Skyrocketing Costs of Healthcare, Education, and Childcare
Even before the recent inflation spike, families in many countries were struggling with the high cost of essential services like healthcare, higher education, and childcare. These are fundamental to a decent standard of living – staying healthy, getting an education, caring for children – yet their costs have been climbing for years, often outpacing general inflation and wage growth. In the U.S., this has long been a source of financial stress: medical bills and college tuition can be crippling. But the U.K. and EU are not immune either. While most European countries have public healthcare and more subsidized education, budget constraints and policy choices have shifted more costs onto individuals (for example, university tuition introduced or raised in the U.K., or gaps in childcare provision across Europe). Thus, the cost-of-living crisis is not only about recent price spikes; it also reflects these long-term cost trends in key life domains.
Healthcare: The U.S. famously has the highest healthcare costs in the world, and those costs have steadily risen. Americans face expensive insurance premiums, deductibles, and out-of-pocket expenses for treatment. Even insured families can be hit with “crushing medical bills,” and medical debt is a leading cause of personal bankruptcy. Over the past two decades, U.S. health expenditures per capita doubled, far outpacing income growth. Employers have shifted more costs to workers via higher insurance contributions. The result: healthcare eats up a larger share of household budgets, effectively a stealth cost-of-living increase. A concrete example – between 2010 and 2020, the average family insurance premium in the U.S. rose ~55%, while median household income rose only ~30%. The pandemic added new costs (COVID treatments, etc.), although in 2020 many waived fees temporarily. By 2022–2023, as stimulus programs ended, many American families found themselves back to struggling with medical bills amidst high inflation.
In the U.K. and much of Europe, direct medical costs are much lower for individuals due to national health systems. However, austerity and underfunding of systems like the NHS have led to longer wait times and some people resorting to private care out-of-pocket. Also, certain expenses like dental care, eye care, and prescriptions (in England) can be significant. So while healthcare isn’t usually the biggest cost-of-living item in Europe, access issues can effectively increase the “cost” (e.g. if you must go private to get timely service, that’s a cost). For instance, record NHS waiting lists have driven those who can afford it to pay privately, a form of cost-of-living pressure that doesn’t show up as inflation but impacts disposable income.
Education: Higher education costs have soared, especially in the U.S. The price of college tuition and fees roughly doubled since the early 2000s (after inflation), leading to an explosion of student debt (over $1.7 trillion nationally). Young adults entering the workforce often carry hefty loan payments, reducing their ability to afford other living expenses like housing. President Biden’s attempt to forgive some student debt (as a relief measure) underscores how education costs are tied into the living standards debate. In the U.K., university tuition was introduced in 1998 and tripled to £9,250 per year in the 2010s. While loans cover this upfront, graduates face repayments that act like a tax on income, effectively lowering their net income for years. In many EU countries, tuition remains low or free, but other education-related costs (books, housing for students, etc.) have risen. Furthermore, skills training and continuous education have become necessary in modern economies – their costs can be a burden if not publicly provided.
Childcare: Perhaps one of the most acute (and under-discussed) contributors to today’s cost-of-living stress is the cost of childcare and early childhood education. For working parents, childcare is often as essential as any utility – you cannot earn income unless someone is caring for your young children. Yet in many advanced economies, childcare is exorbitantly expensive. A recent OECD comparison found that the United States has the highest childcare costs as a percentage of wages: a dual-earner couple on average income spends about 32% of their pay on childcare for two children. The U.K. is not far behind, with net childcare costs consuming roughly a quarter of a couple’s income on average. These are staggering figures – for context, that’s more than most families spend on food or on transport. It means effectively one partner’s salary (often the mother’s) can be largely eaten up by childcare, which is why many mothers drop out of the workforce. In fact, a survey in Britain found that for around two-thirds of families, childcare costs exceed their rent or mortgage payments, and 43% of mothers said they had considered leaving their job because of childcare expenses. The U.S. shows a similar pattern: childcare can cost $10,000–$20,000 per year per child in many states (and much more in big cities), rivaling college tuition. Since 2020, childcare costs have only risen further – between January 2020 and September 2024, U.S. daycare and preschool prices jumped about 22%, significantly outpacing overall inflation during that period.
High childcare costs have broad implications. They discourage labor force participation (especially for women), they strain family finances during prime child-rearing years, and they can even impact demographic trends (people may delay or forego having children because it’s too expensive). Countries like Germany, Sweden, and France that invest heavily in subsidized childcare have much lower cost burdens – for example, in Germany, childcare is heavily subsidized and the average cost is only around $120 per month, which is just 1% of a couple’s income. By contrast, English-speaking countries and some others have treated childcare more as a private responsibility, leading to today’s affordability crunch. Notably, even China – traditionally not discussed in this context – is now looking at ways to improve and subsidize childcare as it grapples with falling birth rates. In 2023, China launched pilot projects in over 20 cities offering tax incentives, housing subsidies, and free or subsidized education for third children to encourage larger families. This reflects a recognition that high child-rearing costs (housing, education, childcare) are deterring Chinese couples from having more children, contributing to a population decline.
The COVID-19 pandemic worsened childcare and education costs in some respects. Many childcare providers closed or reduced capacity, and those that remained often raised fees to cover new health measures or lost income. Governments did step in with temporary subsidies (for instance, the U.S. offered stabilization funds to daycare centers, and increased child tax credits in 2021 which provided some relief to parents). However, many of those supports have since expired. In the U.S., the end of pandemic-era childcare grants in late 2023 raised fears of a “childcare cliff” where thousands of providers might close and costs for parents could jump further. Similarly, the U.K. government announced plans in 2023 to extend free childcare hours to younger ages (as a recognition of the issue), but those plans will phase in slowly over 2024–2025 – and many say they are insufficient given that nursery fees are rising ~5–6% a year.
In summary, the cost of vital services – health, education, childcare – forms a significant part of the cost-of-living crisis. They might not show up in monthly inflation reports in the same way as fuel or food, but over time these costs erode families’ financial stability. A young family may find that after paying rent, daycare, student loan payments, and health insurance, there’s virtually nothing left – even if their income is “middle-class” on paper. This leaves them highly vulnerable to the kind of inflation shock we’ve seen in food and energy. It’s telling that in surveys about cost-of-living concerns, people often mention not just groceries and fuel, but also “childcare, medical bills, tuition” as areas of strain. Any comprehensive solution to the crisis will therefore likely involve addressing these structural cost drivers, for instance through public options or subsidies (as some progressive policy blueprints suggest).