPS, CPS-ORG, or CPS-ASEC microdata. Most data sets are drawn from pooled 2016–2018 or 2017–2019 microdata, whichever microdata set is the most recent available. Data sets that are broken down by geography are drawn from pooled 2010–2019 microdata. Even after pooling years together, we still do not have adequate sample sizes to report statistics for some demographic groups, as indicated in the tables by “NA.”

The CPS asks respondents about both race and ethnicity, so respondents may be categorized as having Hispanic ethnicity and being of any race. To avoid including observations in multiple categories, we create five mutually exclusive categories for race/ethnicity: white (non-Hispanic), black (non-Hispanic), Hispanic (any race), Asian American/Pacific Islander (non-Hispanic; sometimes referred to as “AAPI” in this report), and “other.” Likewise, gender is restricted to the two predominant binary categories: women and men. Note that for clarity, when discussing our findings, we adhere to the category name of “Hispanic,” which is used in official government sources, rather than Latino, Latina, or Latinx.

In our charts, “Foreign-born” refers to anyone who is not a U.S. citizen at birth. “Foreign-born noncitizen” includes foreign-born persons who are either lawful permanent residents, in a nonimmigrant status (migrants with temporary visas), or lacking an immigration status, including both unauthorized immigrants and those with lawful presence (such as Deferred Action for Childhood Arrivals recipients and asylum applicants whose cases are in process).

The data include all public- and private-sector workers ages 16 and older. Due to rounding, in a few cases sums that can be calculated by using the data in tables or figures vary slightly from sums cited in the text.

Acknowledgments

The authors would like to thank EPI Editor Krista Faries for improving the chartbook through her careful editing and preparing of our figures and tables for publication. And we are indebted to EPI’s Online and Creative Director, Eric Shansby, who created the awesome system that makes it possible to design and publish these interactive chartbooks.

Endnotes

1. Julia Wolfe, “Domestic Workers Are at Risk During the Coronavirus Crisis,” Working Economics Blog (Economic Policy Institute), April 8, 2020.

2. Laura Dresser, Valuing Care by Valuing Care Workers: The Big Cost of a Worthy Standard and Some Steps Toward It, Roosevelt Institute, October 2015.

3. Linda Burnham and Nik Theodore, Home Economics: The Invisible and Unregulated World of Domestic Work, National Domestic Workers Alliance, 2012.

4. Occupational Safety and Health Administration, “Policy as to Domestic Household Employment Activities in Private Residences,” Standard Number 1975.6.

5. United States General Accounting Office, Immigration Statistics: Information Gaps, Quality Issues Limit Utility of Federal Data to Policymakers, July 1998.

6.  Elise Gould, State of Working America Wages 2019: A Story of Slow, Uneven, and Unequal Wage Growth over the Last 40 Years, Economic Policy Institute, February 2020.

This report was produced in collaboration with University of California Berkeley’s Center for the Study of Child Care Employment.

The chronic underfunding of early care and education (ECE) is compromising the well-being of educators and the children they teach and threatening the economic security of millions of families in the United States. The current ECE system demands large contributions from the parents of young children, both through payments for ECE services and through forgone income when parents drop out of or reduce their participation in paid labor markets to provide care on their own. Investments from federal, state, and local governments have provided some relief for parents, but those investments have generally been far too small. And while the cost to parents for ECE is high, the current market rates for services are inefficiently low because ECE teachers are underpaid. Nationally, the median hourly wage for ECE teachers is $12.12 (EPI 2019b).

A greater public investment is required to create a comprehensive and high-quality system that works for parents, children, and teachers alike. Gould et al. (2020) estimate the costs of a transformed ECE system—in which teachers are appropriately compensated and programs are of high quality and available to all families—for all 50 states and the District of Columbia, using a variety of data sources.1 All together, the enhanced system—fully phased-in and comprehensive—would require an annual investment in the range of $337 to $495 billion, serving between 11.5 and 16.0 million children.

While a comprehensive and high-quality ECE system would require a large infusion of dedicated financing, it is important to understand that we are not starting from scratch. A substantial down payment has already been made through the explicit and implicit resources that are currently dedicated to the care and education of young children. This report provides some context for the investment needed for an ECE overhaul by providing a rough count of the money already in the ECE system from direct contributions. We also account for income forgone by families when parents participate in fewer hours of paid work to care for their children.

Further, substantial benefits would stem from a fundamental overhaul of the system. Investments in high-quality ECE for our children will pay dividends on this country’s economic future and, even in strictly fiscal terms, these investments will essentially pay for themselves over the course of a couple of decades.

Public spending on today’s ECE system

Public spending on early care and education in the U.S. is about $34 billion, with about $22.2 billion coming from the federal government and $11.8 billion from state and local governments.

According to the most recent data from the Organisation for Economic Co-operation and Development (OECD), U.S. public spending for education and care for children ages 0–5 was about 0.33% of GDP in 2015 (OECD 2017), which is the equivalent of about $64 billion in 2017.2 (For context, average public spending for these costs among OECD countries was 0.74% of GDP.)

Since the OECD data include children through age five, however, that means it includes spending on kindergartners; in the U.S., spending on kindergartners accounts for a substantial percentage of public spending on children ages 0–5. So U.S. public spending on ECE only (that is, not including kindergartners) is actually lower than the $64 billion we calculated above.

To determine how much of that $64 billion is spent on ECE, we start by noting that there are approximately 3.7 million kindergartners in the U.S. public school system (NCES 2019). Per-pupil spending by grade is not generally available. Per-pupil spending overall in public schools was $12,201 in 2017 (U.S. Census Bureau 2019). One could assume this average applies to all kindergartners; however, only 14 states plus D.C. require districts to offer full-day kindergarten (ECS 2018), which means that spending on kindergartners is likely to be lower than the per-pupil average in public schools. We assume that average spending on kindergartners is two-thirds of the per-pupil average in public schools, which means that public spending on kindergartners accounts for about $30 billion of the OECD total.3 This leaves $34 billion in public spending on early childhood education and care outside of kindergarten, or about 0.18% of GDP.

This seems to us to be a reasonable topline estimate of public spending on early childhood education and care in the U.S., and it is roughly in the same range as estimates from other studies.4 Following the methodology used by the BUILD Initiative (2017), we estimate that $22.2 billion of this spending is federal spending,5 which leaves state and local government spending at $11.8 billion.

We think this is likely a conservative estimate of total public spending on ECE, and in particular of state and local government spending on ECE.6 The OECD notes that outside of comprehensively recorded data from the Nordic countries (Denmark, Finland, Iceland, Norway, and Sweden), its social expenditure data may not fully capture spending by local governments. In our search, we did not come across a comprehensive and detailed breakdown of state and local spending on ECE. A more comprehensive survey of all state and local spending on early childhood education and care is outside the scope of this project.

Direct spending on today’s ECE system by parents

Parents currently spend about $42 billion on early care and education.

Parents spend a great deal of money each year paying for their children’s early care and education. There is a large variation across states as well as by age of child because of differences in the cost of living and lower recommended child-to-teacher ratios for younger children. Center-based care for four-year-olds ranges from $4,493 a year in Arkansas to nearly $18,980 a year in D.C., while ECE for infants ranges from $5,760 in Mississippi to $24,081 in D.C. (Child Care Aware 2019). These costs are burdensome not only for low-income families, but also for many middle-income families. As a share of median family income for families with children, parents would have to spend between 10.2% and 28.6% of their total income on infant care (EPI 2019a). Costs for families with more than one child in the ECE system eat up an even larger portion of families’ budgets (EPI 2018).

These individual investments add up to a substantial sum. The Consumer Expenditure Survey (CEX) is a survey of households—technically consumer units—on a wide range of expenditure questions. The survey shows that, in total, all consumer units spend about $42.2 billion on early care and education (BLS-CEX 2018). This equates to a mean expenditure per consumer unit on “day care centers, nursery, and preschools” of $321 per year. Obviously, this average is low because it includes the millions of families who pay nothing in any given year; meanwhile, a small group of families—those with young children—are paying a lot more than this average, and at a relatively early point in their careers when their incomes are low. While these individual consumer contributions are currently funding much of the ECE system today, it is clear that these high and rising costs are unsustainable because of their threat to families’ economic security and well-being. However, if these costs were more broadly shared, the burden on families who are most vulnerable would be far lower (as reflected in the overall average).

One large hidden cost of today’s ECE system: Forgone parental income

Parents forgo about $30–35 billion in income because the current high cost of ECE leads many parents to leave the paid labor force, or reduce their paid work hours, to care for their children.

If a high-quality and more generously subsidized ECE system were put in place, it would not only ease the direct financial burden on parents, but it would also make it possible for those parents to enter the labor market or work more hours. This would help alleviate a huge cost of today’s ECE system: the forgone income of parents who respond to the high costs of ECE by dropping out of the workforce and caring for their children themselves. The labor force participation of parents with young children is weaker in the United States than in many of our peer nations, likely because of our lack of paid parental leave policies as well as the high cost of child care (Bivens et al. 2016).

One way to gauge this implicit cost is simply to ask how many more hours parents would work if public policy made high-quality ECE universally available at no cost or at a low cost. The focus of much of the research tends to be on mothers (not fathers), as historically mothers’ labor force participation has shifted more when children enter the picture. Of course, there’s no reason to believe that fathers can’t and won’t alter their behavior given changing societal attitudes or public policies such as paid parental leave. But what is consistent in the economics research is that when the price of ECE falls, more mothers work. Estimates of this labor force response vary in the research literature. In one representative study, Blau (2001) finds that decreasing child care costs by 1% increases mothers’ labor force participation by 0.2%. Using these estimates, another study finds that the resulting increase in labor force participation from capping ECE costs at 10% of family income could translate into a GDP increase of 1.2%, equal to $210.2 billion (Bivens et al. 2016).

In this report, we draw our estimates of increase in labor force participation from the work of Baker, Gruber, and Milligan (2008), who analyze the introduction of Quebec Family Policy in the late 1990s. This natural experiment is a desirable model for estimating the labor market effects of a highly improved U.S. system because the Quebec expansion made ECE more affordable, was universal, and was accompanied by policies that significantly increased wages of ECE workers. If anything, the policy change in Quebec is less ambitious than what is proposed in Gould et al. (2020) and therefore using those policy estimates will likely underestimate the results in the U.S.

In Quebec, the subsidy rate for ECE costs increased by about 50%, from a subsidy that pays about half the costs to one that pays nearly 80% of the costs (Baker, Gruber, and Milligan 2005). ECE workers received additional professional development and training as well as wage subsidies, which resulted in an estimated wage increase of 38–40% (Tougas 2002). The employment rate for married mothers with young children in Quebec before the Family Policy was implemented is not far from that in the U.S. today—53.0% in Quebec in 1994–1995 (Baker, Gruber, and Milligan 2008), compared with 60.5% in the U.S. in 2018 (EPI 2019b).7

In a regression framework, Baker, Gruber, and Milligan (2008) find that following the implementation of the Family Policy, married mothers in Quebec increased their employment rate by 7.7 percentage points relative to the rest of Canada. Applying these results to the U.S., we estimate that an overhaul of the ECE system could increase the employment rate of married mothers to 68.2%, adding 7,361,660 new workers to the labor force. In Quebec, married women who entered the workforce after the implementation of the Family Policy averaged 30 to 40 hours per week (Baker, Gruber, and Milligan 2008). Using the median hourly wage for married mothers in the U.S. ($19.58 in 2018) and assuming these new labor market entrants work an average of 35 hours per week, this equates to an increase in labor market income of $29.6 billion.8

Baker, Gruber, and Milligan (2008) find that single mothers increased their employment by 4.0 percentage points in response to the provision of more affordable child care. While this estimate is far smaller than for married mothers and is not statistically significant at conventional levels, we can use these parameters to estimate the labor supply effect of large-scale ECE reform on single mothers with young children in the U.S. We estimate that this reform would result in 183,162 additional single mothers joining the workforce (a four-percentage-point increase in their employment-to-population ratio, from 64.9% to 68.9%). Using the median hourly wage for single mothers ($14.95 in 2018) and assuming, as above, that they work on average 35 hours per work, we find that labor market income for single mothers would increase by $5.0 billion.9

Taken together, we find that even a somewhat modest increase in the generosity of ECE subsidies for families—like that represented by the Quebec Family Policy—translates into a mammoth increase in participation among mothers, and this increased labor force participation generates roughly $34.6 billion more dollars in labor market income.

Forgone tax revenue due to lower parental participation in the labor force

Parents’ forgone wages translate into a loss of tax revenue of about $4.2 billion each year.

This loss in labor market income because of unaffordable ECE options under the current system is substantial for families, and it is also large when we examine the costs to federal revenues. Using the total forgone income estimated above, along with the average marginal tax rate, we can estimate the total loss in federal revenues. The increase in earnings for married mothers who are in the labor force is estimated at $35,643 annually. Using the NBER TAXSIM model, we find that federal taxes are $2,961 per newly employed married mother.10 Therefore, the forgone federal tax revenue is about $2.5 billion.

When we include single mothers—with estimated annual increase in earnings of $27,200—in our total, the forgone federal tax revenue rises to $2.6 billion.11 State and local tax revenue is about 58.3% of federal tax revenues, making total state and local tax losses come in at about $1.5 billion.12 Taken together, the total forgone tax revenue in the current ECE system from fewer parents working is about $4.2 billion per year.

Another large hidden cost of today’s system: The underpayment of ECE teachers

In a high-quality system that invests in ECE teachers and pays them comparably to their peers in the K–8 system, these teachers would see their wages rise by $80.3 billion.

The most important ingredient in a high-quality ECE system is a skilled and dedicated workforce. Many of today’s ECE teachers are skilled and dedicated, but their pay is far too low to allow them to build family-sustaining careers around this work. In essence, today’s system is made more affordable to parents because teachers are paid inefficiently low wages. The magnitude of this underpayment can be calculated by comparing what ECE teachers earn today relative to what they would earn if they were given comparable pay and skills development as K–8 educators: The current median annual pay of early educators is $25,218 per year.13 If they were paid commensurate with their peers who teach in the K–8 public school system, their pay would increase significantly, from $25,218 to $60,602—a $35,384 increase in pay on an annual basis.14 Based on the current number of ECE teachers today, this means $80.3 billion more dollars in the pockets of ECE teachers.15

In the current system, many early educators are paid such low wages that nearly one in five live below the official poverty line.16 The proposed increase in pay will transform these low-wage jobs of today into better middle class jobs, alleviating the extreme economic stress educators experience (e.g., worry about paying for food for their families). Further, the availability of high-quality, affordable ECE will likely increase demand for ECE services—and thereby increase ECE employment opportunities, extending these middle-class economic benefits to even more workers.

Forgone tax revenue due to underpayment of ECE teachers

Paying ECE teachers higher wages would mean a gain in tax revenue of about $42.9 billion.

Early educators’ too-low income currently translates into a significant loss in tax revenue for the federal government as well as for state and local governments. The proposed increase in pay would mean an increase in federal revenues of $27.1 billion.17 Using the ratio of federal and state/local taxes discussed above, state and local tax revenue would total about $15.8 billion. In total, tax revenue gains would equal about $42.9 billion in just one year.

Returns to investment of a high-quality ECE system

Sufficient investment in a high-quality ECE system will more than pay for itself in the long run—both in societal benefits and in fiscal returns to government budgets.

While there are billions of dollars in the current ECE system, we can get better long-run returns for our children and society if we invest in a higher-quality system that is reliant on a skilled and stable workforce. Evidence shows that public investments in high-quality early care and education yield substantial benefits to children by increasing future compensation, improving health, and reducing interactions with the criminal justice system (Heckman 2011). These benefits far outpace the costs of investment (García et al. 2016). Surveying the research, Lynch and Vaghul (2015) estimate that it takes just eight years for the societal benefits of investment in high-quality prekindergarten to exceed the costs.

Lynch and Vaghul estimate that investments in high-quality prekindergarten also clear the (far higher) fiscal cost-benefit bar; that is, these investments would, in the long run, have a positive net effect on government budgets. Children with better early care and educational opportunities draw on fewer government resources throughout their lives, as well as earning higher compensation as adult workers—which creates additional tax revenues long-term. In fiscal terms, it takes just 16 years for the government budget benefits to exceed annual government costs.

Conclusion

High-quality early care and education is important and it is worth the investment. The U.S. is already pouring billions of dollars into the current system through government expenditures and parental contributions. And yet the current system is failing parents by stretching family budgets and keeping millions out of the labor force. The current system is also failing early educators by keeping their pay low and their working conditions suboptimal, which comes at a cost for their own economic security as well as at a cost to the children in their care. The loss of potential earnings for both parents and educators translates into lower government revenues. Finally, the current system is failing to make the kinds of high-quality investments that U.S. children deserve and that will pay off many times over in years to come.

Acknowledgments

The authors wish to acknowledge the generous support of the Joyce Foundation and the Heising-Simons Foundation. The authors also appreciate the assistance of Julia Wolfe, state economic analyst, and Zane Mokhiber, data analyst.

Notes

1. See Gould et al. 2019 for a more complete methodology using California as the lead example.

2. Authors’ calculation from BEA 2019, Table 1.1.5.

3. We take two-thirds of $12,201 (= $8,134) and multiply it by 3.7 million kindergartners to get $30.1 billion.

4. For example, Barnett and Kasmin (2016) estimated that U.S. government spending on early care and education for three- and four-year-olds was $23.9 billion in 2015, and the BUILD Initiative (2017) estimated that government spending on early care and education for children under five was $41 billion in 2015.

5. This total includes $9.2 billion from Head Start (Head Start 2018); $0.6 billion from Title I-IV funding (U.S. ED 2017); $0.8 billion from IDEA funding (U.S. ED 2017); $0.2 billion from Social Service Block Grants (OCS 2019); direct TANF spending of $0.9 billion (OFA 2018); tax expenditures of $2.8 billion (JCT 2017); $3.5 billion from the Child Care Development Fund (CCDF) (OCC 2017); $0.8 billion from TANF transfers to the CCDF (OFA 2018); and $3.4 billion from the Child/Adult Care Food Program (FNS 2019).

6. Aside from the OECD notes, we also think this is likely to be an underestimate of state and local spending in particular because in both Barnett and Kasmin 2016 and BUILD Initiative 2017, state and local government spending makes up about 45% of total public spending on ECE, while our estimate implies just 35% of public spending on ECE is by state and local governments.

7. Baker, Gruber, and Milligan (2008) focus initially on married mothers because their results are stronger and statistically significant.

8. We calculate $19.58 per hour times 35 hours times 7,361,600 new workers equals $29,627,278,700 in additional labor income. Median hourly wage for married mothers is from EPI 2019b.

9. We calculate $14.95 times 35 hours times 183,162 workers equals $4,981,019,970 in labor income. Median hourly wage for single mothers is from EPI 2019b.

10. For the purposes of the using the TAXSIM model, we assume married mothers have one child and no other income. To the extent that there is other household income, which is likely given that they are married, the tax liability for their labor earnings may be higher.

11. For the purposes of the using the TAXSIM model, we assume single mothers have one child and no other income.

12. The 2018 ratio of state and local current receipts (less federal grants to states to avoid double counting) to federal government receipts (BEA 2019).

13. To calculate median annual pay, we look at the 2018 median hourly pay of early educators (from Current Population Survey Outgoing Rotation Group data; see EPI 2019b) and we assume early educators work full time and full year. We find that the median hourly pay of early educators is $12.12. We multiply this by 2,080 hours per year to get an annual salary of $25,218.

14. Because K–8 teacher pay is typically not full year, we use the methods discussed in Allegretto and Mishel (2019) and rely on weekly wage data to compare K–8 teacher pay with early educator pay. Then, since early educators are more likely to work the full year, we adjust hourly pay data for early educators to full-time, full-year earnings and apply the ratio of weekly wages to determine the new pay of early educators.

15. According to American Community Survey data (Ruggles et al. 2019), there were 2,268,571 early educators in 2018.

16. According to American Community Survey data (Ruggles et al. 2019), 18.4% of early educators across the U.S. live in households that are below 100% of the poverty threshold.

17. Using NBER (2018) TAXSIM, we assume ECE teachers are single parents with one child. Federal tax liability includes federal regular tax minus the child tax credit (including the refundable part) minus the EITC plus FICA (Social Security and Medicare taxes).

References

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Bivens, Josh, Emma García, Elise Gould, Elaine Weiss, and Valerie Wilson. 2016. It’s Time for an Ambitious National Investment in American’s Children: Investments in Early Childhood Care and Education Would Have Enormous Benefits for Children, Families, Society, and the Economy. Economic Policy Institute, April 2016.

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Gould, Elise, Marcy Whitebook, Zane Mokhiber, and Lea J.E. Austin. 2019. A Values-Based Early Care and Education System Would Benefit Children, Parents, and Teachers in California. Economic Policy Institute, July 2019.

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Acknowledgments

The authors wish to acknowledge the generous support of the Joyce Foundation and the Heising-Simons Foundation.

Endnotes

1. As discussed later, the total cost depends largely on the number of children who would participate in such a system.

2. EPI analysis of Bureau of Economic Analysis, National Income and Product Accounts Tables [data tables], 2019.

3.  We define fair wages for ECE teachers as wages that are comparable to the wages earned by their K–8 counterparts; it is important to note, though, that these wages are still not as “fair” as we might hope for, given that K–12 teachers face significant pay penalties, as EPI research has shown. See, for example, Sylvia Allegretto and Lawrence Mishel, The Teacher Pay Penalty Has Hit a New High: Trends in the Teacher Wage and Compensation Gaps Through 2017, Economic Policy Institute, September 2018.

4. Marcy Whitebook, Deborah Phillips, and Carollee Howes, Worthy Work, STILL Unlivable Wages: The Early Childhood Workforce 25 Years After the National Child Care Staffing Study, Center for the Study of Child Care Employment, University of California, Berkeley, 2014; Marcy Whitebook, Caitlin McLean, Lea J.E. Austin, and Bethany Edwards, Early Childhood Workforce Index – 2018, Center for the Study of Child Care Employment, University of California, Berkeley, 2018.

5. Marcy Whitebook, Building a Skilled Teacher Workforce: Shared and Divergent Challenges in Early Care and Education and in Grades K–12, Center for the Study of Child Care Employment, University of California, Berkeley, September 2014.

6. Economic Policy Institute, Current Population Survey Extracts, version 0.6.0, 2019; Steven Ruggles et al., Integrated Public Use Microdata Series USA (IPUMS USA): Version 9.0 (Minneapolis, Minn.: IPUMS, 2019), https://doi.org/10.18128/D010.V9.0.

7. Costs vary by region of the state; statewide averages are provided here.

8. Economic Policy Institute, The Cost of Child Care, by State (calculator), last updated July 2019. “In-state college tuition” is tuition at a four-year public college or university.

9. Economic Policy Institute, Family Budget Calculator, last updated March 1, 2018; Department of Health and Human Services, Child Care and Development Fund (CCDF) Program; Proposed Rule, 80 Fed. Reg. 80466–80582 (December 24, 2015).

10. Child Care Aware of America, The U.S. and the High Cost of Child Care: A Review of Prices and Proposed Solutions for a Broken System, 2018, PDF downloadable from https://usa.childcareaware.org/advocacy-public-policy/resources/research/costofcare/.

11. Rebecca Ullrich, Stephanie Schmit, and Ruth Cosse, Inequitable Access to Child Care Subsidies, Center for Law and Social Policy (CLASP), April 2019; Sarah Thomason, Lea J.E. Austin, Annette Bernhardt, Laura Dresser, Ken Jacobs, and Marcy Whitebook, At the Wage Floor: Covering Homecare and Early Care and Education Workers in the New Generation of Minimum Wage Laws, Center for Labor Research and Education (UC Berkeley), Center for the Study of Child Care Employment (UC Berkeley), and COWS (UW-Madison), May 2018.

12. Lea J.E. Austin, Marcy Whitebook, and Harriet Dichter, Financing Early Educator Teacher Quality: A Closer Look at Assumptions That Drive Variations in Estimating the Cost of Services, Center for the Study of Child Care Employment, University of California, Berkeley, 2019.

13. Our concurrent report, Who’s Paying Now? The Explicit and Implicit Costs of the Current Early Care and Education System (Elise Gould and Hunter Blair, Economic Policy Institute, January 2020), provides some context for the investment needed for an ECE overhaul by providing a rough count of the money already in the ECE system nationwide.

14. In our concurrent report, we estimate that parents forgo roughly $30–35 billion in income because the current high cost of ECE leads many parents to leave the paid labor force, or reduce their paid work hours, to care for their children. See Elise Gould and Hunter Blair, Who’s Paying Now? The Explicit and Implicit Costs of the Current Early Care and Education System, Economic Policy Institute, January 2020.

15. Marcy Whitebook, Elizabeth King, George Philipp, and Laura Sakai, Teachers’ Voices: Work Environment Conditions That Impact Teacher Practice and Program Quality, Center for the Study of Child Care Employment, University of California, Berkeley, 2016; Marcy Whitebook, Marisa Schlieber, Aline Hankey, Lea J.E. Austin, and George Philipp, Teachers’ Voices: Work Environment Conditions That Impact Teacher Practice and Program Quality — New York, Center for the Study of Child Care Employment, University of California, Berkeley, 2018.

16. Josh Bivens, Emma García, Elise Gould, Elaine Weiss, and Valerie Wilson, It’s Time for an Ambitious National Investment in America’s Children: Investments in Early Childhood Care and Education Would Have Enormous Benefits for Children, Families, Society, and the Economy, Economic Policy Institute, April 2016.

17. National Academies of Science, Engineering and Medicine, Transforming the Financing of Early Care and Education (Washington, D.C.: National Academies Press, 2018), https://doi.org/10.17226/24984.

18. Marcy Whitebook, Caitlin McLean, Lea J.E. Austin, and Bethany Edwards, Early Childhood Workforce Index – 2018, Center for the Study of Child Care Employment, University of California, Berkeley, 2018.

19. For a more complete methodology using California as the lead example, see Elise Gould, Marcy Whitebook, Zane Mokhiber, and Lea J.E. Austin, Breaking the Silence on Early Child Care and Education Costs: A Values-Based Budget for Children, Parents, and Teachers in California, Economic Policy Institute, July 23, 2019.

20. Steven Ruggles et al., Integrated Public Use Microdata Series USA (IPUMS USA): Version 9.0 (Minneapolis, Minn.: IPUMS, 2019), https://doi.org/10.18128/D010.V9.0.

21. Steven Ruggles et al., Integrated Public Use Microdata Series USA (IPUMS USA): Version 9.0 (Minneapolis, Minn.: IPUMS, 2019), https://doi.org/10.18128/D010.V9.0; Organisation for Economic Co-operation and Development (OECD), OECD Family Database: PF3.2 Enrollment in Childcare and Pre-School, OECD, Social Policy Division, Directorate of Employment, Labour and Social Affairs, 2018; National Center for Education Statistics (NCES), “Fast Facts: Homeschooling” (web page), 2017.

22. National Survey of Early Care and Education (NSECE) 2012 data; Ajay Chaudry et al., Cradle to Kindergarten: A New Plan to Combat Inequality (New York: Russell Sage Foundation, 2017).

23. Data from Economic Policy Institute, Current Population Survey Extracts, version 0.6.0, 2019, analyzed using methods in Sylvia Allegretto and Lawrence Mishel, Teacher Wage and Compensation Penalty Methodology, Economic Policy Institute, April 2019. In general, we trust the methods and sampling used in the CPS-ORG; however, when the estimates vary greatly from other sources, notably the Occupational Employment Statistics (OES), we use information from both surveys to reach our estimate. Specifically, when the estimate for teacher pay using the CPS-ORG is more than 10% higher than the OES estimates for the same occupation, we deflate our teacher pay estimate down to 110% of the OES value.

24. Economic Policy Institute, “Wages by Education” [online interactive table], State of Working America Data Library, table last updated February 19, 2019.

25.  It is important to note that, while ECE teachers (both lead and assistant teachers) would receive higher pay under our model than they are currently receiving, we have based our estimates for ECE teacher pay on elementary and middle school teacher pay and, as EPI has shown in other research, public school teachers face a significant pay penalty. That penalty is 20% on average nationally; at the state level, the penalty runs as high as 36.4%. (See Sylvia Allegretto and Lawrence Mishel, The Teacher Pay Penalty Has Hit a New High: Trends in the Teacher Wage and Compensation Gaps Through 2017, Economic Policy Institute, September 2018.) Because assistant teacher salaries are based on a percentage of BA teacher pay, those salaries may also seem lower than what would be deemed fair in other circumstances. To the extent that the pay penalty narrows for public school teachers in the future as better contracts are negotiated, we would hope that ECE teacher pay would rise as well.

26. Bureau of Labor Statistics, Occupational Employment Statistics, May 2018 State Occupational Employment and Wage Estimates [online data set], last modified April 2, 2019.

27. Bureau of Labor Statistics, Occupational Employment Statistics, May 2018 State Occupational Employment and Wage Estimates [online data set], last modified April 2, 2019.

28. American Academy of Pediatrics, American Public Health Association, and National Resource Center for Health and Safety in Child Care and Early Education, Caring for Our Children: National Health and Safety Performance Standards, Guidelines for Early Care and Education Programs, 4th ed., 2019, PDF downloadable at https://nrckids.org/CFOC; LoopNet Market Trends (LoopNet), Property Asking Rent—Lease Trends, 2017; U.S. Census Bureau, “Table B25031: Median Gross Rent by Bedrooms,” data from the 2013–2017 American Community Survey 5-Year Estimates, accessed via American FactFinder, 2018.

29. Costs for both center- and home-based settings are adapted from Augenblick, Palaich and Associates, The Cost of Preparing Students for Kindergarten in Southwest Florida, prepared for Future Ready Collier Early Childhood Education Work Group, April 2017.

What this report finds: California’s early child care and education (ECE) system is underfunded, and California policymakers have not been willing to acknowledge the true cost of creating a comprehensive ECE system. Proposals for ECE reform have focused primarily on improving access and affordability for families but have ignored the elephant in the room: Early care and education is substantially “funded” through low teacher pay and inadequate supports for ECE teachers. In addition to being a serious injustice, lack of adequate financial and professional supports for ECE teachers compromises the consistency and quality of care children receive.

Why it matters: Before they enter kindergarten, young children need consistent care from teachers who are well prepared and well supported. Working parents need access to dependable, high-quality, affordable child care. And we need to send a message that the work of teaching young children, performed primarily by African American and Hispanic women, is a valuable and respected occupation in California. Early care and education should no longer be financed through low teacher pay.

This report was produced in collaboration with University of California Berkeley’s Center for the Study of Child Care Employment.

What can be done about it: Policymakers and other stakeholders have an opportunity to disrupt the status quo and ensure that California’s ECE system has the funding it needs to work effectively for children, families, and teachers. In this report, we develop an estimate of what it would cost to provide high-quality and comprehensive early care and education for California’s families that doesn’t overburden them financially or come at the expense of ECE teachers. The total estimated annual cost of a fully phased-in system ranges from $29.7 to $75.4 billion, or $30,000 to $37,000 per child. The total cost depends largely on the number of children that would participate in such a system.

Early care and education (ECE) systems provide care and instruction to children before they enter kindergarten, i.e., to infants and children generally younger than five years old. The systems include the educators providing the care and instruction and the resources to access that care. California’s early care and education system—like ECE in all states—shortchanges children, families, and teachers. It represents a key component of the state’s weakening infrastructure—infrastructure that was created decades ago and that desperately needs major overhaul. Meaningful and effective reform requires a significant investment if we want our children to get off to a good start, if we want to help parents balance work and family life, and if we want to secure skilled and stable early educators to provide quality services.

Currently, state and federal financing fall short of serving all families who are eligible for child care subsidies, and many more families who are not eligible for subsidies are also heavily burdened by the cost of child care. In our largely market-based system, children’s access to services and the quality of those services are chiefly determined by their families’ ability to pay. At the same time, teachers are underpaid, and many are financially insecure, living dangerously close to or below the poverty line, which places their own families at risk. As a result, many early educators are driven to seek additional employment to make ends meet.

The amount of funding available for the workforce is the linchpin of a successful early care and education system. Without well-qualified and fairly compensated early educators, ECE programs will not be able to provide and sustain a high standard of care for the children of California.

There is no justifiable defense of the status quo from a developmental, economic, or equity perspective and, in fact, there are compelling reasons to disrupt the system currently in place. What is needed for the children, parents, and the economy of California is a values-based budget for early care and education—one that ensures access to high-quality services for all children, lifts the heavy cost burden from families, and gives early educators the respect and pay their work deserves. This paper makes the case for aligning the costs of our ECE system with what is required to create a strong and sustainable system. Herein, we model a system to meet the needs of all families in California and solve the myriad problems the current system fails to address.

Key takeaways

Child care costs too much for many California families. The result is:

• High-quality child care is out of reach for many California families.
• The typical California family with young children is unable to meet the recommended affordability standard (that no more than 7 percent of income be spent on child care); for example, to obtain center-based care for an infant, the typical family must spend 25 percent of their annual income.

High-quality early educators in California are undervalued and underpaid. The result is:

• Economic and food insecurity is common among these workers, who are almost exclusively women and the majority of whom are people of color.
• Early educators are twice as likely as other California workers and six times as likely as K–12 teachers to live in poverty.
• There are high levels of turnover among early educators; this churn undermines the consistent relationships with adults that are essential for young children’s healthy development and makes it challenging to sustain the existing workforce, let alone expand to meet an increased demand for services.

The root cause of the problems with the early care and education system in California is underfunding.

• What parents can afford to pay is not enough to provide teachers with a fair wage and ensure high-quality care and education for young children.
• Early educators are expected to underwrite the cost of the broken child care system with their low wages. This expectation is largely unchallenged.

A values-based budget for early care and education requires a meaningful investment.

• The annual cost of a fully phased-in high-quality and comprehensive ECE system for California ranges from $29.7 to $75.4 billion, or $30,000 to $37,000 per child.
• The numbers above represent total annual costs. Because there are already many dollars invested in the current ECE system from various levels of government as well as directly from parents, the net new expenses required to fund this system are significantly lower.
• Because of the increased demand anticipated once the system is in place, additional investment is required to increase the size of the workforce—recruiting and training new teachers—for a total one-time additional cost of $3.0 to $9.7 billion.

The problems

Child care costs too much for many California families. High-quality child care is out of reach for many California families—and not just those with low incomes. Combined state and federal investment falls far short of serving all eligible children who qualify for current subsidy programs, and most families relying on child care are heavily burdened by the cost (Ullrich, Schmit, and Cosse 2019; Thomason et al. 2018). The average fee for full-time early care and education in California ranges from $11,200 a year for a four-year-old child to $16,500 a year for an infant (CCA 2018). According to the Economic Policy Institute’s Family Budget Calculator, child care costs are one of the most significant expenses in a family’s budget (EPI 2018).

The Department of Health and Human Services deems early care and education affordable for families if it consumes 7 percent or less of a family’s income (DHHS 2015). Unfortunately, the typical California family with young children cannot meet this affordability standard; to place an infant in a center-based ECE program, for example, a median-income family would have to spend 25 percent of its annual income (EPI 2019c). Child care expenses are even further out of reach for families with more than one child requiring care.

It is particularly difficult for low-wage workers—who are more likely to be women and, specifically, black or Hispanic women (Cooper 2019)—to afford child care. For a full-time, full-year minimum wage worker anywhere in California, child care costs as a share of income far exceed the recommended affordability standard of 7 percent of income. Even minimum wage workers in Emeryville—the California city with the highest minimum wage in the state (currently $16.30/hour, or just under $34,000 a year for full-time, full-year work)—would need to spend nearly 50 percent of their earnings on infant care. As a result, parents struggle financially and may have to forgo opportunities in the labor force, while many California children simply do not have access to high-quality early care and education.

Early educators in California are undervalued and underpaid. California’s early educators, nearly all of whom are women and most of whom are women of color, closely match the racial and ethnic diversity of California as a whole and are substantially more diverse than K–8 teachers in the state, who are mostly white (Ruggles et al. 2019). This group of diverse women, however, work in one of the lowest-paid occupations in the state. California early educators are paid a median wage of just $13 an hour, putting them in the 28th percentile of the overall wage distribution in the state; in other words, more than 70 percent of California workers are paid higher wages than teachers of young children (Ruggles et al. 2019). And the younger the children in their care, the lower the pay. One-third of center-based teachers have bachelor’s degrees but are still paid about 47 percent less than K–12 teachers with the same level of education. Teachers working full time with infants and toddlers are paid $6,240 less per year, on average, than teachers working with three- to five-year-olds (Austin, Edwards, and Whitebook 2018). Educators of color are more likely than their white peers to work with the youngest children, and therefore be paid less (Whitebook, McLean, et al. 2018).

Pay is so low that significant economic and food insecurity are common among the early educator workforce in California (Austin, Edwards, and Whitebook 2018). Given their low pay, it is not surprising that early educators are twice as likely as other California workers and six times as likely as K–8 teachers to live in poverty (Ruggles et al. 2019). Figure A compares the rates of poverty among early educators in California with rates of poverty among all California workers; it also breaks down poverty rates by race/ethnicity. African American early educators are 50 percent more likely to be in poverty than their white peers.

Figure A

Low pay and poor working conditions affect the quality of care children receive. Teachers’ skills, knowledge, and well-being all affect the early learning and development of the children in their classrooms. There is compelling evidence from developmental science that high-quality ECE programs play an important role in shaping early learning and later school and life success. More recently, developmental science has also documented the negative consequences of stress, especially toxic levels resulting from trauma and poverty among children and the adults in their lives (IOM & NRC 2015). When ECE teachers are burdened with financial strain and poor working conditions, that stress can be transmitted to the children in their care.

Consistent relationships with caregivers and educators are critical for young children’s learning and development, but low pay fuels high turnover rates and undermines efforts to attract new teachers. Under these conditions, it becomes nearly impossible to fill job openings, let alone expand services. In addition, when teachers live on the edge economically, it hinders their capacity to remain focused and to engage in the supportive teacher–child interactions that matter most for facilitating children’s learning.

To support ECE teachers, we must not only improve their compensation; we must also ensure they have the professional support they need. Well-supported teachers are better equipped to respond to children’s many needs, but inadequate resources and professional support compromise teacher practice and well-being. ECE work environments should reflect policies and practices that promote ongoing professional development and learning, teamwork and staff initiative, staff economic and physical well-being, and knowledgeable, supportive staff leadership. Studies identify positive relationships between early educators’ perceptions of these conditions in their workplaces and observed measures of quality in ECE settings (Whitebook et al. 2016; Whitebook, Schlieber, et al. 2018).

The root cause of the problems with the early care and education system in California is underfunding. There has been an insufficient investment to address the multiple problems with the system. These problems include poor access to quality services; families being driven to the edge economically by child care costs; parents’ diminished participation in the labor force due to difficulties finding affordable, high-quality child care; low early educator earnings and resulting reliance on public supports; the high cost of turnover; and challenges recruiting and retaining workers (NASEM 2018). In addition, the current system drives inequities, as it results in inequitable access to high-quality services for children, greater cost burdens on the families with the least resources, and disparities in educator earnings based on the ages of children served and program funding sources—disparities that disproportionately impact African American members of the workforce (Whitebook, McLean, et al. 2018).

What parents can afford to pay is not enough to provide teachers with a fair wage and to provide high-quality care for young children. The United States as a whole is not investing enough—and certainly no single state is either—to secure a consistently high quality of care in early childhood services. In fact, the U.S. is lagging behind other countries. Almost all industrialized nations have recognized that it takes substantial public investment, even in a market-based system, to achieve high-quality early care and education that is affordable for families. While spending levels vary across countries, the United States spends below the average for industrialized countries tracked by the Organisation for Economic Co-operation and Development (OECD).{{1}}

To date, most efforts in the United States to improve both access to and quality of child care have amounted to no more than tinkering around the edges of the system. Decades of reform efforts, including investments of state and federal dollars, have failed to deliver meaningful changes, largely due to severely constrained public financing and an unwillingness, even among key stakeholders and advocates, to talk about what an equitable, high-quality system will cost and the necessity of far greater public investment than we have seen to date.

To the extent that greater public investment has been undertaken, it has focused primarily on increasing access for low-income children by expanding the subsidy system or by establishing public preschool. Increasingly, policymakers are also looking at how to make child care more affordable for families who do not currently qualify for subsidies. Only rarely, however, do increased investments target better working conditions and compensation for early educators, who are essential for program quality (Whitebook, Phillips, and Howes 2014; Whitebook, McLean, et al. 2018).

Efforts to envision better workforce policies and secure adequate funding have been constrained in part by an assumption that change must fit within the confines of the existing infrastructure and funding streams. Such constraints have undermined a comprehensive approach to quality improvement and workforce policies and have allowed practices like raising required qualifications for the workforce to move forward without linking them to resources that simultaneously address teachers’ earnings and economic well-being (Whitebook, McLean, et al. 2018).

It is well known that personnel costs are the major determinant of the costs of services. The amount of funding available for the workforce is the linchpin of a successful early care and education system: Without well-qualified and fairly compensated early educators and without supportive working conditions, programs will not be able to provide and sustain a high standard of quality for the children in their care. California has yet to substantially address this reality. Up to now, the state has essentially allowed early educators to subsidize the system at a cost to themselves and their families—which, in turn, imposes a cost on the children and families that rely on their services.

Accounting for the elements necessary to support quality teaching practices—particularly in terms of qualifications, compensation, and adequate staffing levels and supports—is critical to articulating the realistic costs of a high-quality early care and education system (Whitebook 2014). Given that cost estimates are used to inform policy and revenue strategies, it is necessary for policymakers and the public to understand just how large the gap is between the current system and the system that is needed, and to be able to design short- and long-term goals for progress in reforming the system.

Building a values-based budget for California’s early care and education system

Increasingly policymakers are beginning to recognize that we can’t solve the child care crisis without a major investment. At long last, what were once hushed discussions about the true cost of early care and education have moved into the national discourse. In the recently released consensus report by the National Academies of Science, Engineering and Medicine (NASEM), Transforming the Financing of Early Care and Education, the case for reform is clearly stated:

The deficiencies in the current system are hurtful to all children and families in need of ECE options and the adults who are ECE practitioners and educators—who are themselves often in extreme economic distress. (NASEM 2018)

Acknowledging that “for too long the nation has been making do with ECE policies and systems that were known to be broken,” the report calls for a new national financing structure and increased public investment for early care and education. Transforming the Financing represents a sea change in the public discourse about the costs involved in creating an equitable, high-quality ECE system—as it makes clear that substantial new sources and levels of funding are requirements for reform.

Whereas NASEM’s consensus report articulates principles for financing early care and education at a national level, the reality is that most policy and new investments in early education occur at the state level. In this report, we identify the investment required to achieve the high-quality ECE system that California workers, parents, and children need and deserve.

In developing our estimates, we factor in the following: the estimated number of children whose parents will enroll them in the ECE system; what shares of these children we expect to be enrolled in home-based versus center-based care (which are subject to different regulations); the regulations that influence required expenditures, such as staffing ratios and space requirements; and what levels of pay, benefits, and professional working conditions are needed to attract and retain a highly skilled workforce.

Our estimates do not take into account how much money is already invested in this system. We strictly estimate the total cost required, not the net new cost.

Funding can come from a number of sources. However, this study does not tackle the funding mechanisms nor does it discuss what shares of funding should be provided by the federal government, the state of California, and contributions from parents. What is abundantly clear to us, though, is that early care and education should no longer be financed through low teacher pay.

Aligning costs with values

Creating a values-based budget for early care and education requires aligning costs with what is needed. Well-prepared and well-paid educators are the key. A realistic and comprehensive estimate of what it would cost to achieve a skilled and stable workforce requires a key set of assumptions about qualifications, compensation, and ratios of children to teachers. To that end, we’ve modeled a system based on the following principles.

Estimating the costs

We estimate the costs of a fully phased-in overhaul of California’s ECE system based on the above principles. In order to estimate the total costs, we answer a series of questions: How many children are expected to participate in the ECE system? How many of these children will be enrolled in home-based versus center-based facilities? How much should early educators be paid? To answer these questions, our ECE cost model incorporates data from a variety of sources and uses multiple parameters in order to provide a reasonable range of total costs.

How many children are expected to participate in the early care and education system?

We begin our analysis by estimating the number of children in California. Using five years of data (2013–2017) from the American Community Survey, we estimate the number of children in California at each age (below age 1, age 1, age 2, etc.) for all children under five years old. It is essential to estimate the number of children at each age (not just the total number of children under five) because of variations in the ages at which parents elect to enroll their children as well as different recommended teacher–child ratios for different ages of children.

The number of children who will require care depends on how many families decide to participate in the ECE system. Our lower-range estimate of the number of children requiring care is the current share of children under age five who are in either home-based or center-based care in California, based on our analysis of National Survey of Early Care and Education (NSECE) 2012 data. Our mid-range estimate is based on the labor force participation of parents who have children under the age of five, calculated using data from the American Community Survey (Ruggles et al. 2019). If all parents in a family work (one, if a single-parent family; two, if a two-parent family), then we assume that all young children in that family will enroll in the ECE system. To obtain our high-range estimate for the number of children age two and under participating in the program, we look at participation rates among OECD countries that have more comprehensive ECE systems already in place. We find that Denmark has the highest rate of participation for that age group, so we use Denmark’s participation rate to calculate our high-range estimate for California.

For children ages three and four, we use the inverse of the overall homeschooling rate in the United States (for children ages 5–17),{{2}} which also happens to coincide with the OECD’s findings for Denmark for this age group (OECD 2018; NCES 2017). Using these parameters, we estimate that the number of young children in the reformed ECE system in California would be somewhere between 992,000 and 2,018,000.

How many children will be enrolled in home-based versus center-based facilities?

In our analysis, families choose between two major forms of early care and education: center-based or regulated home-based. Because the ratio requirements and facilities are quite different in the two settings, it is important to estimate the number of children enrolled in each type of ECE facility in order to obtain meaningful cost estimates. Younger children are typically more likely to be enrolled in home-based care, while those closer to school age are more likely to be enrolled in center-based care. We draw on state-level data from NSECE and estimates provided in Cradle to Kindergarten (Chaudry et al. 2017), as well as other assumptions about take-up rates, to determine the overall shares of children, ages zero to five, who are in center-based and home-based care in California. These ratios are then applied to the total number of children enrolled to determine the total number of children in each setting.

How many staff members will be needed to serve the early care and education system?

Given the number and distribution of children in each type of care, we determine the number of teachers and administrators needed using the recommended ratio requirements—that is, the maximum number of children per teacher in a home-based or center-based ECE setting, which differs by the age of the children. In the first step of this determination, we estimate the number of teachers needed for each group of children at any given time in each setting. Then, we determine how many full-time-equivalent (FTE) teachers are required given the hours a program is typically open during the week; how much noncontact time is required for lead versus assistant teachers or home-based providers; how many days are available for professional development; and how many days of paid time off (including holidays, vacation, and sick time) are allotted to each teacher. Using these statistics, we can estimate the total number of FTE teachers needed; we divide this total evenly into those with bachelor’s degrees and those with associate degrees, so that at any given time each class has a lead teacher and an assistant teacher. Following these parameters, we calculate that the total number of teachers required in California’s reformed ECE system ranges from 323,000 to 826,000.

How much should early educators and other staff be paid?

Pay for staff in the ECE system should mirror that of staff in the primary and secondary school system in California. In our model, pay for early educators with a bachelor’s degree is determined by salaries of elementary and middle school teachers in California, as estimated using Current Population Survey Outgoing Rotation Group weekly and hourly earnings data (EPI 2019a). The teaching assistant salary is determined by taking the ratio of the average pay for those with some college or an associate degree to the average pay for those with a college degree and applying that ratio to the salary for teachers with bachelor’s degrees (EPI 2019b). The administrator salary is determined by averaging the salaries of educational administrators for preschools and for elementary and secondary schools, both of which are available in the Occupational Employment Statistics (OES) data (BLS-OES 2019). The salary for administrative assistants is based on the average salary for the category “Office and administrative support workers, all other” in the OES data.{{3}} Full-time wages for each staff position in our budget are provided in Table 1. In addition to paid time off, discussed above, benefits—such as health insurance and retirement contributions—are assumed to cost an additional 25 percent of annual wages for all positions.

Table 1

Nonpersonnel costs

The largest nonpersonnel cost is rent. For center-based care, we estimate rental costs using square-footage recommendations (AAP, APHA, and NRC 2019) and the median per-square-foot cost of real estate in California (LoopNet 2017). We estimate home-based care rent assuming 40 percent of median gross rent in California for a three-bedroom home (U.S. Census Bureau 2018). Given the variations both in the square-footage recommendations and in the estimates of the number of children served in each type of setting, our estimates reflect a range of costs.

Also included in this calculation are expenses for food, kitchen supplies, educational equipment, utilities, building maintenance, and insurance, among other things. These nonrent, nonpersonnel costs are adapted from Augenblick, Palaich and Associates 2017 for both center- and home-based settings.

Total cost of a values-based budget for early care and education

We find that the annual cost of a fully phased-in high-quality and comprehensive ECE system for California ranges from $29.7 to $75.4 billion, or $30,000 to $37,000 per child. Because we anticipate increased demand once the program is implemented, we also consider the one-time cost of an investment to increase the size of the workforce (i.e., to provide education for a large number of new teachers); we estimate this one-time cost to range from $3.0 to $9.5 billion.

Benefits to California of a values-based budget for ECE

A broad array of stakeholders in California now recognize that their hopes for high-quality early care and education cannot be realized in a system that relies so heavily on families and educators to shoulder its costs. Thus, estimating the costs for a reformed vision of what ECE should and can look like is important for establishing short- and long-term policy and resource goals. Because personnel costs are the primary driver of service costs, assumptions about staff (staffing levels, qualifications, compensation, and professional supports) included in estimates have the very real potential to be drivers of policies and resource allocation for decades to come. Policymakers and other stakeholders have an opportunity to disrupt the status quo and assert that the work of teaching young children, performed mostly by women of color, is a valuable and respected occupation in California.

The estimates developed in this model move past our current entrenched policies that are based on decades-old beliefs about what it means to care for and teach young children. Our estimates are instead grounded in a twenty-first century knowledge of what is required of early educators, the conditions necessary for effective teaching, and the levels of compensation ECE teachers require and deserve. Furthermore, our estimates seek to eliminate disparities in pay among educators based on the age of the child, the setting, or the funding source. Eliminating these disparities is essential to creating the conditions for all children to have equitable access to teachers who are well prepared and well supported. It is also a matter of justice to early educators themselves.

As with any challenge to conventional thinking that calls for changing business as usual, a first glance at the estimate (of $30,000 to $37,000 per child, with a total system cost of $29.7 to $75.4 billion) may induce sticker shock, especially in light of current K−12 spending (which also calls out for greater investment).{{4}} To be clear, our estimate is an estimate of the total cost required, not the net new cost. (Articulating the gap between current resources and what is needed, however, will be a necessary component for advancing reforms and increased investments.)

Although states have historically spent less per child for children before they enter their school years than for children in K–12, services for younger children should be more expensive because they require more teachers for fewer children and because these services are typically required by families for longer hours and for more days of the year. Furthermore, schools serving older children benefit from economies of scale that are not available to early childhood settings, given that ECE programs are almost universally smaller (in terms of the number of children they serve at each site) than even the smallest K–12 school. This difference of scale has an impact on costs associated with space, utilities, purchasing, employee benefits, and the like.

California stands to benefit in multiple ways by making a serious investment in early care and education in line with the key values articulated in this model. Such an investment will ensure California has a skilled and stable ECE workforce that can deliver high-quality services and meet growing demand. Instituting a plan in line with our model would also remove barriers to work and increase employment and earnings among parents, particularly mothers (Bivens et al. 2016). Employers would benefit from reduced absenteeism and turnover when more stable child care is in place. Children entering older grades with a solid early childhood foundation will be more likely to be successful in school. Further, adequate levels of funding to support education and professional development for early educators can help address wage disparities within the occupation and relative to teachers of older children. Finally, investing in the true costs of quality early care and education services would create opportunities for those young people who would gladly pursue a career in teaching our youngest children—if it offered a pathway to the middle class rather than to poverty.

Acknowledgments

The authors wish to acknowledge the generous support of the Joyce Foundation, the David and Lucile Packard Foundation, the Heising-Simons Foundation, and the W.K. Kellogg Foundation.

Endnotes

{{1.}} According to the OECD, on average, countries spend about 0.7 percent of their gross domestic product (GDP) on early care and education services. Countries that spend below the average include the U.S., Estonia, Japan, Portugal, and Turkey—each of which spend less than 0.5 percent of their GDP. At the high end, France, New Zealand, and the Nordic countries spend 1 percent or more of GDP on early care and education services (OECD 2016).

{{2.}} We assume that families who homeschool their school-age children are unlikely to enroll their younger children in full-time ECE programs. Therefore, we believe that applying the inverse of the overall homeschooling rate to the number of three- and four-year-olds in California is a meaningful way to develop a high-range estimate for the number of children in this age group participating in ECE programs. The fact that Denmark’s participation rate for this age group mirrors the inverse of the homeschooling rate in the U.S. suggests that this is a reasonable assumption.

{{3.}} Note that this category is not limited to office and administrative support workers who are employed in schools.

{{4.}} In a series of reports, García and Weiss examine the factors contributing to teacher shortages in the K–12 system. According to these authors, we need to “tackle the pay and other factors that are prompting teachers to quit and dissuading people from entering the teaching profession” and “we must provide extra supports and funding to high-poverty schools and their teachers” (García and Weiss 2019).

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