Child care crisis costs American businesses

The Covid-19 pandemic brought to the surface cracks and resilience in the American economy, with child care taking center stage as daycares closed, schools went remote and parents tried to juggle their children and their jobs.

While employment in the child care sector has returned to its baseline level after the pandemic, according to the latest data from the Bureau of Labor Statistics, a shortage of workers and available spaces for children in some areas is weighing on the sector.

Costs are also rising for families. A February report from Bank of America showed that costs for families increased between 15% and nearly 30% in terms of the average child care payment per household, year over year, during the fourth quarter of 2023. The largest increase was observed among households with average child care income. income of between $100,000 and $250,000 annually.

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

Billions in American Rescue Plan Act stabilization funds earmarked for the child care sector expired last fall, potentially resulting in higher costs for families or centers that close their doors.

ReadyNation, an advocacy group of more than 2,000 business executives, lobbies in support of policies and programs at the state and federal level that support a strong workforce and economy, including child care.

The group released a report in 2023 that found the nation's infant and toddler child care crisis costs the U.S. approximately $122 billion in lost profits, productivity and income each year. That's up from $57 billion in 2018, before the pandemic exposed and exacerbated holes in the system for working families and the businesses that depend on them.

The ReadyNation study found that a combination of “Covid-19 and insufficient political action has now significantly worsened the crisis.”

“All taxpayers are affected by this. We need to realize that the taxpayer loss is $1,470 each year for each working parent due to lower income taxes paid and lower sales taxes due to the lack of purchasing power of people who are unemployed,” said Nancy Fishman, national director of ReadyNation.

Part of the solution at the national level is to support what the group calls “the workforce behind the workforce”: early child care providers.

“Supporting the early childhood workforce could include things such as ensuring child care providers have access to benefits. We all know how much benefits matter, whether they are health care benefits or the ability to find high-quality child care.” quality for their own children,” Fishman told CNBC. “Programs that support additional training and education for child care providers are also important.”

In California alone, the economic cost, including lost income, productivity and income, is estimated at $17 billion, ReadyNation projects. According to the group's estimates, that number is higher than any other state in the country.

While child care jobs in the state have recovered to a 2020 base as of this spring, according to an analysis by the Center for the Study of Child Care Employment, other states have seen larger job gains after the pandemic.

Some child care workers in California organized in 2019, with Child Care Providers United, which today represents more than 40,000 licensed and license-exempt, friends and family, home-based child care providers. The providers are part of the state subsidy program in California, and the union is a partnership of SEIU Locals 99 and 521, as well as UDW/AFSCME Local 3930.

The group landed its first contract in 2021 and gained access to the country's first retirement benefits.

The union says child care providers are currently reimbursed a percentage of what it costs them to provide care in the state. The average wage for child care providers is $7 to $10 an hour, and many providers do not report take-home pay, he said.

Currently, providers are advocating through the state budget process to be reimbursed for the full cost of providing care to create more dignity in their work, keep providers open, and attract new providers to the workforce.

Deborah Corley-Marzett operates a subsidized home care center in Bakersfield, California. She told CNBC that she would like to hire more staff to help her and her children, but it is difficult to find the right person and offer competitive salaries in this environment. Low-wage workers in the state's fast-food sector, for example, just earned a historic minimum wage of $20 an hour, putting pressure on other sectors to keep pace.

“I have a staffing problem. I literally can't afford to hire someone to come work with me in the mornings right now. I can't afford it,” Corley-Marzett said. “I don't have enough children right now. But I physically can't take care of any more children.”

Lawmakers maintain that progress has been made, but that more work remains to be done. State Sen. Nancy Skinner, a Democrat who represents parts of the Bay Area and chair of the California Women's Caucus, said the group continues to prioritize early childhood care and education. The group advocated for a $2 billion increase in state spending over the past two years toward early care and education, for a total of $6.5 billion.

The Caucus' current focus is maintaining consistent reimbursement rates for child care providers while the state faces a budget shortfall.

“We have low unemployment, but many sectors of the economy are looking for workers,” Skinner told CNBC. “If your family is in a situation where you can't go to work because you don't have adequate child care, or you can't afford it, then you can't do that job that's there, vacant, waiting for you.” “.