Culture and Social Issues

Overregulation In Childcare Tied To Families Having Less Kids, Report Says

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Families in states with highly regulated childcare systems are more likely than in less strict states to have fewer kids than they desire in connection with the increased cost of childcare, an October report found.

Strict regulations on childcare, such as increased educational requirements, more training hours for employees and limited child-to-staff ratios, are meant to improve the service and appeal more to parents but often increase costs, likely factoring into parents’ decisions to have more kids or not, according to a report by West Virginia University’s Knee Regulatory Research Center.

“Childcare challenges facing U.S. families are making news headlines as a ‘classic’ example of market failure,” the report reads. “With wages that are too low relative to prices, it is easy to assume that the childcare market simply cannot clear. This prompts calls for greater intervention in the form of subsidies. However, a subsidy approach misses the key role that the regulatory environment of the childcare market plays in raising costs. Though well-intended, the regulatory framework cripples progress towards affordability, availability, flexibility, and quality for American families seeking childcare solutions.”

The average fertility gap in the U.S. — the difference between desired family size and actual family size — is 0.8 kids but is lower by between 0.025 and 0.029 in states with less restrictive childcare regulations, the study found. The study predicted that if Massachusetts, the state with the highest regulations, such as requiring more staff per student and more education for employees, adopted the same policies as Louisiana, the state with the lowest regulations, the total fertility rate in the state would increase by 14%.

“Childcare workers and parents bear the weight of licensing regulations and administrative costs,” Anna Claire Flowers, co-author of the report and PhD fellow with the Mercatus Center, said in a statement. “High-quality care is the goal, but some measures have been shown to boost prices much more than quality. Regulation on childcare affects entrepreneurial decisions in the industry and influences parents’ labor market decisions. While not the only major player, childcare regulation is one piece of the policy puzzle that can make it more or less difficult for families to find compatibility between work responsibilities and raising children.”

States like those in New England generally have stricter regulations and higher-than-average fertility gaps, the report found. States like Texas, Nevada and Arizona had some of the least strict childcare regulations and fared better than the national average for fertility gap rates.

Childcare costs rose nationally by 32% from 2019 to 2023, outpacing the 20% rise in overall prices within that same time frame.