The Center for American Progress provided the original design for the child-care legislation in 2015, just one year after the launch of the ACA exchanges, and the two programs are unsurprisingly similar in design. Under the ACA, the federal government subsidizes the cost of health care on the exchanges. Under the child-care plan, the federal government will provide money to states so that they can improve the quality of child-care services, increase the pay of child-care workers, and subsidize the price of child care for families who use those services. In the first year, only families with incomes below their state’s median will be eligible. In the second, third, and subsequent years, the eligibility cutoff is respectively set at 125 percent, 150 percent, and 250 percent of each state’s median income. In 2028 the program expires—a gimmick to keep down the 10-year cost.

Such hard eligibility cutoffs, sometimes called benefit cliffs, mean that earning a single dollar beyond the limit could cost families tens of thousands of dollars in subsidies. Some two-income families may find that they are better off if one parent leaves the workforce—not to take care of the kids during the day, but to afford to have someone else watch them. (In heterosexual couples, the parent who leaves is almost always the mother.)

Parents with incomes above the cutoff will face another challenge: higher prices for the same care they currently receive. As of 2020, the median wage for child-care workers was just $12.24 an hour, putting them in the bottom 2 percent of earners. The legislation under consideration mandates that participating child-care centers pay workers the same as elementary-school teachers with similar credentials and experience. The legislation would also dramatically increase demand for child-care services as newly subsidized users pour into the sector. This would force wages upward even in the absence of an explicit wage mandate, because child-care centers would have to increase pay to attract new workers.