Pay now or later: investment in child care is down payment on country's future - proposals to make the economics of child care fairer

Black Enterprise, Sept, 1994 by Cecilia A. Conrad

Despite the family-friendly policies of some major corporations and federal initiatives designed to subsidize child care, employer-assisted child care remains a privilege available primarily to permanent, full-time employees of large corporations (see "Who's Watching The Kids?" Economic Perspectives, August 1994). Given the underrepresentation of African-Americans in the professional and technical occupations most likely to offer child care benefits, black families may be particularly disadvantaged. High-income families have access to better quality day care because not only do they have more dollars to spend, but they receive bigger subsidies from the federal government.

[TABULAR DATA OMITTED]

How can we eliminate this inequity? Professor Philip Robins at the University of Miami has proposed making the current tax credit fully refundable and more progressive by increasing the maximum credit from 30% of expenses to 80% for those families with incomes below $10,000, and by eliminating the credit for families with incomes above $60,000. Other observers estimate this policy change would increase the share of the child care tax credit received by the bottom half of the income distribution from 25% to 43%. Another option would be to follow the example of Western Europe and substitute a family allowance for the current tax credit. A family allowance would subsidize not only the cost of child care provided by others, but also child care services provided by the parent. Under the current system, the only subsidy available for parentprovided child care is welfare. The allowance could be a fixed amount per child regardless of family income, in which case the subsidy would be the same for all families. Or, the amount of the allowance could vary inversely with income and look much like the refundable, progressive tax credit proposed by Robins.

Whatever the policy option, it is important to remember that the problem of quality child care is not just a difficulty for individual families. Children today are the workforce of tomorrow. Retirees, regardless of their parental status, will depend on the wages and taxes paid by these future workers for their economic support. Quality child care will help to insure that these future workers are competitive in a global marketplace.