By The Oregonian Editorial Board, 2/20/16
It's too bad you can't send a toddler to college. At just over $6,700, tuition and fees at Portland State University total about half the amount that families in Multnomah County pay on average for a year of child care. As one child-care advocate noted, it's enough to make you wonder whether parents should be advised to start child-care funds, not college funds.
The price tag is a challenge all its own. But when you factor in Oregon's modest incomes – the median household income in 2014 was $50,521 – paying for child care and other expenses requires mathematical contortions that leave low-income families scrimping for basic needs. The state routinely ranks as one of the least affordable for child care in the country by comparing median child-care expenses to median income, according to Child Care Aware of America.
In fact, that's one of the arguments pushed by advocates for phasing in a three-tiered higher statewide minimum wage with Portland employers paying at least $14.75 an hour by 2022.
As Gov. Kate Brown said in a statement last month, "the costs of essentials such as food, child care and rent are rising so fast that wages can't keep up. Many Oregonians working full-time can't make ends meet, and that's not right."
The problem is it's not so clear that an increased minimum wage will be the answer and may even complicate the affordability equation that leaders say they want to solve.
First, there are those costs that already determine a certain level of child-care pricing. Staffing, driven by regulations on caregiver-to-child ratios, accounts for about 80 percent of a center's expenses, said Bobbie Weber, a faculty research associate with Oregon State University, who has researched child-care issues for more than two decades.
The other 20 percent includes administrative costs, rent, utilities, business expenses and satisfying other state requirements, although Oregon's regulatory structure is not particularly burdensome compared to other states, Weber notes. In fact, the state tries to limit how many costs it has to pass on to centers that operate in a "profoundly dysfunctional marketplace," said state Early Learning System Director Megan Irwin. The state absorbs all but $3 of the cost of each background check conducted for child-care centers.
Even charging families upwards of $13,000 a year per child, however, isn't making anyone rich, Weber said. The median hourly wage for child-care employees in Oregon – almost half of whom have at least bachelor's degrees – is $10 on the low end and $13.75 an hour on the high end, she said.
Meanwhile, profit margins for child care centers "if they're lucky" are in the 1 percent to 3 percent range, she said. "They're making just enough money to keep the doors open."
That low return certainly doesn't encourage newcomers to enter the market, and by doing so help bring down the price of the service. Which brings us back to the problem of how to help Oregonians better afford the child-care options that do exist. Can lifting the minimum wage really make it more affordable?
With staffing amounting to such a high portion of a child-care center's costs, it's hard to see how increasing those costs will mean anything but higher prices to families. But the answer may eventually come in research underway at the University of Washington's Evans School of Public Policy and Governance. There, a team of researchers is analyzing the effects of a phased-in minimum-wage hike to $15 an hour on Seattle workers, businesses and the local economy.
The impact on child-care centers is a particular focus, said study director Jacob Vigdor, who is the school's Daniel J. Evans professor of public policy and governance. Not only do low-wage workers depend on child-care services, but child-care providers themselves often rely on low-wage labor, he said. In addition, many providers operate as nonprofits, which are not as capable of adjusting to higher wage demands, especially if they offer a sliding scale of fees for poorer families, he noted.
It is too soon to draw conclusions – Seattle's minimum-wage boost started just last April with a mandated increase to $11 an hour. But there is the potential that higher wages will translate into higher prices for families or unsustainable costs for some centers, Vigdor said.
Weber, the Oregon State researcher, pointed to other programs that the state provides that deserve more attention for more directly addressing child-care affordability.
For example, the state devotes state and federal funds for child-care relief programs, including subsidies as well as a new pilot program to pay for preschool, said Irwin, the state early-learning program director. But currently, funding in the subsidy program covers only 16 percent of the low-income families who seek the assistance, she said.
The new pilot program, dubbed "Preschool Promise," is in development now and aims to cover tuition for about 1,200 low-income 3 and 4-year-olds in various preschool programs, Irwin said.
Whether that will ultimately be a better focus for policymakers remains to be seen. But they will first need to recognize that a minimum wage hike won't be the silver bullet that leaders believe it to be.
– The Oregonian/OregonLive editorial board