The Rising Cost of Child and Pet Day Care

https://marginalrevolution.com/marginalrevolution/2025/07/the-rising-cost-of-child-and-pet-day-care.html

by surprisetalk • 12 months ago

60 102 12 months ago

tayo42• 12 months ago

Child care is incredibly expensive, idk how anyone who isn't incredibly rich does it. Like 1k a month to get your child watched for 3 half days a week.

Who has a spare 1-2k laying around per month?

Also annoying this article introduced Baumol effect without mentioning what it is and just plugging a their book.

JTbane• 12 months ago

It seems like the childcare companies recognize that it's either one parent quits their full-time job or pays them.

bombcar9• 12 months ago

Quit your full time job and do home childcare!

mjohn• 12 months ago

That's a bit unfair. The Baumol effect is well known to most people in the author's audience.

If you had clicked on the link to his book you would have found out that it's available for free: https://www.mercatus.org/students/research/books/why-are-pri...

jmclnx• 12 months ago

Yes it is rising and how would one stop it ? In reality there is no way to stop it outside of what the article recommends. Plus this also applies to many other labor intensive industries.

People who work in these industries want to be paid and deserve to be paid enough to live on, so the money needs to come from somewhere.

Lets pretend a way is found to make things real cheap, doing that means many people will not be able to purchase other items, thus harming the bottom line of many other industries.

Add to that the very rich is hording wealth. It seems today's economic society is racing to a big crash, unless a way is found to release that wealth to subsidize these activities. I think the wealth is there, but it is locked up by the very rich.

moomoo112• 12 months ago

There’s a lot of PE activity in this sector imo.

They buy out all these established places and jack up the prices. It goes from calling them to book to some polished booking portal.

It’s mostly catered towards those who can afford it, so the 200k base SWE x 2 family can afford the 2x jacked up prices, and they continue increasing the prices every 1-2 years.

blakesterz• 12 months ago

That was my first thought as well. I know PE is famously eating up Vets, I wonder if they've started on these too?

andrepd• 12 months ago

It's so great living in the ~best~ only system for organising the economy.

Working people can't afford homes or starting a family, but at least we are generating amazing value for shareholders.

orangecat2• 12 months ago

They buy out all these established places and jack up the prices

Is the theory here that the previous owners were altruistically pricing below what the market would bear?

joncrocks• 12 months ago

I think the theory is that they buy up a significant portion of the market, i.e. consolidate lots of independents. Then they raise prices in concert, and take advantage of reduced competition.

csa6• 12 months ago

Is the theory here that the previous owners were altruistically pricing below what the market would bear?

As someone who has done research on pricing in a range of sectors, it’s usually some form of ignorance rather than altruism.

In case you think I’m just picking on child care providers, I will provide an additional example — non-VC SaaS services were often wildly mispriced/underpriced until the “charge more” mantra became more widespread (thank you, patio11).

moomoo112• 12 months ago

PE buys all these businesses out (there's demand, and its rising), and they close most of them to consolidate into cold, brutal buildings.

PE did this with medical providers. When I was a child family doctors were a thing (btw, 2000s). I saw in my area that a lot of the small practices were bought out, and now there are medical "campuses" which have like dozens of different providers. I was talking to my dentist about this and she explained it to me that way so unless she's lying idk what to say.

blargey• 12 months ago

I'm starting to think "altruistic pricing" is a skewed framing to begin with. The implication that not maxing out every trick in the book to find the highest price the market will "bear" is a loss.

That "slack", where people provide better goods and services, for a lower price than the market could theoretically bear, is the very definition of Having Nice Things.

The implied "optimal" price discovery is a highly adversarial process - derived from an every-growing playbook of price discrimination tactics, deceptive marketing, high-pressure sales tactics, exploitation of intertia and other external overheads, covert cuts to the quality being provided, etc, etc.

Such pricing is both a symptom and cause for "low trust society" behaviors. The increasing ubiquity of those "efficient" pricing strategies may very well have amounted to a covert pillaging of the commons.

fsckboy2• 12 months ago

o the 200k base SWE x 2 family can afford the 2x jacked up prices

you are talking about housing in a high income area and of course those prices are going to be higher, it would start out shocking if they weren't, and quickly stabilize where we are now, as people loaded up their wagons and headed toward the landrush

It’s mostly catered towards those who can afford it

all markets cater to those who can afford it. if not, prices go down, or up, to establish a new equilibrium.

pempem4• 12 months ago

"All markets cater to those who can afford it"

I'm not sure this is true. PE driven markets currently seem to cater to the break point. What is the absolute most I can charge until someone will walk away? If I break it into a subscription, or into pieces will I be able to charge even more than that break point because the buyer has not or cannot easily do the math? Maybe offer financing and take a cut there as well.

I am not making a moral argument, but it is far more sophisticated than "those who can afford it" and so, this is then not really about affording it, rather its about restructuring what the category should cost socially speaking and pushing that even further. This is happening in a large number of sectors at the same time.

goda90• 12 months ago

Many explanations have been offered for rising child care costs. The Institute for Family Studies, for example, shows that prices rise with regulations like “group sizes, child-to-staff ratios, required annual training hours, and minimum educational requirements for teachers and center directors.” I don’t deny that regulation raises prices—places with more regulation have higher costs—but I don’t think that explains the slow, steady price increase over time. As with health care and education, the better explanation is the Baumol effect, as I argued in my book (with Helland) Why Are the Prices So Damn High?

While I agree regulation probably doesn't explain the whole price increase, I wonder if governments can do a better job preventing regulation from causing price increases without cutting corners on the regulation itself. Subsidize training for example. Make the child-staff ratios and group sizes a more dynamic factor based on age and needs. Maybe set aside funds to subsidize targeted special needs child care so the kids with fewer needs can be cared for more cheaply(I imagine this is controversial just like schools having separate special needs classes was).

Of course there's the catch all approach of adding childcare to the public schools budget and rolling the cost into taxes.

bglazer• 12 months ago

The article makes very clear that costs are rising for "pet day care" just as quickly as for real day care for children. This can not be explained by regulation, as pet day care is far far less regulated compared to daycare for children.

lantry• 12 months ago

Subsidize training for example

This just spreads the cost across all taxpayers, instead of just the people consuming the service. Not to say that's a bad thing, just saying that it's not really "reducing the cost of regulation".

Make the child-staff ratios and group sizes a more dynamic factor based on age and needs.

At least in my state, this is already the case. for infants, 1 adult per 6 children; increasing the ratio as they get older, up to 1 adult for 18 children when they're 4.

I don't think you're wrong that there are ways to reduce the burden of regulation, but I think we overestimate how much "low hanging fruit" there really is here. The common-sense, obvious, uncontroversial solutions are usually already in place

squigz• 12 months ago

1 adult per 18 4-year old children seems... hectic.

danaris• 12 months ago

This just spreads the cost across all taxpayers, instead of just the people consuming the service.

Yes—and then we can (in theory—obviously not going to happen in the current political climate) shift the bulk of that cost onto the taxpayers who can most afford to subsidize it, and away from the people who are just getting by. Who are, not entirely coincidentally, also the people most likely to be in need of childcare services.

monkeyelite• 12 months ago

It’s expensive because people are willing to pay a lot for it.

Complaints about child care costs never end in “so I stopped paying them”.

WesleyLivesay• 12 months ago

No, but it might cause some people to say "so I am not having kids"

makeitdouble2• 12 months ago

“so I stopped paying them”.

This was exactly what I got from a colleague about a decade ago. Day care was so expensive it was eating half of her salary, so she quit, stopped paying for day care and stayed at home instead.

A lot of couple do the math and end up in the same place, where working their ass off to earn more, just to pay more doesn't make sense.

bombcar9• 12 months ago

Exactly this. And those people never complain about daycare costs because they’re not paying them at all.

And for awhile the market looks good as the prices can rise as the “cheapest” leave.

But eventually it will collapse.

lesuorac2• 12 months ago

A lot of couple do the math and end up in the same place, where working their ass off to earn more, just to pay more doesn't make sense.

I think if you're breaking even on daycare and salary then you're still coming out economically ahead to keep working.

Daycare costs stop once you enroll the kid into school. Typically salaries scale with years of experience so you're forfeiting ~7-9 years of salary growth by stopping work.

That said, there are non-economic reasons to raise your kids ...

bitlax• 12 months ago

Wouldn't that be single-earner families?

legitster• 12 months ago

A lot of the "regulations" baked into childcare aren't really going to move the needle - the inefficiencies are baked into the model. I don't care how lax your state is, you're not going to run a successful childcare center with 100 kids and 1 caretaker. So the cost of childcare is always going to be linked strongly to median prevailing wages.

While I think Baumol may have something to say here, I think we should listen to Henry George a bit more. The lion's share of overhead for a daycare goes towards its real estate costs. Similarly, it's a growing share of cost of living for both the workers and the customers. And as Henry George pointed out, the cost of housing goes up without creating economic value for anyone.

J_Shelby_J• 12 months ago

The knock on effect of high housing costs is driving force behind price increases and declining quality of service everywhere.

It’s an absurd situation here in California, where we are some of the richest people in history, but because the cost of housing so high, the price of everything is driven to the breaking point… meanwhile, the important jobs required for a nicely ran country are too expensive to afford and so our transit, healthcare, service industry, etc is awful.

bryanlarsen• 12 months ago

Daycare is expensive even when located in places where they get free or heavily subsidized rent, like church basements.

aaomidi• 12 months ago

The people working there don’t live in the church

lcnPylGDnU4H9OF• 12 months ago

the cost of housing goes up without creating economic value for anyone

This is kinda wrong. It does create value for the people who are loaning out the money that the working class uses to purchase the houses. Of course, in this context that value goes straight to the hands of bankers and never leaves but it's worth noting that this situation that the working class hates happens to be rather beneficial to the capital class.

Jensson• 12 months ago

That is value transfer not value creation.

jjav2• 12 months ago

The lion's share of overhead for a daycare goes towards its real estate costs.

Not really. Salaries are by far the highest cost.

BoiledCabbage2• 12 months ago

And the largest part of those salaries is again used to pay for housing.

Roughly one thirds of American incomes go to cover housing. Cheaper housing means lower wage demands.

nothercastle3• 12 months ago

Yeah but real estate costs a close Second. Then probably insurance

cced• 12 months ago

cost of housing goes up without creating economic value for anyone

The banks capture that in interest payments.

dukeofdoom• 12 months ago

Maybe property taxes. Cities keep bumping these up. But also the intersection of people that neet multiple sets of requirements approaches zero pretty quickly. I watched a guy that's a professional filmer, and he explained that actually the circle he's in is pretty small. So while the set of people that want to do his career is fairly large. That people that jumped through all the requirmeny hoops is like filter. So he has no problems finding work because of it

8200_unit2• 12 months ago

We've lost the fundamental stability of a time when one income could comfortably sustain a family. There has been a systemic shift that undermines family well-being.

lotsofpulp2• 12 months ago

That stability existed due to half of the population (women) not having the option to attain high paying jobs.

8200_unit2• 12 months ago

While it's true that women's professional opportunities were limited in the past, I disagree that this was the sole or even primary reason for single-income stability. My grandparents' generation, for example, often saw one parent (usually the father) working a manufacturing or union job that paid enough to cover a mortgage, raise several children, and afford basics, even with the mother not working outside the home. The purchasing power of those wages was simply far greater.

clove• 12 months ago

Now they don't have the option to be housewives unless they actively seek out a rich husband. Who benefits? (There is only one correct answer):

1. Families. 2. Women. 3. Corporations.

Tadpole9181• 12 months ago

The workforce saw an explosion of productivity, and women added upwards of 100% more members of the workforce.

The problem is that all of that wealth went to the billionaires and the rest of us got the bones in the scrap pile. Now we can't even raise our children because we need to work, but we cannot even not raise our children because it costs more than we make.

e403• 12 months ago

Let’s now t forget about the large population of black Americans who were left out, too.

HumblyTossed4• 12 months ago

That's kinda still the case. The half below the median can't all magically find jobs above the median. Though talking heads would lead people to believe that's true.

csa6• 12 months ago

We've lost the fundamental stability of a time when one income could comfortably sustain a family. There has been a systemic shift that undermines family well-being.

I used to agree with you.

I currently believe that period of time (mid-20th century, esp. in the US) was a historical anomaly set up by a fairly unique set of circumstances, and we’re just on a long and slow path to reverting back to equilibrium/norm now.

I hope I’m wrong.

BoiledCabbage2• 12 months ago

I currently believe that period of time (mid-20th century, esp. in the US) was a historical anomaly set up by a fairly unique set of circumstances

It was a period of high taxation on the highest incomes, large social welfare programs and by relative terms fairly low income inequality.

Finally productivity gains benefitted the labor class and not just the capital class.

That all halted in the 70s and 80s.

ponector4• 12 months ago

I'm quite sure if you spend money on the same goods like during that day - you can sustain a family. Small house with asbestos, little amount of home appliances, basic small car, no food delivery, no AC etc.

bombcar9• 12 months ago

I know a decent number of single income families and they even have A/C!

You do have to intentionally budget but you can raise five+ kids on a single salary if you want to.

lozenge• 12 months ago

This is an outdated view.

The essential costs - housing, healthcare and education - have far outpaced inflation while the cost of food and appliances has not. How can a single income compete in buying from the limited supply of houses against dual incomes?

robertjpayne• 12 months ago

The primary cause of population decline has nothing to do with incomes. You see high income earners having a smaller number of children.

It's because women frankly have better options than motherhood and what stay at home parenting entails.

pempem4• 12 months ago

I just had this conversation with a friend today.

Yes - given a small number of rights that frankly we should have always had - women have found all kinds of representation in education, salaries and diverse paths in life. Paths not previously open to us and pursued at tremendously high cost.

But population decline frankly is occurring because society is uninterested in changing its relationship with child bearing and child rearing. Men have limited interested in stepping up, women are doing work at home, work at work, work in society. Corporations have less interested in flexibility where women are near continuously penalized or held back. Even in a "progressive" presidency there were more CEOs named John than women CEOs. There's disinterest even when the next generation of workers is on the line and the government...well they are actively moving to unwind the rights we've won.

HumblyTossed4• 12 months ago

It's because women frankly have better options than motherhood and what stay at home parenting entails.

It's not about having better options so much as knowing that they'll be bringing a child into a world that's only going to get worse. A child who may never own a home, who may struggle to make ends meet. A child who may go bankrupt if they lose the healthcare lotto.

nothercastle3• 12 months ago

Well there are no security guarantees with being a SAHM. Your husband can easily cheat divorce you now and you don’t get much alimony and only some child support. Its better for the woman and the child to have a backup plan.

HumblyTossed4• 12 months ago

Thanks to the Powell Memo.

skeezyboy3• 12 months ago

wage increases not matching price increases... ah yes the american dream. simply put, youre poor, youre country has conned you, people live in better conditions all over the world.

soulofmischief2• 12 months ago

Who exactly is this comment directed towards? Americans can't help the fact that they were born in America. Also, you meant to say "your" and did not add an apostrophe to your contractions.

skeezyboy3• 12 months ago

umm, americans? its true though. how can there be so many people struggling financially in the richest country on the planet?

secabeen• 12 months ago

Another important factor in many states is the drive towards living wages across the board. For decades, child care (and probably pet care) was done by low-status immigrants and women, often at wages not sufficient to live alone or raise a family on. In more recent years, we've pushed up minimum wages and allowed not just white men to seek and obtain jobs that do pay more. It's overall good that we shrunk the under-classes compared to 100 years ago, but that does mean that if your business model depends on taking advantage of low-status people, it's not sustainable anymore, and you have to raise prices.

ahmeneeroe-v2• 12 months ago

For decades, child care (and probably pet care) was done by low-status immigrants

This is not correct.

nisegami• 12 months ago

Perhaps the "barrel children" concept can be utilized within countries like the united states where the parents work in urban centers to provide for the children living in lower cost rural areas?

egypturnash• 12 months ago

I wonder how much of the need for both of these industries would vanish if more families had one stay-at-home parent.

showerst• 12 months ago

We send our daughter to a daycare that has a number of families so wealthy that one or both parents wouldn’t have to work. They still do daycare because many people want careers, and/or because they think the socialization and environment diversity is good for their kids.

bombcar9• 12 months ago

Obviously you’re not going to meet the families that don’t use daycare … at daycare.

pempem4• 12 months ago

You're asking if ~35% of people currently working stop, would childcare and pet care as industries begin to disappear

I think, definitely. I also think there are several knock-on effects that might take the better part of a generation, if not two, to adjust.

fsckboy2• 12 months ago

the Baumol effect isn't an effect, it just describes a narrow case of the Substitution Effect. Price of beef goes up, you substitute pork and chicken, and those prices go up. You may think of yourself as a Computer Programmer but if Ditchdiggers get paid 3x as much in your area, you'd put Ditch Digging on your resume. To get you to program computers again, they'd have to pay you more.

mschuster91• 12 months ago

Still, the basic truth remains: if we want more affordable day care—for kids or pets—we need to use less of what’s expensive: skilled labor. That means either importing more people to do the work, or investing harder in ways to do it with fewer hands.

Both has serious problems. #1 is politically untenable (unless, of course, continuing the status quo of turning a blind eye towards employers abusing undocumented people to drive down wages), and #2 is fundamentally impossible until we gain AGI. It's bad enough when bad AI deletes production databases [1] - I'd raise hell when an "AI cat care" provider would kill my cat, and probably engage in some sort of self-justice should an "AI child care" provider kill or maim my child.

[1] https://www.heise.de/en/news/Artificial-intelligence-Vibe-co...

charlie90• 12 months ago

weird, I thought the labor theory of value was "debunked".

ponector4• 12 months ago

Daycare and basically all child non-entertainment services (health and education) should be heavily subsidized. It's a new taxpayer, all money will be repaid tenfold.

bombcar9• 12 months ago

Apparently much cheaper to simply import a fully grown taxpayer instead.

akimbostrawman• 12 months ago

Infinite money glitch with no downside??? Simply never stop importing people I'm sure there won't be any issues at all!

msgodel• 12 months ago

More and more you can get the most value out of just attending to your own problems rather than specializing and outsourcing.

The Rising Cost of Child and Pet Day Care

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