WSJ Your Money Briefing - Child Care Will Be on the Ballot in Several U.S. States

Episode Date: October 31, 2024

As child care becomes financially out-of-reach for many families, voters in several counties will decide next week on ballot measures to raise taxes and boost accessibility. Wall Street Journal reporter Harriet Torry joins host J.R. Whalen to discuss why affordable daycare is seen as vital to local economies. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

This podcast is brought to you by CME Group, the world's leading derivatives marketplace, offering the widest range of global benchmark products across all major asset classes. CME Group, where risk meets opportunity. Here's your money briefing for Thursday, October 31st. I'm JR Whalen for the Wall Street Journal. The shortage of affordable and accessible childcare has left many families with limited options. Next week, voters in several states will be asked to foot the bill to help ease the funding gap. The broader economic picture is that a lack of affordable childcare is just keeping people out of the workforce and that is stopping the economy from growing locally.

We'll talk to Wall Street Journal economics reporter Harriet Torry after the break. Exchanges. The Goldman Sachs podcast featuring exchanges on rates, inflation, and U.S. recession risk. Exchanges on the market impact of AI. For the sharpest analysis on forces driving the markets and the economy, count on exchanges between the leading minds at Goldman Sachs. New episodes every week. Listen now. To address economic struggles in the industry, child care is on the ballot in many counties across the country. Wall Street Journal economics reporter Harriet Torrey joins me. Harriet, under the ballot measures how would childcare be funded? It's a little different in every place. These are initiatives that are taking place at local levels. So for instance in Travis County in Texas, which is the

county that most of Austin falls into, they are proposing an increase in property taxes of two and a half cents per hundred dollar valuations. For the average homeowner that would amount to about $130 a year in extra property taxes of two and a half cents per hundred dollar valuations. For the average homeowner, that would amount to about $130 a year in extra property taxes. And all of that money will go towards providing affordable child care. And there are some other initiatives in other places as well. There's one in Sonoma County in California and St. Paul, Minnesota. They're all a little bit different, but essentially they're suggesting raising property or sales taxes locally by small amounts to put money towards childcare for those

areas. In your story you write a lot about the situation in Texas. What's significant about what's going on there? Well, Texas is a very interesting part of the country because it has a high population. It's seen extremely strong growth in recent years and it has a very high fertility rate, one of the highest in the nation. So there are a lot of babies in Texas, there are a lot of people who need childcare. The demand far outstrips the supply and that's especially the case for affordable childcare, subsidized childcare, which is available but there is an extremely long wait list in the

Austin area. It takes about two years to get off the wait list. The idea is that this initiative will provide more money to get more people off the wait list, provide more subsidized care and that will help people to go back to work, especially in blue collar industries. What do critics of state funding say about this? Many people ask the question, why should I have to pay for somebody else's childcare? A lot of people don't have kids, so it's reasonable for them to ask, why is this falling on me?

But many people see that the broader economic picture is that a lack of affordable childcare is just keeping people out of the workforce and that is stopping the economy from growing locally. There are some critics of these types of measures. The childcare industry, part of its problem is that there is, of course, a lot of regulation in that industry. You have to have a certain number of teachers ratio per kids. And some people say that some of the regulations are too onerous and that they can help businesses

by making it easier to operate rather than bringing in state subsidies. What are the political implications of the broad idea of government even getting involved in this? The debate has really changed since COVID. Child care has always been a problem. It's always been hard for people to find reliable childcare and it's always been expensive because this is a business where it is very labor intensive. During COVID, childcare shut down en masse, a lot of people lost their jobs, and then it became hard to rehire because many of the people who had been working in childcare could go out and get perhaps better paid jobs working in warehouses, working in the retail sector

or in a restaurant. And it's just become very, very hard for people to hire childcare workers. It's always been a relatively poorly paid position. a lot of businesses say I don't have the capacity to bring more children into my daycare because I can't hire enough staff. It's what one academic who I spoke to in the story said is a broken business model because it's not profitable for the businesses to operate and it's too expensive for parents to pay. So what that means is that some people just are out of the workforce because they can't afford to pay for childcare.

This has had a significant impact on families, right? Yeah. I spoke to one person in the story who has a two-year-old daughter and she tried to work. She took a job as an office manager, but it was just really hard because most of her paycheck went towards paying for the daycare bill. It was hard for her to get to work on time because she had a long commute and the daycare only opened at certain hours She just couldn't make it work. She couldn't make the math work

Why are states having to put these measures on the ballot in the first place? Has anything been done at the federal level? There is some movement on the federal level bills have been introduced in the house and in the Senate Particularly on the tax credit side because there are tax credits available to employers and to employees for childcare. So there is movement on the federal level, but for some states that are really facing these demographic problems, they've just taken action themselves. An interesting example of this is Vermont, which has essentially the opposite problem of Texas.

Vermont has one of the lowest fertility rates in the whole country. It has a rapidly aging population and they introduced a new payroll tax earlier this year, which will go to fund child care so that the workers that they do have are able to work and just to attract more people back into the labor force. So different states are approaching this in different ways but they ultimately all have the same goal which is to try and just make it easier for people to combine work and caregiving for the benefit of the local economies. What are the presidential candidates said about how they would tackle the child care funding gap?

Both sides have been talking about expanding child tax credits. And again, this is something that we've seen in the Senate, that tax credits for child care and for families in general could be a potential way forward. More specifically, Donald Trump hasn't offered a plan per se, but he has talked about how important this issue is for the country. And he said that he expects that the country will be bringing in so much money from taxing foreign nations that that will help to take care of the childcare issue. And for Kamala Harris's side, she has said that her plan is for working families to spend no more than 7% of their income on childcare.

That's WSJ reporter Harriet Torry. And that's it for your money briefing. We'll be back tomorrow with WSJ's Laura Saunders to discuss moves you can make now to lower next year's tax bill. This episode was produced by Zoe Culkin with supervising producer Melanie Roy. I'm JR Whelan for the Wall Street Journal. Thanks for listening.