Why Does Childcare Cost So Much
If you have ever looked at your child care bill and thought, “How can child care possibly cost this much?” you are not alone.
Then you may hear what early childhood teachers earn and wonder, “Wait. Where does all that money go?”
That is one of the strange realities of child care: it can be expensive for families and still not generate enough revenue to cover the true cost of providing high-quality care.
Both things are true at once.
The price of child care is not the same as the cost of child care.
In 2021, the Center for American Progress modeled what it actually costs to operate child care in every state.
For Iowa, the estimated annual cost of high-quality center-based care was:
Infant: $26,400
Toddler: $20,600
Preschooler: $17,800
Their high-quality model included things most families would probably want in a child care program: better teacher compensation, smaller groups, more planning time for teachers, and well-resourced classrooms.
Want to see the math yourself? The Center for American Progress created an interactive Cost of Child Care tool that allows you to build a child care program and see what happens to the cost as you change staffing, compensation, benefits, classroom size and other factors. Check it out! https://www.costofchildcare.org.
Those numbers are not current tuition rates, and the study is several years old. They are useful because they demonstrate something important: what families are charged and what it actually costs to provide care are often two very different numbers.
People are the cost because people are the care
At Hand in Hand, compensation accounts for about 78% of our licensed child care budget.
That makes sense when you think about what child care actually is. It is people caring for people.
Iowa requires minimum staffing ratios based on a child’s age:
Birth through age 2: 1 adult for every 4 children
Age 2: 1 for every 7
Age 3: 1 for every 10
Age 4: 1 for every 12
Ages 5 through 10: 1 for every 15
These are minimum licensing requirements.
Now consider an infant classroom with 12 babies. At minimum, three adults must be with those children.
But Hand in Hand is open 52.5 hours each week.
Those three people cannot work every hour we are open. They need lunch breaks. They take vacation. They get sick. They complete required training. They plan activities, document progress and communicate with families.
And if one teacher steps out of the classroom for five minutes, another qualified person still has to step in.
Then add all the work happening outside the classroom: enrollment, billing, food service, cleaning, recordkeeping, licensing, supervision, training, scheduling and keeping the building running.
The staffing ratio is the starting point. It is not the full staffing cost.
Inclusion changes the math
At Hand in Hand, there is another important piece.
Minimum ratios assume that every child in a classroom can safely and successfully participate with the same level of support.
Children do not work that way.
Slightly more than half of the children we serve need some level of additional support. Only about 38% of those children have a Medicaid waiver that can help fund that additional support.
So, we staff based not only on what licensing requires, but also on what the children in the room actually need.
At points in our school-age summer program, that meant staffing at roughly four times the minimum level required by the state.
That is not about making child care fancy.
It may mean having another adult available to help a child regulate big emotions. It may mean supporting communication, toileting, transitions or mobility. It may mean giving one child the extra support they need while the rest of the group continues learning and playing.
It means a child gets to belong.
That is what inclusion looks like in practice. And yes, inclusion changes the cost of care.
Child Care Assistance is another piece of the puzzle
Iowa’s Child Care Assistance program, or CCA, helps eligible working families pay for child care. It is an important part of making care accessible.
About 40% of the children in Hand in Hand’s early childhood programs currently use CCA.
But public reimbursement does not necessarily equal what it costs to provide the care.
At Hand in Hand, CCA reimbursement is lower than our private-pay rate. Iowa also places limits on reimbursement for days when a child is absent. The challenge is that most child care expenses do not disappear when a child is gone for the day.
The classroom is still open. The teachers are still there. The lights are still on. And that child’s space needs to be available when they return.
This is one reason child care economics are so difficult. Programs are balancing what care costs, what families can afford and what public programs reimburse.
Those three numbers rarely match.
So why not simply charge the full cost?
Because families are already carrying a tremendous burden.
Many families spend around $15,000 a year per child on care. Simply passing every additional cost on to families would make child care inaccessible for more people.
At the same time, reducing staffing to the absolute minimum would mean some children could not safely or successfully participate.
And early childhood teachers deserve competitive wages for the incredibly important work they do.
There is no single lever that fixes all three problems.
That is why high-quality child care requires more than tuition. It requires public investment, philanthropy, thoughtful business decisions and a community that understands child care as infrastructure.
Because child care does more than care for children
When a child has safe, reliable care, a parent can go to work.
An employer can keep a great employee.
And a child spends their day building relationships, learning to communicate, solving problems, developing skills and preparing for school and life.
Research on early brain development shows that experiences and responsive relationships during the earliest years help build the foundation for future learning, behavior and health.
That is why child care is often described as a two-generation investment. It supports children and the adults raising them at the same time.
And the benefits ripple outward to employers, schools and our entire community.
The real cost of inclusion
At Hand in Hand, we are working to balance four things that matter deeply: quality, inclusion, access and long-term sustainability.
Sometimes those priorities create hard decisions.
But we believe families deserve transparency about those decisions and about what it really takes to provide the kind of care our community needs.
We also believe children should not have to fit neatly into a staffing ratio to belong.
The gap between what families can reasonably pay and what high-quality, inclusive care actually costs is not a problem families or child care providers can solve alone.
It is a community challenge. And that means it is also a community opportunity.
It's Ours
Every year, closing that gap takes more than $500,000 in community support. Not because something went wrong, but because quality, inclusive child care costs more than tuition and public reimbursement can cover on their own.
Hand in Hand is here because generations of Quad Citians have chosen to invest in children and families. Families, teachers, donors, businesses, volunteers and community partners have all helped build what exists today.
That $500,000 is not our gap to close alone. It's ours, together.
A monthly gift helps us plan staffing with confidence instead of uncertainty. It means a classroom stays fully staffed, a child gets the support they need, and a teacher gets paid what the work is worth.
Hand in Hand belongs to the Quad Cities. It is here for our community, built by our community.
If you believe in that, become a monthly donor. This is how it stays ours.