Federal Reserve Chair Janet Yellen recently summed up the economic benefits of widespread child care and paid family leave. Since 1979, she explained in a speech at Brown University, women have brought about most gains in real household income. Making life easier for working moms helps women enter and stay in the workforce and in turn boosts economic growth, Yellen reasoned.
As an economics professor who researches issues that working women face, I couldn’t agree more. When more women earn income their own families benefit – along with the whole economy. And I’m heartened to see that after its initial proposal for a child care tax break that would mainly benefit the rich, the Trump administration has switched gears. It now seeks to bring relief to working families farther down the economic ladder.
According to media reports based on skeletal details, officials want to increase the Child and Dependent Care Credit, which lets working parents deduct up to US$2,100 from their taxes. That’s the kind of fix that would make our economy friendlier toward working moms as Yellen prescribed.
More women working outside the home
The nation’s workforce has changed dramatically since the 1950s. Back then, workplaces generally centered around male breadwinners. Stay-at-home wives did most of the caregiving.
In a majority of families with children today, both partners earn money, do housework and take care of their kids. Families with children have become less likely to live with extended family members able to pitch in with caregiving and more likely to be headed by single parents. In 2013, the sole or primary earner was the mother in nearly 40 percent of households with children.
On top of the time burden, child care costs are growing. Full-time care for kids under four years old ran $9,589 on average in 2015 – more than the tab for in-state college tuition, according to a report from Care.com, the largest online care market, and the New America Foundation, a think tank.
Another burden: The U.S. is the only industrialized nation without paid family leave for employees with newborns. The Family and Medical Leave Act of 1993 covers only workplaces with more than 50 employees. It guarantees unpaid time off.
Some companies voluntarily offer new mothers and fathers paid parental leave to care for newborns and newly adopted children. Others provide paid family leave for whatever emergency arises.
Unfortunately, many workers can’t even take unpaid leave without jeopardizing their jobs.
On top of the Child and Dependent Care Credit, the federal government helps working parents save on child care expenses by allowing companies to let employees use dependent-care flexible spending accounts.
These FSAs help middle- and high-income workers more than low-earners with little or no tax liability – whose need for help is greater. For them, there’s the Earned Income Tax Credit. Its distribution as an annual lump sum, averaging in most states between $2,000 and $3,000, is ill-suited for the cash-strapped families scrambling to pay their bills year-round who are eligible for this benefit.
After experiencing widespread push-back, the Trump administration recently said it would revise its initial proposals to do more for low-income parents with limited tax liability or who pay no taxes at all. It also outlined plans for new child care and elder care savings accounts that included few details.
Earlier this year, The New York Times reported that the Trump administration was “contemplating” changes to its original maternity leave proposal. By giving new mothers six weeks of paid time off, even that plan would set an important precedent. But it would exclude adoptions and many increasingly common new configurations for American families.
The Trump administration should ensure that all workers benefit from family-friendly tax and employment policies, not just high-paid earners and new mothers. Men and women alike should be free to take paid family leave, and all employees needing to care for their close relatives deserve an opportunity to do so without losing their jobs or obliging more women to stay out of the labor force.
Maximizing “women’s presence in the workplace … allows us to capitalize on the talents of our entire population,” as Yellen said. “It is also good business.”