Who's watching the kids: for black families the answer is not only difficult, but costly

Black Enterprise, August, 1994 by Cecilia A. Conrad

Some major corporations have recently discovered that it pays to be family friendly. To help workers cope with the demands of family life and work, a growing number of companies are offering child care referral services, flextime arrangements and in some cases, subsidized child care through on-site centers and/or child care vouchers that can be used off site (see "Business & Child Care," December 1993).

According to a 1991 Conference Board report, "Linking Work and Family Issues to the Bottom Line," corporations that have initiated these work and family policies report better employee morale and reduced absenteeism among both male and female employees. Most employees firmly believe that their family-friendly environment also helps in the retention and recruitment of a quality workforce.

These programs represent a positive social trend, but they also underscore the inaccessibility of quality child care most American families are faced with. Employer-assisted child care remains a privilege available primarily to permanent, full-time employees of large corporations. Those employed by small businesses, temporary workers and part-time workers generally do not receive a child care benefit. Eight percent of those employed by mid-size and large establishments - and only 1% of small-company employees - receive a child care benefit.

Also, while these benefits are extended to 11% of professional and technical workers and 9% of clerical workers, only 5% of production workers receive a child care benefit. Given the underrepresentation of African-Americans in professional and technical occupations and the numbers of black temporary and part-time workers, black families may be particularly shortchanged.

Government policy over the past decade has exacerbated the problem. Direct subsidies to child care providers, programs targeted primarily at low-income families, have accounted for a declining share of the federal budget. In New York City, there are approximately 14 eligible children for each slot in a subsidized center. In the meantime, indirect subsidies - the Child Care Tax Credit, flexible spending accounts (FSAs) and employer deductions - are now the largest government child care programs. These programs give a larger subsidy to families with higher incomes.

The tax credit allows families to deduct from their tax payment a percentage of their child care expenditures. It is available for expenses necessary to enable a single parent or two parents to be gainfully employed. For married couples, both must be gainfully employed or actively looking for work, or one parent can be disabled or a full-time student. The household must include a dependent under the age of 13. The percentage of expenses that can be credited decreases as income increases, from a maximum of 30% for households with incomes under $10,000 to a minimum of 20% for families with an income of over $28,000.

Nevertheless, higher income households enjoy a greater subsidy for two reasons. One, unless the dependent is less than 12 months old, the tax credit is not refundable. Families who owe no taxes receive no child care subsidy. Most families with incomes below $10,000 have zero tax liability, so they derive no benefit from being able to credit 30% instead of 20% of their child care expenses. Two, the dollar amount of the tax credit increases as expenses increase. Higher income families spend more on child care, so they receive larger subsidies.

FSAs also tend to favor families with higher incomes. An FSA is an employment-based benefit that allows an employee to spend pre-tax dollars for child care and other expenses.

Hence, high-income families have access to better quality day care not only because they have more dollars to spend, but also because they receive bigger subsidies from the federal government. The net effect is that too many low income families are forced to rely on unlicensed family day care or on relatives and friends as child care providers. A recent Carnegie study concludes that these are a lower quality, less reliable alternative.

NEXT ISSUE: Eliminating inequities in access to quality child care.

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