February 19, 2026
Affordability challenges loom large for American families, and the cost of child care burdens families with young children, often pushing parents out of the labor force. This problem is particularly pronounced in states like California, where poverty rates are high and low-income parents may spend a large portion of their paycheck just to have a safe place for their kids while they work. But these challenges in the market for early childhood care and education (ECE) are not insurmountable.
What would a robust investment in high-quality ECE for infants and toddlers in California mean for working parents, businesses, and the broader economy?
In a new policy brief, Chloe Gibbs and coauthors find that a high-quality, universal child care program in California, aimed at improving affordability and access for families with infants and toddlers, would allow more parents of young children to join the workforce, increase the state’s GDP, and lead to long-term benefits for the next generation.
The brief provides a comprehensive look at how high child care costs and other frictions in the market for ECE impact parents, children, businesses, and the economy. In 2023, the average annual cost of child care in California was $11,900 per child, roughly 11 percent of the median income for households with young children. High costs not only limit the number of children who have regular child care arrangements -- less than half of the children under age five -- but also affects which families can afford it. Mothers in the lowest-income households are the least likely to be in the labor force, with the cost of child a significant contributing factor.
As the graph shows, the mothers in the lowest-income households would have to pay nearly 80% of their incomes for child care – making it infeasible for them to participate in the labor force at the rates of mothers in higher-income households.
Affordability and access challenges are caused by a poorly functioning market for ECE, particularly in certain areas of the state and for families with infants and toddlers. Some estimates suggest that the gap between licensed child-care slots and young children potentially in need of child care is as large as 600,000. The fragmented state of the market, served by many small firms and sole proprietorships with thin profit margins, constrains providers’ capacity to scale up to meet the potential demand in the absence of public investment. Parents facing high prices they cannot afford often forgo formal care and opt for ad hoc or informal arrangements, making it difficult for providers to invest in quality improvements, such as paying higher caregiver and early educator wages.
If these issues were addressed with public investment, the benefits would be considerable. The researchers outline how a high-quality ECE program aimed at improving affordability and access for families with infants and toddlers would cost $4 to $8 billion annually when targeted to low- and middle-income families and $12 to $21 billion annually if universally available. Such an investment would enable more than 100,000 mothers of young children to join the workforce, contributing as much as $23 billion to state GDP. This is to say nothing of the documented long-term benefits of high-quality ECE to participants, which include greater educational attainment and lower rates of delinquency and incarceration in adolescence and adulthood.
The policy brief is entitled “The economics of the market for early childhood care and education in California,” by Chloe Gibbs, Caleb Brobst, T.V. Ninan, and Abigail Sanchez.
Experts
