Earlier this month, New Mexico announced that, starting in November, childcare will be free for every family in New Mexico.
New Mexico will become the first (so far only) state to offer free childcare to all families with children, no matter their income. The new policy could serve as a template for other states to pursue similar approaches to making childcare affordable and accessible for all.
What Is New Mexico’s Free Childcare Policy?
New Mexico’s new policy is simple. Every family in the state is eligible for free childcare, regardless of income. No means testing, asset test or other, over-complicated hoops to jump through.
“Childcare is essential to family stability, workforce participation, and New Mexico’s future prosperity,” said Lujan Grisham. “By investing in universal childcare, we are giving families financial relief, supporting our economy, and ensuring that every child has the opportunity to grow and thrive.”
The new policy is an expansion of New Mexico’s effort to make childcare free for families earning up to 400% of the federal poverty level—around $120,000 per year for a family of four. That change was made in 2022, and early evidence showed it lifted more than 120,000 New Mexico families out of poverty.
All New Mexico families stand to benefit from the expanded eligibility, even wealthy ones. But, lower-income families spend a much greater proportion of their household income on childcare, compared to families with higher incomes, based on analysis from the Center for American Progress.
Is Childcare Unaffordable?
New Mexico’s policy change comes as childcare costs place an ever-increasing burden on American family finances. On average, it costs American families more than $13,000 per year, per child to pay for childcare, based on analysis by national non-profit, Childcare Aware of America.
That same analysis showed that for a family with two children, childcare costs in the majority of states are higher than average rent and mortgage payments. That means families are spending far more than the 7% of annual income that the Department of Health and Human Services uses to benchmark the cost of childcare for families that are receiving subsidies.
America is second to last out of OECD countries when it comes to subsidies for early education and childcare, according to research from the Urban Institute. On average, similarly wealthy countries spend more than $14,000 per child to provide affordable childcare and high-quality early education options. The United States spends $1200 per child at the federal level, and less than $500 per child in the 0-2-year age range, behind every country in the OECD other than Lichtenstein.
The lack of affordable childcare causes multiple problems, with young children not prepared for school, pulling mothers from the work force even if they want to keep working, and creating an enormous drag on household budgets, at a time when all American families face rising costs for other essentials like food and housing.
For parents in college, trying to upskill so they can move into better paying jobs, the lack of affordable childcare is one of the most frequently cited challenges that leads to students missing classes, or dropping out, based on national survey research from Trellis Strategies, a non-profit based in Texas. Work from New America, suggests that supporting broad based public benefits is one way to help parents access and succeed in higher education
Does New Mexico Have Enough Childcare Providers To Meet Increased Demand?
On top of making childcare free, New Mexico will also provide support for childcare providers, to incentivize and support new child providers. The state is setting up a low interest loan fund, starting with $12.7 million in its first year that can be used to subsidize the construction, expansion and renovation of childcare facilities.
In addition to the loan fund, the state will provide incentive payments to childcare providers that commit to paying a minimum wage of $18 an hour for staff, and providing at least 10 hours of care a day, five days a week. The state anticipates it will need an additional 5,000 childcare workers to create a fully universal system. Incentivizing higher pay for childcare workers—who on average earn just over $15 an hour—is one way to increase the number of qualified staff.
One of the beneficial side effects of widening eligibility in 2022 was a drop in the number of childcare providers living in poverty, from over 27%, down to 16%.
Will New Mexico Inspire Free Childcare Policies In Other Places?
New Mexico is leading the way at the state level with free childcare for all, but New York City Mayoral candidate Zohran Mamdani, recently proposed universal free childcare for the city, as first reported in the New York Times. In 2023, Vermont introduced increased reimbursement rates for childcare providers to bring costs down for families, paid for by a less than half a percent payroll tax increase.
It remains to be seen whether more states and cities will follow New Mexico’s lead with universal free childcare, but whether they do or not, the reality is that American families with young children need the help.