As states pull back on support for childcare services, single mothers will have an even harder time building wealth and staying out of debt.
Single mothers aren’t faring very well in the recovery. Their unemployment rate was 12.4 percent in November, up from 11.7 percent in June 2009. An unemployed single mother will clearly need help with at least one thing to go out and get another job: childcare. And those who have jobs are still trying to make ends meet, potentially working longer hours and in need of someone to care for their children. But just as the need for childcare assistance is surely rising, states are cutting back. A new report from the National Women’s Law Center shows that those in need of assistance were worse off this year compared to last year in 37 states when it came to income eligibility limits to qualify, waiting lists, copayments, reimbursement rates, and eligibility for assistance to parents looking for a job.
Denying women support for childcare will directly impact their ability to save and their need to take on debt. As a report from NYU Wagner, “At Rope’s End,” says, “The hefty costs associated with single parenthood, which include childcare, housing, food, health insurance, among others, decrease the likelihood that, even with a stable income, these mothers will be able to accrue wealth.” And paying for childcare is no small cost. The average price of full-time care can range from $3,600 to $18,200 annually, according to the NWLC report, and At Rope’s End estimates that this cost accounts for over three-quarters of single mothers’ monthly expenditures.
The effects can be seen in single women’s wealth building and debt loads. Wealth is measured by subtracting total debt from total assets; single mothers have a median wealth of only $100. Meanwhile, over three-fourths of single mothers have some kind of debt, and the most common form is credit card debt. Almost half of single mothers — 47 percent — have that type of debt, and the median amount is $1,200. When childcare takes up three-quarters of your budget, the other expenses likely have to be put on plastic to make ends meet.
And of course credit card debt can quickly become an expense in and of itself. While about a quarter of single mothers have debt related to education and about 30 percent have debt to own homes, the interest rates are quite different. The 30-year fixed mortgage rate is at a record low of 3.94 percent. The interest rate on federal Stafford student loans is 6.8 percent and is 7.9 percent for PLUS loans. Compare that to the average credit card interest rate, 16.75 percent. Any revolving balance left on a credit card will quickly increase the amount of money owed. Not to mention that while student and home debt is certainly a heavy burden on many right now, they at least go toward paying for a potential asset. Credit card debt gets you nothing.
Childcare assistance is not just about the need to support young children’s development, or about helping unemployed single mothers get back to work, or making sure employers have female employees who are able to show up at work. Those are all issues. But it’s also about keeping single mothers out of debt and helping them build the wealth they need to provide for their families.
Bryce Covert is Editor of New Deal 2.0.
The Roosevelt Institute is a non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.