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: So we've been tracking this 'raise beats cost' series for a while now, and I realized we haven't tackled one of the biggest line items for millions of families: childcare. Luna: Right, because if you look at the data, childcare costs have been climbing at about five percent a year for the last decade. That's brutal. Lucas: Exactly. And the narrative for a long time was that wages just couldn't keep up. But the latest numbers tell a different story. Average hourly earnings in the private sector hit thirty-seven sixty in June, up from thirty-seven fifty-one in May. That's a solid monthly gain. Luna: And median weekly earnings are at twelve hundred four dollars as of early last year. That's up about four percent year-over-year. So wage growth is running above core inflation, which is at three point three percent. Lucas: Right. And when you focus specifically on childcare, the Bureau of Labor Statistics data shows that the cost of daycare and preschool has risen about four point eight percent over the past twelve months. So on average, wages are now outpacing that increase. Luna: But I bet a lot of parents listening are skeptical. Because if you live in a major city, you're probably seeing double-digit increases. Those national averages can mask huge local variation. Lucas: Absolutely. In places like San Francisco or New York, childcare costs jumped by eight to ten percent last year. So the national average is actually propped up by regions where costs are rising more slowly. But the key point is that the gap has flipped: wages are winning on aggregate. Luna: And that's a big deal because childcare is often the second-largest household expense after housing. For a family with two kids, it can easily run twenty thousand a year or more. Lucas: Yeah. And one reason costs are so sticky is that childcare is incredibly labor-intensive. You need one caregiver for every three or four infants, and those workers are in short supply. The industry has been grappling with a labor shortage since the pandemic. Luna: That's been a big driver of wage increases in the sector itself. Childcare workers are getting paid more, which is good for them, but it pushes up costs for parents. Lucas: Right, and that brings us to an interesting tension. The same forces raising wages for the broader economy are also raising the cost of services like childcare. But if your raise is outpacing that cost, you're still coming out ahead. Luna: Quick honest thing — a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds making this many shows. If walking through the economy with us has made something click, that link is there. Lucas: Yeah, it's a small group that keeps the whole thing ad-free. We're grateful for that. So back to childcare: another factor is regulation. States have been tightening staffing ratios and background check requirements, which add costs. Luna: And those regulations are generally good for safety, but they also limit supply. When you combine that with higher wages for caregivers, you get a perfect storm of rising prices. Lucas: Exactly. But the data from the Employment Cost Index shows that wages for all workers rose about four point five percent in the first half of 2026. That's comfortably above the childcare inflation rate of four point eight percent. Luna: So the headline is: on average, your raise is finally beating the cost of childcare. But if you're in a high-cost area, you might still feel squeezed. Lucas: That's the nuance. The ten-year breakeven inflation rate is at two point two six percent, which suggests the bond market expects inflation to moderate. So if wage growth stays around four percent, the outlook for parents is improving. Luna: What about the recent GDP slowdown? The economy grew at just one point five percent in Q2. Could that slow wage growth and reverse this trend? Lucas: It's a risk. If the labor market cools, wage gains could slow. But right now, the job market is still tight, with unemployment low. So for the foreseeable future, wages are winning against childcare costs. Luna: Let's bring in a concrete example. Take a family in Columbus, Ohio. The average cost of full-time daycare for an infant there is around twelve thousand a year. Median household income is about seventy thousand. That's a big chunk. Lucas: But if that family's income is growing at four percent, that's an extra twenty-eight hundred dollars a year. And childcare costs are rising at four point eight percent, which is about five hundred seventy-six dollars more. So they net about twenty-two hundred extra. Luna: So the math works, but barely. And that assumes they have only one child in care. For two kids, it's a different story. Lucas: Right. That's why we're emphasizing the aggregate. For families with multiple children, childcare costs can be overwhelming. But the direction of travel is positive. Luna: And the bottom line is that for the first time in years, the typical worker's raise is outpacing the cost of childcare, even if it's just barely. Lucas: Exactly. And that's a real shift from the post-pandemic period when wages were lagging behind everything. So if you've been feeling like you're treading water, the data says you're starting to swim. Luna: Alright, that's a good note to end on. Next time, we'll look at another hidden cost — maybe health insurance. Lucas: That's a big one. Thanks for listening, and as always, we'd love to hear your thoughts. You can find us at buy me a coffee dot com slash fexingo if you want to support the show.