Every morning, Elizabeth Schmidt, a 28-year-old single mother in Manchester, drops off her 5-year-old son Jaxyn at a local child care center. She’s currently working as a barber and hairstylist in Nashua, making most of her money on commission in biweekly paychecks. Schmidt estimates she earns anywhere from $10,000 to $15,000 in take-home pay each year. But she spends a third of it on child care, and that’s after help from the government.
Schmidt is grateful to be getting the subsidy from the state she started getting in March, since it lowered her weekly child care bill from $190 to about $70. But $70 a week is still between 24 and 36 percent of her paycheck.
That leaves little for rent, so Schmidt is currently living with her mother and helping out with expenses.
For several months, Schmidt had to pay the full cost of child care while state officials processed her application. This happened as she was getting recertified, changing employers and moving Jaxyn to a new child care center.
“They made me jump through all these hoops and once I did that and got them everything they needed, there [were] like seven more hoops I had to jump through,” Schmidt said.
Cost for care
A recent study by the Economic Policy Institute ranked New Hampshire as the 12th most expensive state for child care. The cost for infant care is $11,810 per year on average — just shy of $1,000 per month — and the annual cost for child care for a 4-year-old is $9,457.
For two-thirds of the typical families in New Hampshire, this isn’t affordable, based on the U.S. Department of Health and Human Services definition of affordability, which is no more than 10 percent of family income.
The EPI study shows that for the median family in the state, child care is about 14 percent of their income, while for minimum wage earners, it’s more than 78 percent. For Schmidt, the unsubsidized cost of child care could range from 65 percent to almost her entire paycheck.
And it’s worse for those with two or more kids. To put an infant and a 4-year-old in day care would be more expensive than rent in most parts of the state and it would cost about 26 percent of a typical family’s income, which is $81,832.
According to the 2016 New Hampshire Early Care and Education Market Rate Survey conducted by DHHS, prices have gone up between 2014 and 2015, with average weekly rates ranging from about $179 to about $226 depending on the length of the contracts. Prices in the 90th percentile ranged as high as $297 and overall they were highest for all age ranges in the southern and eastern regions of the state.
While programs are getting bigger, there are fewer facilities, so that increased capacity may not necessarily mean it recaptures kids from programs that closed. The average capacity in 2001 was about 38.5 children and in 2015 it was 51. Meanwhile, 34 programs shut down over the two years between surveys.
Most of the 900 or so day care facilities statewide are for-profit — 60 percent.
Only a few offer special care hours beyond the typical 9 to 5. Only nine programs offered care from 7 to 9 p.m., three programs offered 9 to 11 p.m. and two offered overnight care.
The subsidies help, but advocates say it’s still not enough to make it affordable for people.
“The problem is, the amount we give them is really not sufficient,” said Jackie Cowell, the executive director of Early Learning NH, a child care access advocacy group.
Cowell says the state set the qualifying threshold higher than the federal government, which funds most of the state subsidy, recommends.
But what if you make just enough money to not qualify for aid?
Steve Norton, the executive director of the New Hampshire Center for Public Policy Studies, said besides those in the lowest income brackets, one should be concerned with “that person making $30,000 a year and spending 20 percent or 30 percent of their income on child care. How do they survive here?”
Factors driving cost
Ask anyone familiar with the world of child care why it’s so expensive and everyone will say it’s because it requires lots and lots of people.
“The main reason child care is so expensive for families is it’s a labor intensive business,” said Julie McConnell, the director of child care lending at the New Hampshire Community Loan Fund.
And since child care workers don’t get paid very much — around $21,300 annually, according to the EPI — there’s a lot of turnover with staff, another added cost.
Mary Jane Wallner, a state representative and the director of Merrimack Valley Day Care Services in Concord for 44 years, has seen that labor cost increase as demand has shifted over the years to more of the younger infants.
That’s going to mean hiring many more child care workers because of state licensing rules that set minimum teacher-to-child ratios. For infants, it’s one teacher for every four. That’s compared to one teacher for every 12 4-year-olds.
“You can do the calculation yourself and you can start to understand why the costs are high,” Wallner said. “With more younger children in child care, that’s certainly a more expensive service.”
She estimates a typical child care center’s labor costs make up between 60 and 80 percent of its overall expenses.
Still, Wallner says the problem isn’t with the state requirements. Wallner thinks the state has struck a good balance of minimum standards and high quality.
Besides labor, Wallner also cites the state’s high energy costs and rents as factors in the climbing price tag for families.
She also sees an increased need for child care.
“[Demand has] changed a lot … because there are so many more families that need care ... whether it’s a one-parent home where mom or dad is working to support their family or whether it’s a two-parent family. We’re seeing more and more two-parent families needing child care,” Wallner said.
State investments in aid have declined as well, according to Cowell. And that in turn resulted in a loss of two over-$30 million grants that would have helped reduce costs.
“In 2011, we took $8 million out of our child care system and we didn’t agree to put it back, so the federal government wasn’t going to invest in us,” Cowell said.
Many of these factors are being experienced nationwide, but the process driving up costs in New Hampshire may actually share some commonalities with the same forces at work behind climbing rents.
To follow this, Norton said that we first need to understand that New Hampshire, like much of the Northeast, is a high-cost area. All of the New England states plus New York and New Jersey were ranked in the bottom 12 for the cost of living category in CNBC’s recent Top States for Business list. New Hampshire was 42nd.
Yet, in the Granite State, Norton said, we have the most robust middle class in the region and some of the highest incomes. The Pew Charitable Trusts showed in a study last year that 49.7 percent of the state — the largest share in the Northeast — was in the middle class in 2013. While states like Massachusetts, Connecticut and New Jersey had higher median incomes, Norton said New Hampshire doesn’t have as many top earners.
“We have a very big middle class. In fact, relative to the rest of the country we have relatively few millionaires,” Norton said.
In many ways, that’s not so good for those in poverty or just above the poverty level who need child care.
“What that means is a certain portion of the population is capable of paying for those significantly higher costs, but we also have poverty and pockets of poverty and those individuals struggle, obviously, to meet the financial obligations of child care,” Norton said.
The same thing is happening with rents, as the Hippo reported in June. (Find the article titled “The rent is too high” in the June 30 issue at hippopress.com by clicking on past issues and going to page 6). There is enough market demand for developers to build almost exclusively high-end and market rate rental properties while vacancy is at an all-time low and demand is high for people of all incomes. Those with low incomes, as with child care, are priced out of the system as a result.
Cowell argues that there should be more public investment in early child care and education. Studies have shown that investing in good-quality early child care can offer a return on tax-dollar investments of 7 to 11 percent.
“We are spending more money by doing nothing,” Cowell said.
Some might be content to increase subsidies and cast a wider net, but others would like to someday see a system for tax-funded child care not unlike our public school system. James Heckman, a Nobel prize-winning economist, has shown in his extensive research on the subject of child care that such a public child care system would actually be an economic driver and cost less than the current system in the long run. That’s because the investment pays off in the form of reduced spending on special education because fewer kids are left behind, reduced spending on prisons thanks to decreased crime rates and increased tax revenues from better graduation and career outcomes.
Heckman’s research seems to be resonating among lawmakers in Congress and in state capitols. Bloomberg reported more and more states — with both Republican and Democratic governors — are including hundreds of millions more pre-K dollars in their budgets partly because they see it as good fiscal sense. But Julie McConnell at the New Hampshire Community Loan Fund says New Hampshire is lagging behind other states in early child care spending. To catch up, she thinks it would have to start with a culture shift.
“The way the issue has evolved here is that we’ve always seen it as a parental responsibility, perhaps not a public responsibility, and I think that’s the ultimate challenge,” McConnell said.
A shorter-term solution might be to encourage more employers to play a part in lowering child care costs or increasing access.
For example, the Bright Horizons Early Education Center on the Timberlands company campus in Stratham is open to the community and employees enjoy a subsidized rate as part of their benefits package. And more are starting to look into investing dollars either to alleviate the cost for employees or, as may be the case for bigger companies, offer it for a free or reduced price at the workplace.
McConnell has seen local charity organizations like the New Hampshire Charitable Trust, the Endowment for Health and others start to prioritize early care and education for the first time.
“That feels like an important shift in the public discussion and dialogue on this issue,” McConnell said.
Many are making the argument that child care access is important on a social justice basis and for the welfare of the children themselves. But something else could be argued in the defense of affordable child care — that it’s an economic driver for a state struggling to keep young families from leaving or attract them from elsewhere. And that’s an argument that Norton hasn’t heard advocates turn to much so far.
“The question is … is it sufficiently important for the economic well-being of the state and the development of an effective workforce to force communities and legislature to put some resources here? It hasn’t been to date, but certainly we’re seeing more of that emerge as New Hampshire grapples with a declining workforce,” Norton said.