The U.S. economy notched a welcome, if puzzling, milestone in 2024 when the labor force participation rate among prime-age women — 25 to 54 — rose to a record 78.4%, increasing about five percentage points from a decade earlier.

This is unambiguously good, as more workers equals a bigger economy. The reason it’s perplexing is that many economists (including myself) warned at the end of 2023 that many women were about to drop out of the labor market as pandemic-era programs to support working mothers came to an end.

During the height of COVID-19, Congress sent $53 billion to states to bolster child-care providers. Those funds mostly expired in September 2023, setting up what was a dubbed a “child care cliff” that would decimate providers relying on state aid. When the funding ran out, America went over the cliff and yet the number of working women surprisingly increased.

So were all those predictions wrong? They weren’t. Many women left the workforce as others entered, and the historic high distracted from the critical policy lesson the child-care cliff offered: Public investment in child care increases labor force participation — the holy grail of public policy. And yet, few in Washington seem to see child care as a priority.

The labor force participation rate is a deeper and more nuanced measure of the job market’s performance than its more famous cousin, the unemployment rate. The latter is point-in-time metric that measures whether the economy has enough jobs for the people who want to work. The former is more structural, measuring whether people want to work or can work. And the size of the economy is predicted by the number of people working. So although getting people back to work after losing a job is important, getting people to start to work is critical. Higher labor force participation generates dividends for the economy in the form of higher family incomes, higher tax receipts and lower social program participation.

Labor force participation is arguably a more relevant question — and more elusive goal — now than it was for much of the 20th century. When the baby boomers were in their prime working years, they pushed up overall participation to new highs. As they aged and retired, they dragged it lower.

In 2000, overall (16 and older) labor force participation rate averaged around 67% and prime-age participation was around 84%. Fast-forward to 2024 and overall participation has shrunk almost five percentage points even as prime-age participation bounced back to 83.6%.

In effect, the boomers enabled policymakers to coast on policy related to labor for many years. That time is clearly over, as the recent rebound in participation rates isn’t enough to make up for the surge in retirement from a major demographic group. We need more workers.

Which brings the issue back to child care. As the industry faced collapse during the pandemic as families kept their children at home, a third of child-care workers were laid off. The $53 billion spent by the government in this area of the economy was the largest federal intervention into care since the Lanham Act of World War II funded child care to support wartime production.

The Joint Economic Committee, which is tasked with “recommending improvements in economic policy” to Congress, investigated why the labor force participation rate among prime-age women rose despite the cliff having come and gone.

The JEC found the overall trend for women masked what was happening with mothers of children under the age of 5. By its estimation, labor force participation increased 3.7 percentage points for mothers with children under 5 when pandemic aid was flowing to child care. When it ended, participation fell 1.4 points. The rise and fall contrasted with mothers of children age 5 to 18, who saw continued gains through 2024.

The JEC report goes on to note that its findings dovetail with work from the White House’s Council of Economic Advisors, which found states that provided funding of their own when federal dollars stopped flowing had a smaller drop in labor force participation for mothers of young children.

In short, the dire predictions were right in both directions. During the period of child-care subsidies, the share of mothers of young children working increased, and when it ended, the share decreased. Mothers with very young children simply aren’t a large enough share of prime-age women to change the overall trend.

Still, the lesson should be instructive to lawmakers. When they finally decide to design effective policy that would meaningfully boost labor force participation, the federal subsidization of child care meets the criteria.

Yes, that costs money, which in an era of trillion-dollar deficits may be a hard sell in Washington. But not enacting policy that works because of cost is just a political excuse, not an actual limitation.

The federal government can absolutely afford to transform child care for families from the scarce, expensive service it is now to one that is free for most, far cheaper for some and available to all who want it.

For reference, the child care and preschool provisions of the Biden administration’s Build Back Better Act were $380 billion over a 10-year period. Assume officials underestimated and the cost was closer to $500 billion. That still makes fully subsidizing child care just a quarter of the cost of the first Trump administration’s Tax Cut and Jobs Act of 2017, and an eighth of the cost of extending that bill’s expiring provisions — a centerpiece of the Republican agenda.

The historic labor force highs prime-age women notched last year do not portend rosy days ahead or reflect thoughtful, crafted labor force policy. The boomers will continue to leave (the youngest turn 61 this year). Policymakers have in hand clear lessons-of how to counter their exit, but are not pursuing it. What’s lost from their inaction is a windfall for the economy.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Kathryn Anne Edwards is a labor economist and independent policy consultant.

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