New Mexico is poised to make history this November as the first state in the nation to guarantee free childcare to all its residents, a move Governor Michelle Lujan Grisham has heralded as a groundbreaking step toward supporting working families. Announced in September 2025, the policy is set to take effect on November 1, thrusting New Mexico into the national spotlight and sparking a heated debate over the best way to address America’s escalating childcare crisis.
Formal childcare costs have soared by 29 percent across the United States over the past four years, according to recent data reported by multiple sources, including the state’s own Early Childhood Education and Care Department. This relentless rise has left many parents grappling with tough decisions: Should they leave the workforce, put off career advancement, or even reconsider having more children? For many, the cost of care is simply outpacing their ability to keep up.
Governor Lujan Grisham’s plan aims to ease this burden by making childcare free for every family in New Mexico, regardless of income. The governor described the move as a “model for the nation,” signaling her hope that other states—or even the federal government—might follow suit. But while the intention is certainly bold, critics argue that the plan overlooks some fundamental economic realities.
One of the key issues, as highlighted by critics and economic analysts alike, is the phenomenon known as Baumol’s cost disease. Named after economist William Baumol, this theory explains why sectors that rely heavily on human interaction—like childcare, education, and healthcare—see costs rise faster than inflation. Unlike manufacturing or tech, where automation can boost productivity and lower costs, childcare remains stubbornly labor-intensive. A single caregiver can only look after so many children at once, no matter how advanced the technology or training. As wages rise in other sectors, childcare providers must offer higher pay to attract workers, but they can’t offset those costs with productivity gains. The result? Prices keep climbing.
“The similarities between childcare and other labor-intensive sectors allow us to make some pattern predictions about New Mexico’s approach,” one analyst noted, drawing parallels with the soaring costs of universal healthcare and higher education. For example, “Medical for All” proposals have been estimated to cost between $28 and $32 trillion over ten years, largely because making a service universally available creates a surge in demand that the existing supply can’t easily meet. The same logic applies to universal childcare: more families will want to use the service, but there may not be enough providers to go around.
New Mexico’s own estimates reveal the scale of the challenge ahead. The state projects it will need roughly 5,000 additional childcare professionals to accommodate the increased demand generated by free childcare. That’s a massive expansion for a workforce that’s already stretched thin. To attract more workers, the plan includes incentives for providers to pay entry-level staff at least $18 per hour—a significant bump in a sector where wages have traditionally lagged.
But even with higher pay, there are other hurdles. New Mexico requires all childcare workers to complete training in 11 topic areas and maintain 24 hours of additional training each year. While these requirements are designed to ensure quality, they also make it harder for new providers to enter the market quickly. Critics warn that this could lead to persistent shortages and long waiting lists, especially in rural areas where access is already limited.
The issue of supply constraints isn’t unique to New Mexico. In Massachusetts, for instance, some of the strictest childcare regulations in the country have pushed average annual costs above $25,000 per infant—nearly double the national average. Regulations covering everything from child-to-staff ratios to facility requirements can drive up costs and limit the number of available spots. While such rules are often well-intentioned, aiming to ensure safety and quality, they can inadvertently make care less accessible and more expensive.
“Regulation also plays a major role in determining the cost of care,” experts point out, emphasizing the wide variation in costs across states. In places with heavy regulatory burdens, the barriers to entry for new providers are high, and operating costs for existing centers can be prohibitive. As a result, families have fewer options and pay more out of pocket.
To address these challenges, some advocates suggest a different path: reducing unnecessary regulations, creating more flexible career progression opportunities for childcare workers, and allowing parents to choose from a wider array of care options. Home-based alternatives, for example, can be more cost-effective and adaptable to families’ schedules, but are often hamstrung by state rules that make it hard for small providers to get started. “A wider range of childcare options would better serve families,” one policy analyst argued, noting that parents are uniquely positioned to judge what’s best for their children.
The state’s Early Childhood Education and Care Department is bracing for the impact of the new policy, estimating that it will need to spend around $20 million per year on expansion projects to build out the necessary infrastructure. This money will go toward facilities and staffing that were previously the domain of private business owners, effectively shifting the cost to taxpayers. Critics warn that unless supply constraints are addressed, the influx of public funds may simply lead to longer waiting lists and frustrated families, rather than the seamless access the governor envisions.
Supporters of the plan, however, argue that bold action is needed to break the cycle of rising costs and limited access. By making childcare free, they say, New Mexico is sending a powerful message about the value of early childhood education and the importance of supporting working parents. The hope is that increased demand will eventually spur more people to enter the field, especially if wages rise and working conditions improve.
Still, the debate remains fierce. Some see New Mexico’s approach as a much-needed experiment in social policy, while others worry it’s a “trial run in the wrong direction.” The tension between expanding access and ensuring quality, between controlling costs and meeting demand, is likely to persist as other states watch closely to see how the plan unfolds.
As November approaches, New Mexico stands at a crossroads. Will universal free childcare prove to be the breakthrough that working families desperately need, or will it expose deeper flaws in the system that require a different kind of fix? The nation will be watching, and the lessons learned here could shape the future of childcare policy across America.
