During the 2025 Child Care Aware of America Symposium, an expert panel held a discussion about the economics of child care. The panel included Linda Smith, Buffet Early Childhood Institute, Theresa Hawley, Center for Early Learning Funding, and Jason Fichtner, Bipartisan Policy Center.
The discussion sparked an important realization: if we want meaningful progress, policymakers must be fluent in both the micro and macro dimensions of child care economics. At the micro level, this means understanding how affordability, access, and workforce challenges affect families and providers. At the macro level, it means recognizing how child care infrastructure directly impacts economic growth, labor force participation, and long-term societal outcomes. Bridging these perspectives is essential to designing effective, sustainable solutions.
Both the Micro and Macro Economics of Child Care Matter
When we talk about child care, we often focus on the emotional and developmental benefits for children and the peace of mind it offers working parents. But behind the scenes, the economics of child care play a critical role in shaping the availability, affordability, and quality of these services. To truly understand and improve the child care system, we must consider both micro and macroeconomic factors — the small-scale decisions made by families and providers, as well as the broader economic trends and policies that shape the entire industry.
Microeconomics: The Personal Side of the Equation
At the microeconomic level, decisions about child care are deeply personal. Families weigh the cost of care against their income, work schedules, and values. For many, child care is the second highest household expense after housing. Parents may have to choose between full-time employment and staying home because child care costs outpace their earnings. These individual decisions, multiplied across millions of families, impact workforce participation and economic productivity on a national scale.
Child care providers are also making tough economic choices. Most are small businesses or sole proprietors operating on razor-thin margins. They must balance the cost of staffing, rent, food, materials, insurance, and taxes, with what families can afford to pay. To stay open, providers often underpay staff — a reality that leads to high turnover and workforce shortages. Understanding the microeconomics of child care helps us see how decisions at the individual level are constrained by a market that often does not function efficiently.
Macroeconomics: The Bigger Picture
On a macroeconomic scale, child care is a foundational element of a functioning economy. When families can access affordable, reliable care, parents — especially mothers — are more likely to enter and stay in the workforce. This increases household income and contributes to overall economic growth. Conversely, when child care is inaccessible, entire sectors of the economy feel the strain through reduced productivity and labor force participation.
Public investment in child care yields substantial economic returns. Research consistently shows that every dollar invested in high-quality early childhood education can generate up to $7 in future savings through improved educational outcomes, reduced crime, and higher lifetime earnings. Additionally, the child care sector itself is a significant employer, especially of women and people of color. Policies that support child care infrastructure — including subsidies, tax credits, workforce compensation and benefits and professional development — ripple across the economy.
Connecting the Dots
Effective policy solutions must be grounded in both micro and macroeconomic realities. For example, increasing public funding for child care can ease the financial burden on families (a microeconomic benefit) while also strengthening workforce participation and the economy (a macroeconomic benefit). Similarly, wage support for child care workers can reduce turnover and improve care quality, supporting better outcomes for children and families and ensuring the sector’s long-term sustainability.
In short, child care is not just a personal issue or a family concern — it is a critical economic issue. By understanding both the small-scale decisions and the larger systemic forces at play, we can craft smarter, more sustainable solutions that support children, families, providers, and the economy as a whole.
Resources
- U.S. Chamber of Commerce. Untapped Potential: Economic Impact of Childcare Breakdowns in the U.S.
- Federal Reserve Bank of St. Louis (2025). The Economic Impact of Child Care by State
- U.S Department of Health and Human Services, Administration for Children and Families, Office of Child Care. Provider Cost of Care Calculator
- U.S. Department of Health and Human Services, Administration for Children and Families, Office of Child Care. (2025). Estimating and Reporting the Cost of Child Care
- U.S. Department of the Treasury. The Economics of Child Care Supply in the United States