Child care crisis costs U.S. businesses

The coronavirus pandemic has exposed both the cracks and resilience of the American economy, thrusting child care into center stage as daycare centers closed, schools went remote and parents tried to balance work and childcare responsibilities.

Child care employment has returned to baseline after the pandemic, Latest data from the Bureau of Labor StatisticsA shortage of workers and child care slots in some areas is weighing heavily on the industry.

Costs are also rising for families. Bank of America’s February report The average cost of child care per household is projected to increase by 15% to nearly 30% year over year in the fourth quarter of 2023. The largest increases were seen among households earning an average of $100,000 to $250,000 per year.

Policy advocates argue that child care, including for infants and toddlers, is an economic issue that affects all Americans, not just those with young children.

Billions of dollars in American Rescue Plan Act stabilization funds earmarked for the child care sector expired last fall, potentially leading to increased costs for families and facilities that close.

ReadyNation is an advocacy group made up of more than 2,000 business executives that lobby for policies and programs at both the state and federal levels that support a strong workforce and economy, including child care.

The group released a report in 2023 saying the early child care crisis is costing the U.S. an estimated $122 billion in lost income, productivity and revenue each year — up from $57 billion in 2018, before the pandemic exposed and exacerbated flaws in the system for working families and the businesses that rely on them.

According to a survey by ReadyNation “The combination of COVID-19 and inadequate policy measures has significantly worsened the crisis.”

“All taxpayers are affected by this and need to recognize that the loss in purchasing power of unemployed people translates into a loss of $1,470 per year per working parent as they pay less in income tax and also pay less in sales tax,” said Nancy Fishman, national director of ReadyNation.

Part of the national solution is supporting what the group calls “the workforce behind the workforce” — early childhood care providers.

“Supporting the early childhood workforce includes making sure child care workers have access to benefits. We all know how important benefits are, whether it’s health insurance benefits or being able to find quality child care for your child,” Fishman told CNBC. “Programs to support additional training and education for child care workers are also important.”

Readiness estimates that in California alone, economic losses, including lost income, productivity and revenue, will total an estimated $17 billion — more than any other state in the U.S., the group estimates.

Child care jobs in the state have recovered to 2020 baseline levels as of spring, according to an analysis by the Center for Child Care Employment Research, but other states have seen bigger job gains since the pandemic began.

Some California child care workers formed Child Care Providers United in 2019. The organization currently represents more than 40,000 child care workers in licensed, license-exempt, home-based, and friend and family care. Child care workers participate in California’s state grant program, and the union is a partnership between SEIU Locals 99 and 521 and UDW/AFSCME Local 3930.

The group won its first contract in 2021 and was the first in the country to be entitled to severance pay.

Currently, child care workers are compensated a percentage of the cost of providing care in the state, the union said, adding that the average hourly rate for child care workers is between $7 and $10, and many workers report having no take-home pay.

Providers are currently advocating through the state budget process to be fully reimbursed for the costs of providing care in order to bring more dignity to their work, keep providers open, and attract new providers to the workforce.

Deborah Corey-Marzette runs an in-home care support center in Bakersfield, California. She told CNBC that she would like to hire more staff to support her and her children, but that in this environment it’s hard to find qualified workers and offer competitive wages. For example, low-wage workers in the state’s fast-food industry just secured a historic $20-an-hour minimum wage, putting pressure on other industries to catch up.

“We’re having staffing issues. We just can’t afford to hire someone to come in and work with us in the mornings. We just can’t afford it,” Corey Marzette said. “We don’t have enough kids right now, and we physically can’t take on any more kids.”

Lawmakers say progress has been made, but there’s more to be done. State Sen. Nancy Skinner, a Democrat who represents parts of the Bay Area and chairs the California Caucus of Legislative Women, said her group continues to prioritize early care and education. The group has advocated for a $2 billion increase in state spending on early care and education over the past two years, bringing the total to $6.5 billion.

With the state facing a budget deficit, lawmakers are now focused on maintaining stable reimbursement rates for child care facilities.

“Unemployment is low, but many sectors of the economy need workers,” Skinner told CNBC. “If families are in a position where they can’t go to work because there isn’t enough child care or they can’t afford child care, then they’re not going to get the jobs that are out there.”