Biden Tax Plan Paves Way for Women to Power Economic Growth

President Joe Biden is betting an investment in child care and other social programs will spur long-term economic growth.

Many of the policies -- part of Biden’s new $1.8 trillion plan -- could do just that by increasing women’s labor force participation, boosting productivity and distributing benefits more equitably.

But it’s hard to quantify how big the impact will be and the proposals are funded in part by massive tax hikes on the wealthy, fueling debate about whether the economic gains justify the costs to U.S. taxpayers.

“There will likely be an economic boost of having more child care available,” said AnnElizabeth Konkel, an economist at the Indeed Hiring Lab. “How much of an impact is extremely difficult to say right now.”

Biden Tax Plan Paves Way for Women to Power Economic Growth

Biden’s new plan includes universal preschool, guaranteed paid family leave and an extension of the expanded child tax credit. He’s also proposing subsidized child care for low- and middle-income families and a $15 minimum wage for the million-plus child care labor force.

Investments in these types of programs could help bring more women into the workforce. The share of working women ages 25-54 had finally clawed back to levels not seen since the early 2000s at the start of last year. But the pandemic -- and its closing of schools and day-care centers -- reversed that.

Even now as the job market comes roaring back, there are nearly 2 million fewer women in the workforce than before Covid. And Black women in particular are falling behind other groups in job gains.

Biden Tax Plan Paves Way for Women to Power Economic Growth

“Anything that will improve labor force participation and provide greater flexibility in the workforce will benefit the economy in the long term,” said Bill Hoagland, senior vice president at the Bipartisan Policy Center.

It’s not clear whether Biden’s latest package will get very far in Congress. The proposal does, however, mark a significant shift away from small-government theories that have dominated in Washington for years.

The “American Families Plan” would spend $225 billion to fund child-care centers, pay workers more, and reduce the cost of care for some families. Parents would only pay a portion of their income based on a sliding scale, with care fully covered for the lowest-earning families.

That could help address the fact that about half of Americans live in child-care deserts, or places where there’s an insufficient supply of affordable care. Infant care costs exceed 20% of the median household income in 21 states and the District of Columbia, while costs for 4-year-old child care are more than a tenth of income in nearly every state.

The plan seeks to extend the expanded child tax credit -- which is already a contentious issue on Capitol Hill -- through 2025. The change mirrors increases Congress passed last month that temporarily raised the credit and made the payments periodic.

Biden has also proposed 12 weeks of guaranteed paid family and medical leave, at a cost of $225 billion over a 10-year period. It would provide workers up to $4,000 a month based on their average weekly wages.

The U.S. lags rich countries in Europe and the rest of the world in providing paid maternity and paternity leave. Now, just 35% of U.S. workers get paid parental leave, according to a 2019 Kaiser Family Foundation survey.

Some $200 billion would go towards establishing universal preschool for all three and four-year-olds regardless of family income. The program would slowly pass a larger portion of the costs along to states, according to senior administration officials.

When the District of Columbia began offering universal preschool in 2009, women in low-income families saw the biggest jump in workforce participation, while high-income women also saw a large boost, according to the Center for American Progress. That said, middle-class households saw no improvement.

The White House also wants to set a $15 minimum wage for early childhood educators.

The median pay of child-care workers was $11.65 an hour in 2019, according to the Center for the Study of Child Care Employment at the University of California, Berkeley. Early educators are disproportionately women of color, and Black workers are paid $0.78 less per hour than their White peers.

Taken altogether, the proposals mark a “meaningful investment in care, in paid leave, that will help many workers in the formal labor market,” said Elise Gould, senior economist at the Economic Policy Institute. “That will absolutely be good for economic growth.”

©2021 Bloomberg L.P.

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