New Zealand is the only OECD country with a more expensive childcare system than the US, per a Bank of America analysis.
Charles Rex Arbogast/ AP
The US has the second most expensive childcare system among developed countries, per a Bank of America analysis. The average US couple with two children spends over 30% of their income on childcare.Steep childcare costs have caused some US women to exit the workforce.
If you’re having a hard time affording childcare, you’re not alone. The United States has one of the most expensive childcare systems in the world.
That was among the key findings of a new Bank of America report released on February 22, which analyzed how high childcare costs could slow the growth of women in the US workforce.
Using data from the OECD, an international economic coalition of 38 countries, Bank of America estimated the average childcare costs for a couple with two children and compared this to the average combined wages for a couple with the same profile. Thirty OECD countries were included in the analysis.
Bank of America found that the average US couple with two children spends over 30% of their combined wages on childcare.
Of the 30 countries analyzed, only New Zealand had a more expensive system — Germany and Austria had the most affordable. The average childcare cost among all 30 countries was less than 15% of a couple’s wages.
“Given that childcare responsibilities have traditionally fallen disproportionately on mothers, the rising cost of childcare sparks concern about the progress of women’s participation rates in the workforce,” the report’s authors wrote, adding, “As the expense has increased over the last several decades, the percentage of women in the workforce has stalled.”
Women in the US are working at near-record levels. As of January, roughly 78% of women in the US who are between the ages of 25 and 54 were working or looking for a job, per Bank of America. However, women in the US are still less likely to be in the labor force than women in most of the OECD countries analyzed. Differences in childcare costs are among the reasons.
The Bank of America report did not discuss why US childcare is more expensive than other countries, and the company declined to speak about that topic with Business Insider.
Why childcare in the US is so expensive
After accounting for expenses like rent, food, apparel, transportation, childcare, and health insurance premiums, Business Insider estimated in January that it would cost about $25,714 to care for a small child in 2024.
The labor-intensive nature of the childcare industry — in part due to adult-to-child ratio requirements — is a key factor that pushes up costs. But this isn’t unique to the US.
Among the main reasons childcare is more expensive in the US than in the rest of the developed world is that other countries dedicate a larger share of their government spending to childcare.
The US spends roughly 0.4% of its GDP on early education and childcare, compared to 0.8% for the average OECD country. No country spends more than Iceland, at about 1.7% of the country’s GDP.
A New York Times analysis of OECD data published in 2021 found that the US spends roughly $500 a year per child on early childhood care, compared to over $14,000 for the average OECD country.
“It is going to take an investment from our federal government to come forward and to think about the return on investment if you invest in early childhood and childcare,” Cindy Lehnhoff, director of the National Child Care Association, previously told Business Insider.
Ultimately, it’s up to Congress and state governments to balance childcare spending with other budget priorities. Additional childcare funding could have been provided through the Build Back Better legislation in 2021, but it was ultimately cut from the final package.
In addition to boosting the number of working women, reducing childcare costs could motivate some US couples to have children. A recent study from the Beijing-based Yuwa Population Research found that high childcare costs were among the main reasons for China’s low birth rate.
“Caregiving responsibilities still disproportionately fall on women and are ultimately a factor in keeping them from getting into, remaining, and progressing in the labor force,” the report’s authors wrote.