The expiration of $24 billion in American Rescue Plan (ARPA) funding looms over child care providers leaving them with substantial budget shortfalls. While the nation’s child care predicament has persisted for decades, the COVID-19 pandemic not only exposed flaws in the system but also exacerbated them exponentially.
Contrary to popular belief, this is not a problem the market can resolve on its own. Placing the onus on employers is also an inadequate solution. If governments at the local, state and federal levels fail to address the child care crisis, we face the grim prospect of an estimated 70,000 child care centers closing, 663 of those in Utah. This results in countless households losing access to child care, with many family members – often women — forced to forgo income opportunities and educational pursuits. The closure of such a significant number of child care providers would not only devastate individual households, but also have dire consequences for the broader economy.
A study by the U.S. Chamber of Commerce Foundation reveals that Utah currently has $1.36 billion in untapped economic potential and $258 million in tax revenue annually due to a lack of child care. Workers earning $50,000 a year who take three years away from work to care for children (typically women) are estimated to lose more than $500,000 over the course of their career.
This number will only grow as child care options decrease. Working parents of young children are not the only ones who will suffer because of failing to invest in our child care eco-system.
The Century Foundations finds that the child care workforce could lose 232,000 jobs and 3.2 million children could lose their child care. Additionally, parents, who then are forced to leave the workforce or reduce their hours, could cost the nation $9 billion in lost earnings resulting in states’ loss of $10.6 billion in tax and business revenue each year. Businesses are already short-staffed. This predicament will exacerbate the issue and lead to slower economic productivity and growth at a time when our nation’s economy is already vulnerable.
The economic ramifications of the child care crisis cannot be understated. Child care centers do not conform to the traditional economic market model due to several factors driving up overhead costs, which include expensive licensing requirements, insurance, food, equipment and the necessity for a low staff-to-child ratio, particularly for younger children. Consequently, profit margins for child care providers are extremely low. They cannot simply raise prices to match supply and demand; fees are already approaching unaffordable levels for many families. According to Child Care Awareness of America, the average price of care in 2022 was $10,853. Furthermore, expanding the number of children they care for compromises safety, quality of care, and often runs afoul of government and insurance regulations.
Wage and benefits of child care employees is another pressing issue. Most child care positions require a four-year degree, yet employees typically receive minimum wage with no access to benefits due to the narrow profit margins of providers.
According to the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics, the median child care worker earned $14.49 an hour in 2022. This low income and lack of benefits make child care centers unattractive workplaces creating a substantial barrier to scalability. With ARPA funding, providers have been able to raise wages and sustain staff. For example, a child care center who has been receiving around $640,000 annually from the ARPA grants will face a $1.2 million budget gap requiring them to raise their base tuition from $1,275 a month for infants to 3 years olds to $2,000 a month. The base rate for preschool was $925 a month and is now $1,600. Nonetheless, the center will still face an approximate $900k loss.
Politicians are advocating for employers to take on a larger role in addressing the child care crisis. While employers can contribute by offering increased flexibility, such as teleworking options, they cannot resolve the crisis — and we should not rely on them to do so. Such an approach might lead to a system akin to our current health insurance setup, leaving out gig workers, those in informal employment and those who lose their jobs. Moreover, employers can swiftly retract these benefits, particularly during periods of economic uncertainty like today. Furthermore, they cannot effectively address the core issue of providing wages to attract more talent. The responsibility for filling these gaps with funding rests with our government. If government officials muster the courage to provide funding to bridge these gaps, the long-term returns on investment would be ten-fold.
Recognizing child care as a critical piece of our infrastructure is not just a social imperative; it is an economic necessity. As we approach a pivotal moment with significant funding expiring, government officials, on all levels, must take decisive action to support child care providers and ensure families, particularly women, are not forced out of the workforce due to a lack of accessible and affordable child care.
The expiration of funding would not only cripple the child care system but also have far-reaching repercussions on our economy, potentially costing us billions in untapped economic growth. The consequences of child care center closures would ripple throughout our nation, hindering productivity and growth precisely when we need it most.
Mackenzie Genecov is an economic development specialist for the U.S. Economic Development Administration; however, her opinions are personal and not representative of the agency. Mackenzie has a master’s degree from the University of Denver in Global Finance, Trade and Economic Integration. She moved to Utah from Colorado a year and a half ago with her family to be closer to the outdoors. After extreme difficulties finding quality affordable child care and then being on waitlists for over a year, she’s become a child care advocate.
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