• Description

Inflation has recently emerged as the top economic concern in the U.S. The Federal Reserve is now raising interest rates in an attempt to curb inflation, but their job would be easier, and the risk of a recession reduced, if we could directly address some of the job market bottlenecks that are contributing to inflation. This phenomenon has been called "the Great Resignation" – where there are too few workers to fill currently available jobs – because some have left the labor market, while others are reluctant to accept or keep jobs there. The aging of the U.S. population and a recent decline in immigration compound these effects.

In his Wall Street Journal op-ed on May 31, President Biden listed a number of ways to reduce inflation – and one of them was cutting the cost of child care to families, so that the parents of small children could more easily enter the workforce. Indeed, his Build Back Better (BBB) agenda included policies such as greater access to child care and universal pre-K for all 3- and 4-year-olds, policies with the potential to boost labor supply and potentially reduce inflation. That legislation remains in limbo because of the opposition of Senator Joe Manchin (D-WV). But if it had been enacted a year ago, it could have made a difference – not just to the well-being of families and children but even to the inflationary pressures that have now emerged, pressures fueled in part by a lack of workers to produce the products and services people want.

Can child care and pre-K help reduce inflation?