According to Ezra Klein, the cost of day care rose 2,000 % between 1972 and 2007. While I let that figure sink in, I will raise the pertinent questions: how did that happen, and what can we do about it?
Since day care centers are typically small, family-run businesses (maybe that should change), it wasn’t the result of an abuse of market power. I think it comes down to four things. First, on the demand side, more women were going to work. Second, on the supply side, the informal ties within families were eroding; you can’t ask your parents to help with the kids when they live in The Villages. Third, there just aren’t enough workers available to fill more day care centers, particularly since the job pays poorly. Finally, there may be an element of overregulation present here that impacts supply.
So what can be done? I would say there are three options–all of them on the supply side. You can increase the number of workers available by liberalizing immigration laws; you can take a hard look at the regulatory schemes in each state, with an eye to cutting unnecessary costs; and you can provide federal subsidies to encourage capitalists to move into this field.