The Market Can’t Fix Child Care

Not long ago, a legislator told me he thought child care would sort itself out if we just got government out of the way. I hear that a lot.

And let me be clear: I get it. I believe in the power of free markets too. In many parts of our economy, less government interference really does mean more choice, lower prices, and better outcomes. But that only works in industries where a robust market actually exists.

Child care isn’t one of those industries. In fact, there’s nothing “free” about this market at all.

Last fall, the Buffett Early Childhood Institute and Child Care Aware of America convened economists and early childhood experts to look closely at the economics of child care. Their conclusion was blunt: deregulation won’t fix child care. Letting the “market” handle it won’t either.

Economics & Child Care - Buffett Executive Summary.pdf

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And when you look at the fundamentals, it’s easy to see why.

Child care is labor. You can’t automate rocking a baby to sleep or comforting a toddler with big feelings. Wages are the largest cost driver, yet providers can’t raise pay without raising tuition—and parents can’t pay more. That’s why the workforce is leaving in droves and programs are closing.

Parents, meanwhile, aren’t free consumers. They can’t shop around like they would for shoes or groceries. They need care near where they live or work, during the exact hours they’re employed, and from someone they trust. If there’s only one slot in town, that’s not choice—it’s survival.

And the benefits spill far beyond the family. Businesses depend on employees showing up. Communities depend on children starting school ready to learn. The economy depends on a strong future workforce. Economists call these positive externalities—benefits the market consistently undervalues because no single parent or provider captures the return.

That’s why the Buffett group described child care as a public good.

Here’s where the economics get even more revealing...

In a normal market, supply and demand balance themselves. But in child care, demand is fixed. Parents must work, and they must find care. Supply, however, is constrained by workforce shortages, zoning restrictions, the high cost of facilities, and razor-thin margins. When demand is locked in and supply can’t flex, the usual market corrections simply don’t happen. That’s why we see endless waitlists, centers closing, and prices climbing higher than college tuition.

Then there’s the affordability paradox. Families are already stretched, often paying more for child care than their mortgage. Yet providers are still operating in the red. In most markets, if consumers can’t pay enough to sustain the business, the product disappears. But when the “product” is child care, that means parents leave the workforce and kids miss out on critical early learning. That’s not equilibrium—it’s failure.

And if you really want to see how broken this “market” is, look at the data—or rather, the lack of it. The Buffett roundtable flagged this as a serious problem: federal investments are reasonably clear, but state and local funding streams are inconsistent, and program-level funding isn’t tracked at all.

No healthy market operates in the dark. Yet that’s exactly what we’re asking families, providers, and policymakers to do—make billion-dollar decisions with half the picture.

Rolling back regulations won’t fix any of this. It won’t change the fact that child care is labor-intensive, that parents have little choice, that the benefits spill beyond the family, or that the funding landscape is a black box. It will just make care riskier and lower in quality, without making it affordable.

If we want child care that actually works—for families, for businesses, for the economy—we have to stop pretending deregulation or laissez-faire economics will do it.

The solutions lie in sustained, accountable public investment, better data, and a willingness to treat child care the way we already treat K–12 education: as a public responsibility.

The Buffett report asked the right questions about affordability, regulation, supply, and who pays. Now the rest of us need to stop recycling myths and start building answers.

Because child care isn’t just a private transaction between parents and providers. It’s a public good. And it’s long past time we treated it that way.