Caring for Young Children: Inequality in the Cost Burden of Child Care

This study examines the "cost burden" of child care, defined as child care expenses divided by after-tax income, using data from the wave 10 core and child care topical modules to the 1996 Survey of Income and Program Participation. We estimate that the average child under six years of age lives in a family that spends 4.9 percent of their after-tax income on day care for young children. However, this conceals a wide distribution: 63 percent of such children reside in families with no (non-immediate family) child care expenses and 10 percent are in families where the cost burden exceeds 16 percent. The burden is typically greater in single-parent than married-couple families but is not systematically related to a measure of socioeconomic status that we construct. One reason for this is that disadvantaged families use lower cost modes and pay less per hour for given types of care. The cost burden would also be much more unequal without low cost (presumably subsidized) formal care that is focused on needy families and government tax and transfer policies that redistribute income towards them.