Universal Childcare: A Financial Analysis

Universal childcare is amongst the latest of government-funded programs which several Senators across America have started demanding. For instance, Senator Elizabeth Warren has been demanding that such a program be implemented in America as a part of her agenda for the 2020 Presidential elections. The rationale behind this program is that every group which cannot support itself financially gets government assistance. For instance, the physically challenged and old people get government assistance. Then, why is it that the children are not is provided any assistance from the government?

The basic argument behind the implementation of a universal childcare policy is that it would lead to a significant improvement in the quality of lives of the children who would be the beneficiaries of this fund.

Why is Universal Childcare Needed?

American Senator Elizabeth Warren believes that a universal childcare program which would be funded by a tax on multi-millionaires is the need of the hour. This is because of the fact that good quality childcare can turn out to be a strain on the pocket. In many states, centers which provide such facilities are in short supply. As a result, here, the cost of childcare, which is actually a supplementary expense, can exceed the cost of tuition, which should ideally be the main expense. The costliness of childcare can be gauged from the fact that if an average American were to work the minimum income full-time jobs for the entire year, their childcare expense would be greater than the wages earned in the entire year!

According to Warren, the prohibitive costs of this childcare is the reason that many American women prefer to stay at home after giving birth to a child. Hence, if the childcare costs are rationalized, an entirely new cohort of American workers will be released in the market. This is likely to reduce the dependence on foreign temporary workers for performing skilled jobs. Also, as far as the government is concerned, this would mean more revenue in the form of income taxes.

How Senator Elizabeth Warren Plans to Provide Universal Childcare?

Senator Elizabeth Warren feels that universal childcare is great employment creating opportunity. This is because there are few daycare centers in the United States as no one wants to work in them. The average age earned by a daycare employee is about $10 per hour, which is about one-third of the wage earned by a school teacher. Senator Warren wants to bring the pay of daycare workers on par with the teachers so that it becomes a more attractive profession.

Also, Warren wants to ensure that the cost of childcare is reduced. She proposes the creation of a network of government-funded childcare centers. These centers will not charge any money to parents if they earn less than 200% of the federal poverty line. For families who earn more money also, the price will be capped. Daycares will not be allowed to charge more than 7% of the family income. This would be a considerable reduction given the fact that at the present moment, families pay close to 12% of their income towards childcare expenses.

The problem is that Senator Warren wants to increase wages, reduce revenue, and increase quality all at once. This is what may make the plan financially unviable.

The Canadian Experiment

This is not the first time that someone is talking about the possibility of universal childcare. A similar plan has already been created as well as implemented in Canada in the 1990s. The Canadian government had decided to provide free childcare services all over Canada, and they had also made provisions to ensure that the quality of these services does not decline over time.

However, even the non-financial results of the experiment were not encouraging:

  1. Firstly, the number of children being born in that part of Canada increased much more than average. Since the government was taking care of the child-rearing expenses, people started having more children

  2. Secondly, children who were the recipients of government-aided programs did not have a cognitive ability, which was higher than the children of a similar age and demographic profile from other parts of the country. Hence, there was no real “disadvantage” which the children were actually suffering from

The Financial Effects

The financial effects of universal childcare will be disastrous, to say the least. It is estimated that the plan will cost over $700 billion over the next decade. At the present moment, there is no way to fund the plan rather than charge additional taxes to families with a net worth of more than $50 million. Elizabeth Warren argues that close to $2 trillion can be raised by levying a millionaire tax.

The problem is that a lot of other Democratic senators are also creating policies which are relying on the same fund base. Hence, if all of these policies were to be funded, American would run out of millionaires. Also, the usual arguments against taxing the rich for any socialistic purpose also apply in this case as well.

The bottom line is that it is unlikely that universal childcare may become an economic reality anytime soon. This is because there are too many socialistic proposals going around and schemes like Medicare may take priority over childcare.

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