On the Global Conspiracy to Make Childcare More Expensive

For months, Wesley Wade and his wife, Giovonni Wade, ended their days the same way, asking themselves, “How is this so hard?” The task consuming their evenings—after Wade’s days working as a mental-health counselor and Giovonni’s as an attorney—was finding childcare for their baby, Ella.

“She is a very defiant child, which we love,” says Wesley. “It’s very fun.”

But finding childcare? That was not fun. That was incredibly difficult. Wesley, who was studying for his PhD, made an Excel spreadsheet while his wife kept a paper list of options. Seemingly every childcare center in Durham, North Carolina, the big university town where they lived, had a wait-list. There didn’t seem to be enough spots. They went searching for hidden childcare: no website, maybe an ambiguous name like Jay’s Jungle or the Blooming Room. But still, no spaces. The couple had money for childcare, but they couldn’t find someone to give it to.

“I can’t even say the words ‘reasonably affordable,’ ” Wesley says. “None of it is reasonable at all!”

Eventually, Wesley quit his full-time job to take care of Ella. “I don’t know how other people figure this out,” says Wesley. “. . . I think my dissertation research might have been a little easier.”

Why can’t two successful professionals living in one of the wealthiest countries in human history find workable childcare? Why do we nod along when parents with good jobs and sound finances say they can’t afford a second child, or a first? Why is raising children so expensive and getting more so? The answer is waiting for us at a dining-room table in 1990s New Haven, Connecticut, where a professor tinkers with a light meter.

Four thousand years of better, cheaper stuff.

For much of human history, we spent a lot of time in the dark. The sun set, and that was it. People invented many strange and creative light sources to fend off the night: campfires, capturing fireflies in a lantern, making candles from salmon or cow fat, or even, according to some sailors’ accounts, pushing a wick inside an oily seabird and lighting it. But getting consistent light was too much work for everyone to afford it.

The story of light and how people made it is one way to tell the story of human progress, of why daily life has materially improved over centuries. And, as we’ll see, it’s a way to understand what we might now call the cost of living, including for things like childcare in Durham, North Carolina.

Many economists suspected they were overestimating inflation-driven price increases by failing to account for how technology improved the quality of goods.

In the 1990s, Yale economist Bill Nordhaus got interested in artificial light and energy efficiency. He borrowed a light meter from campus staff and, in his dining room, pointed it at different lamps and bulbs. He tracked their efficiency differences: how some produced more light (measured in lumens) when powered with the same amount of electricity.

“I just became more and more interested,” he recalls. “Simple curiosity.”

Nordhaus’s light tinkering became serious research. At the time, economists were puzzling over a big question about how to measure cost of living. With inflation, prices go up most years, but so do salaries. That doesn’t mean that everyone is richer, nor that everything is less affordable. It’s hard to accurately quantify how much better or worse off someone is using salaries and prices.

Economists adjust for inflation by tracking, for example, that a gallon of milk cost 3.4 percent more in 2021 than 2020. But over the long run, these comparisons become absurd. How can one compare the cost of a new Ford Model T in 1910 to the cost of a new Honda Accord in 2025? Or the price of Pony Express messengers with the price of sending an email? Many economists suspected they were overestimating inflation-driven price increases by failing to account for how technology improved the quality of goods.

Nordhaus realized that he and his light bulbs could test this hypothesis, because artificial light was an ideal yardstick of changing prices. Humans have made artificial light since prehistory, but our technological improvements from fire pits to candles to light bulbs can be quantified: A wax candle might emit 13 lumens, while a modern LED light bulb might emit 800 lumens.

This became Nordhaus’s quest: to figure out how much it cost people throughout history to create light, to ward off the night with candles or oil lamps or light bulbs. Which meant he needed literally ancient price data. The wonderful thing about academia is that Nordhaus just bumped into someone on the Yale campus with exactly that. “It’s just unbelievable,” says Nordhaus. “She actually had wage data and price data from the Babylonian era, so 4,000 years ago.”

To compare the cost of lamp oil in ancient Babylon’s markets with a 20th-century utility bill, Nordhaus made two adjustments. First he had to know exactly how much light those Babylonian lamps produced from a set amount of oil. So he bought an ancient-style terra-cotta lamp from a catalog, got it burning with the cold-pressed sesame oil used by Babylonians, and measured its brightness with his light meter.

“I would just measure it and write it down, just the way you see in the old movies,” says Nordhaus. He measured re-creations of other light sources, too, like prehistoric fires.

The second step was to price the cost of those lumens in a universal currency: time. How much light could the average person buy with a day’s wages? The answer in ancient Babylon, where a standard wage was one shekel per month, was not much. A full day of work bought 10 minutes of light.

“Maybe 10 minutes,” says Nordhaus. “It was really expensive.”

Nordhaus’s work allowed him to chart a timeline of the “true” price of light, which confirmed economists’ suspicion that they overestimated increases in the cost of living. Because the cost of light, at least, had dropped remarkably over time:

Nordhaus’s chart is of light prices, but it charts an economic history of the world. For most of history, people barely improved on ancient Babylonians’ light sources, which remained expensive. In the 1700s, the cost of light declined a bit when whaling became a global industry. (Unfortunately for whales, their massive fat stores made them big, floating sources of lamp fuel.) But the economy of the 1700s, like lighting technology, resembled ancient Babylon more than today. A majority of the population was subsistence farmers; well-lit dinner parties were an aristocratic luxury; and the max speed of travel and communication was that of a galloping horse or sailing ship.

Then the Industrial Revolution happened. “You can see it so clearly in lighting,” says Nordhaus. “It’s just an enormous change in the pace of improvement.” Scholars begin to apply the scientific method to problems. Before, universities had mostly just preserved and passed on knowledge; now they began to create new technologies. The number of corporations exploded and financial markets provided funds for railroads, telegraph lines, and research and development.

You can’t innovate your way to a three-person quartet.

Around 1850, a Canadian named Abraham Gesner figured out how to turn coal or oil into kerosene, which seemed like magical lamp fuel: brighter, cleaner, and cheaper. “You work a day, you get about an hour of whale oil. Kerosene, you get about five hours,” says Nordhaus. “. . . Kerosene lit the world and saved the whales.” When John D. Rockefeller created the Standard Oil Company, which evolved into a corporate behemoth unlike anything the world had ever seen, the main product was kerosene for lamps. When Edison and the light bulb came along, further driving down the cost of lighting, Standard Oil feared for their business—until they found a new market in gasoline-fueled cars. Edison was not the last word, of course. People obsessively worked on light bulbs and the systems that powered them, finding little improvements year after year.

Cheaper, faster, more efficient: This is how aristocratic luxuries like light, books, and refrigerators became widely affordable. It’s how millions of people left the farm to become plumbers and poets and paralegals. By the time Nordhaus published his findings on artificial light, a day of work bought around 20,000 hours of light.

The global economy has many faults, but it’s also a giant conspiracy to provide us with better goods at a lower cost. Someone invents the shipping container to make loading and unloading cargo at ports faster and easier. Solar companies team up with Wall Street so homeowners don’t have to pay up front to install panels on their roof. An agronomist develops crops that yield more food every harvest. This process has elevated millions of humans out of poverty and given them the ability to travel, choose a career, and light up Times Square as bright as noon for years on end.

So why is childcare still so expensive?

You can’t innovate your way to a three-person quartet.

To understand how goods get cheaper over time, you go to Nordhaus. To understand why services like childcare get more expensive over time, you read the work of the late Princeton economist William Baumol.

The origin story of Baumol’s most famous theory is that he was asked by John D. Rockefeller III and President John F. Kennedy’s cultural adviser, the philanthropist August Heckscher, to investigate why so many theaters and artists were struggling financially in the 1960s. Like Nordhaus with his dining-room experiments, Baumol, himself an avid painter and sculptor, and his Princeton colleague William Bowen, an assistant professor of economics, tracked down data, poking around backstage, sending questionnaires to theatergoers, and interviewing Broadway producers. Baumol soon developed an explanation, an elegant, data-backed theory that explained much more than why artists were starving—so much so that economists have since spent decades unpacking its implications.

Later dubbed Baumol’s cost disease, the theory explains why raising children becomes increasingly expensive in rich societies. The essential insight is that while a single farmer produces far more food today than a century ago, the performing arts have not generally gotten more productive. “The output per man-hour of the violinist playing a Schubert quartet in a standard concert hall is relatively fixed,” Baumol and Bowen wrote, “and it is fairly difficult to reduce the number of actors necessary for a performance of Henry IV, Part II.”

To oversimplify a bit: The economy is divided between sectors like growing corn and manufacturing shirts, which become more efficient and productive over time, and trades like haircuts, fine dining, and teaching toddlers, which require roughly as much labor as they did before the Industrial Revolution.

Sadly, this doesn’t mean that corn chips and halter tops get cheaper while plays and anniversary dinners remain the same price. Auto repair, plays, restaurants, and teaching toddlers get more expensive. These sectors are the victim of the wider economy’s success:

As the corn chip and halter-top industries get more productive, they can make more product without an increase in costs. Profits up! The chip marketers and halter-top designers capture some of the productivity gains by getting raises and bonuses.

The violinists and teachers see those higher wages in the corn chip and halter-top industries and start switching careers.

The theaters and schools respond by raising their own wages to keep their staff.

But now, costs are up for theaters and childcare centers. Profits down! They raise prices to make ends meet. Or cut costs and reduce quality.

The end result is that theater and childcare are more expensive. Corn chips and halter top prices stay the same, or even drop because of productivity, while a concert and the babysitter you need to go see it have gotten relatively more expensive.

In combination, this adds up to an average price tag for raising a child of more than $300,000, without including college tuition.

This cycle of Baumol’s cost disease explains situations where productivity gains in one sector of the economy lead to rising costs in another sector that can’t achieve the same efficiency improvements. Usually this means labor-intensive services, since human time and attention are the essential feature. As Baumol pointed out, it’s difficult to make Shakespeare more efficient, or for a childcare worker to safely watch additional toddlers. Baumol’s cost disease is why health-care costs keep rising, and why your doctor may rush you out trying to see more patients per hour. It’s why college keeps getting more expensive. Professors can still only teach one class and grade one paper at a time. Or why opera houses and theaters are nonprofits that ask wealthy patrons for donations, even as the ticket prices make your head spin.

This leads to a paradox. From a parent’s perspective, the high price of childcare—$11,000 per child per year, on average, in the United States—suggests that childcare centers must make a killing. But the opposite is true: The staff tends to earn less than nearby burger flippers, and the owners barely make a profit. Given the shortage of spots, childcare centers could raise their prices. But they know that if costs go too high, then a chunk of parents will pivot to quitting their job, like Wesley did, hiring a nanny, or finding a neighbor or family member to watch their child. So childcare centers slightly underprice their service and keep wait-lists, which ensures they’ll never lose out on revenue from a parent pulling their child last-minute.

While the global economy has conspired for decades to bring down the cost of dolls and footballs, the biggest expenses of raising kids—childcare, summer camp, music lessons, babysitting, college tuition, health care—all suffer from Baumol’s cost disease.

In combination, this adds up to an average price tag for raising a child of more than $300,000, without including college tuition. In 2017, the federal government estimated, based on projected inflation and expenditure data, that raising a child born in 2015 would cost, through 2032 (when the child reached age seventeen), $233,610. That’s more than $300,000 in 2025 dollars.

Three hundred thousand dollars is daunting! No wonder people are having fewer children. Securing a spot in childcare already pits new parents against each other like the Hunger Games. College tuition already looks like the Mount Everest of responsible budgeting. And the implication of cost disease is that the only way the cost of raising and educating children will stop going up is if the economy crashes. Sounds bad!

The good news is that wealthy countries have a simple cure for cost disease: subsidizing services like childcare. Baumol did the math: The increase in productivity from other parts of the economy creates enough new wealth to subsidize education, health care, and other sectors afflicted by cost disease.

The bad news is that if people are miserly—if executives and high-paid professionals pat themselves on the back for their high salaries and demand politicians keep taxes low—then other people will have to drop out of the workforce because childcare costs too much and schools suffer from teacher shortages. We seem to see this in the United States, which offers unusually little support to parents compared to peer countries. Due in part to this lack of state subsidies, many couples delay having children until their salaries increase: In 2016, American women in their 30s had more babies than women in their 20s.

Many Americans are famously resistant to tax increases, but this is the road to pauperdom. Since governments mostly provide labor-intensive services like education, policing, and health care, their budgets will inevitably be squeezed by cost disease.

The price of a successful economy is your taxes going up, forever.

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