Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / How Your Raise Is Finally Beating the Cost of Childcare
Transcript
- Lucas: Alright, let's talk about something that hits close to home for a lot of our listeners: the cost of childcare. Luna: It's one of the biggest line items in a family budget, and for years it felt like that cost was just climbing and climbing, no matter what your paycheck did. Lucas: Exactly. And that's the angle I want to drill into today: based on the latest data, it looks like wage growth is finally catching up — and in some cases, actually beating — the pace of childcare cost increases. This is a real shift. Luna: So let's look at the numbers. What are we working with? Lucas: First, the big picture. As of June 2026, average hourly earnings for private-sector workers hit $37.60, up from $37.51 the month before. That's about 4.3 percent over the past year. Luna: And on the inflation side, core CPI — which strips out food and energy — actually dipped slightly in June, to 336.1 from 336.12. So headline inflation is easing. Lucas: Right. So when you combine those two trends — wages up 4.3 percent, core prices basically flat — real purchasing power is ticking up. And that's before we even get to the sector-specific data. Luna: And what does the sector-specific data say about childcare? Lucas: Care.com published their annual cost survey back in April — it's the most comprehensive look we have. For 2026, the average weekly cost of full-time daycare for an infant is around $321, which is up about 2.1 percent from last year. Luna: 2.1 percent — that's less than half the pace of wage growth. So for the average parent, childcare is becoming more affordable relative to income. Lucas: Exactly. And that's a meaningful break from the trend we've seen for the better part of a decade, where childcare costs were reliably growing at 5 to 6 percent a year — well above general inflation and above wage growth. Luna: So what changed? Why is childcare cost growth moderating now? Lucas: A few things. First, there's been a wave of state-level subsidies. Since 2023, over a dozen states expanded their childcare assistance programs, either by raising income eligibility thresholds or by capping copayments for low-income families. That effectively holds down the sticker price for many households. Luna: And there's also been a stabilization in the labor market for daycare workers, right? Lucas: Big time. During the pandemic, daycare centers were desperate for staff — they had to raise wages just to keep doors open, and those costs got passed on to parents. But over the past year, the labor supply in that sector has loosened. Wages for childcare workers are still rising, but more slowly, and centers aren't having to hike rates as aggressively. Luna: That tracks with what we're seeing in the broader employment cost index, which showed wages up about 0.7 percent in the first quarter of 2026 — a continued deceleration from the 2022-2023 peak. Lucas: Yeah, that's a good point. And the effect is real. According to the Care.com data, the average family is now spending about 10.5 percent of their household income on childcare, down from about 11.2 percent two years ago. Luna: Interesting. But I want to push back a little — because those national averages can mask huge regional gaps. In a place like San Francisco or Manhattan, the cost of full-time daycare can easily be $2,500 a month or more. Lucas: You're right to call that out. The Care.com data shows that in high-cost states — California, New York, Massachusetts, Washington D.C. — childcare still eats up over 30 percent of median family income for some families. The improvement is real, but it's not evenly distributed. Luna: And for a single parent making the median wage, even a 2 percent increase in childcare costs can be the difference between breaking even and going into debt. Lucas: That's exactly the scenario policymakers are worried about. The child tax credit expansion from a few years back expired, and there's been a lot of debate about reinstating it, partly to offset these high costs in certain areas. Luna: So where does that leave a parent listening right now, trying to decide whether to go back to work or stay home with their kid? Lucas: The good news is that, on average, the math is getting better. If your wages went up 4 percent and your daycare bill went up 2 percent, you're coming out ahead in real terms. But you still need to run the numbers for your specific situation, because zip code matters a lot. Luna: And there's also the quality dimension — not all childcare is created equal, and cost isn't the only factor. Lucas: Absolutely. But the broader point is that this is one of the first times in years where workers' purchasing power is genuinely improving in this specific category. And that's worth noting. Luna: I think it's also worth noting that this show is ad-free and listener-supported. If walking through the economy with us has made something click — or if you've found yourself actually looking forward to the data each week — you can support the show at buy me a coffee dot com slash fexingo. Lucas: Yeah, it's a simple way to help keep these conversations going without sponsors or commercials. Really appreciate the listeners who've already chipped in. Luna: Okay, back to childcare. Lucas, you mentioned the child tax credit debate — do you see any federal policy changes on the horizon that could further narrow that gap between wage growth and childcare costs? Lucas: There are a couple proposals in Congress right now. One would permanently expand the child tax credit to $3,600 per child, indexed to inflation. Another would create a federal subsidy for childcare that caps family spending at 7 percent of income. Neither has passed yet, but they're both active. Luna: And on the corporate side, we're seeing more employers offer childcare benefits as a retention tool, especially in tight labor markets. Lucas: Yeah, companies like Patagonia and Bank of America have had on-site childcare or subsidies for years, but it's spreading. A recent survey from the Society for Human Resource Management found that 26 percent of large employers now offer some form of childcare assistance, up from 18 percent in 2020. Luna: That helps the workers at those companies, but what about the gig workers, the part-time employees, the self-employed? Lucas: That's the big gap. The gains we're talking about — the moderation in cost growth, the wage catching up — are most pronounced in the formal, full-time workforce. For the roughly 15 percent of workers who are in alternative arrangements, childcare remains a huge burden. Luna: So the headline is good, but the details are nuanced. Lucas: That's almost always the case with economic data. But I do think it's worth celebrating that for the median family, real progress is happening. And if that trend continues — with wages growing 4 percent and childcare costs growing 2 percent — the affordability picture will keep improving. Luna: Let's hope so. Because that would mean more parents — especially mothers — can make the choice to work without feeling like they're losing money on childcare. Lucas: Exactly. It's not just about the paycheck; it's about the freedom to choose. And that's something that matters for the broader economy too — higher labor force participation, especially among women with young children, is good for growth. Luna: And we're already seeing some movement there. The prime-age female labor force participation rate is around 78 percent, up from 76 percent a few years ago. Lucas: Right. And while that's driven by multiple factors, making childcare more affordable is definitely one of them. So this is a trend worth watching closely. Luna: Alright, let's leave it there for today. Next time, we'll look at another category where wages are finally gaining ground. Lucas: Sounds good. For now, keep an eye on those pay stubs and those daycare bills — the numbers are moving in the right direction.