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Day Care Capitalism

One big policy question that comes up now and again is whether the government should subsidize child care to a greater extent than it does—and if so, how? Gary Becker gives us a lecture on the virtues of so-called free markets:

I believe it would be a mistake for the US, Germany, or other countries to emulate the Swedish approach [which subsidizes day care for all working mothers]. For starters, middle class and rich families can pay for their own childcare services for young children, such as preschool programs, whether or not the mothers are working. … It is much more efficient to have better off families buy childcare services in a private competitive market than to spend tax revenue on preschool government-run programs for the children of these families. [But poorer families should get greater day-care subsidies, says Becker.]

Okay, but let's ask why Sweden has a government-run day care system while the United States has a "private competitive market." Because the Swedes love their socialism, and damn the consequences? No, it's because Swedish child-care workers are actually paid more than dirt—a substance that in turn makes more than American child-care workers—and hence, very few Swedes could actually afford day care in the private market. Child care workers make, on average, 66 percent of the median female wage in America; in Sweden it's 102 percent. If American child care workers were ever able to unionize or get paid a decent wage, the "free market" for day care in American would break down completely.

At any rate, my guess is that in the future, child care is going to become more and more unaffordable no matter what country we live in, since it's not an industry that will go through major productivity growth or cost reductions. The price will keep rising of its own accord—no matter how much immigration and American-style capitalism manage to slow wage growth in the sector, they can't stop it. So once child care becomes as unaffordable for the middle classes as it currently is for the lower classes, the government will be forced to step in and offer serious child care subsidies. (At the moment, families below the poverty line pay on average 28 percent of their income for child care; for middle-class families, it's 6.6 percent and rising.) It's inevitable, even in this country. Good, I say.

That won't necessarily mean complete socialism for child care; the government could always offer families vouchers and let them choose their own day care center or whatever, but the vouchers will have to be generous. Another clever innovation is to foster the private "family care" sector—i.e., those stay-at-home mothers taking care of other kids as well—which France has been trying to do in order to rein in public child-care spending. This wouldn't substitute for a publicly-funded child care system, but it could complement it. I'm too lazy to look up the details, though.

Personally, I've always liked ideas that put an actual price on "non-market" activities like informal child care. One nonprofit group, Time Dollar USA, has created "service banks" that allow community members to pay each other in "time dollars" for "volunteer" activities. Say Grandma Nellie looks after your kids each day, and you pay her in time dollars. Then she uses those dollars to get someone to take care of her if she ever gets ill. Or whatever. It's an interesting system, although "professional" social service agencies tend to look down on it, and I think in Florida back in the '80s a pilot program for service banking was looted by a skeptical legislature. But other than that...

Posted by Bradford Plumer on 11/18/05 at 6:38 PM | E-mail | Print

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