LWIA 5 Child Care Market Study

The most current data, from the United States Congress Joint Economic Committee, shows the Consumer Price Index (CPI) inflation for Illinois is up 6.8% for the month of May 2022 and unemployment rate is at 4.7%. ?This data brings up questions on families finding quality child care that they can afford. The cost of child care has significantly increased through the years and has far surpassed the reasonable percentage of income that was paid by parents in previous generations. Two-parent and single-parent households are desperately trying to find a balance between managing childcare vs paying their bills. Illinois is now considered one of the 15 least affordable childcare states in the country, in fact, childcare is more expensive per year than the average person’s rent.

Child Care cost in Illinois varies by counties and it is represented in two brackets, licensed day care centers and licensed exempt day care centers according to the Illinois Department of Human Services (IDHS). A licensed day care will average a cost of $46.49 per day whereas the licensed exempt day care cost runs about $40.50 per day. That is a mere $6 less then licensed daycare centers. This does not represent a huge discount and at the end of the year someone paying for a licensed childcare will be paying $12,087.40, a difference of about $1,500 less than its exempt counterpart.

The southern half of Illinois day care cost is significantly lower where a licensed day care cost is $33.53 per day. That is $12.96 less than its counterpart in northern Illinois and $6.97 more than a licensed exempt day care. The age of a child entering the daycare system has implications to the cost of daycare. For example, the younger the child (under 2 years) the cost is more because it requires greater care than a child who is 2 or older. The cost of daycare is even less once the child reaches ages 3 or older. ?

As minimum wage increases take effect in Illinois, many low-income parents are being pushed slightly above the eligibility requirements for the childcare subsidy programs that they desperately need.

As we continue with eligibility for subsidies, it’s important to look at the cost of living and living wage for comparison. The minimum wage in Illinois is $12 an hour. ?Kane, Kendall, and DeKalb counties are in alignment with the state minimum wage. ???

Although reports show that the average annual salary for the three county areas is between $44,000 to $55,000, there are many households that are earning minimum wage and that is approximately $24,960 annually. If you subtract the day care cost of $12,087.40 from the minimum wage annual salary, it shows that the household will only have $12,872.60 left to pay for rent, light, water, gas, etc. These figures do not include benefits cost for a household.

If we were to take the average annual salary for Kane County of $55,535 and deduct annual childcare cost, it will leave the household with $43,447.60 per year in income to pay bills, feed the family, and maintain as roof over their heads. The housing market has also shown a significant increase and adds to the struggle’s households are experiencing. According to 2022 Kane County FMR, residential rent goes roughly from $1,180, starting with a one bedroom to $2,850 for a 4 bedroom. The annual cost to rent in Kane County can average from $14,160 to $34,200 per year.

In comparison, a 1-bedroom household that earns $55,535 annually and pays for child care at $12,087.40 per year and rent at $14,160 will have $29,287.60 left for the year to make ends meet. This calculation suggest that a 1-bedroom household would have to earn $4,271.90 per month, $1,067.98 per week which represents an hourly wage of $26.69. to make ends meet and even at that rate there will be some struggles adjusting household budgets based on the yearly cost to raise a child.

The United States Department of Agriculture (USDA) published an article in 2020 “The Cost of Raising a Child”, that details the cost of raising a child at approximately $12,980 per year with the cost increasing as the child gets older at the rate of an additional $900 more for teenagers from the age of 15 to 17. Per the article, the household expenses distribution is as follows: housing accounts for the largest share at 29%, food is second at 18%, and childcare/education (for those with the expense) is third at 16%.

Expenses vary depending on the age of the child”. Where can I get relief? Or can I? Another component that needs to be taken into consideration when accessing childcare is eligibility for subsidy and amount of subsidy.

According to IDHS a household may qualify for childcare subsidy if the following are present:

·????????Have a child (or children) under the age of 13, and

·????????Are working and meet income requirements, or

·????????Receive Temporary Assistance for Needy Families (TANF) and are in education, training, or other work activity approved by your caseworker, or

·????????Are a teen parent (under age 20) in high school, an alternative high school, or GED program, or

·????????Are attending education or training activities including ESL, high school equivalence, GED, vocational training, and 2- and 4-year college degree programs.

After the initial assessment, a household must also meet federal income guidelines:

The above chart suggests that a family of 2 cannot make more than $2,903 per month to qualify for childcare subsidy. It is important to note that the amount is before taxes are taken out and at the rate of 12% of federal income tax, it leaves the household with a monthly income of $2,554.64 and if your rent is $1,180 now all you have is $1,723 to ration through the month to meet household needs. That means that a household of 2 can only make $725.75 per week which translates to an hourly wage of approximately $18 per hour to qualify for the subsidy. As if the raise of cost of living wasn’t enough along with day care cost, transportation continues to have a negative impact on household’s budgets.

The Chicago Metropolitan Agency Planning (CMAP) released a report in April of 2021, “Improving equity in transportation fees, fines, and fares”, which highlights transportation disparities for low income residents. In their report CMAP states that low income households have to use their limited financial resources to meet basic needs. These includes housing, transportation, and food, expenses associated with maintaining employment such as commuting costs and child care. Report on the Economic Well-Being of U.S. Households in 2020 - May 2021 from the Federal Reserve indicated that 17 percent of adults were not able to pay their bills in full. These financial implications mean that even if transportation fees, fines, and fares are a relatively small part of household expenses, they are a noticeable daily expense. The reality is that they may cause undue hardships on some households, leading to less efficient mobility decisions and may lead for households to have less options when looking for employment due to distance.

In conclusion, child care cost adds a financial burden on low income households when considering other financial obligations such as housing and transportation. The income eligibility bracket that provides households with subsidy assistance limits a household’s ability to earn enough income to cover other expenses. Although more states are increasing minimum wage the cost of living is also increasing and thus having little benefit to a household. Either a household doesn’t make enough to have a quality of life or makes too much and won’t receive any assistance.