The Child Care Cliff Is Upon Us. Look Out Below.

Publish date: 2024-08-01

Pandemic-era subsidies propping up US childcare providers expire on Sept. 30. About three million children could lose their spots, leading some to call this a “child care cliff.” Women’s participation in the labor force, which as at an all-time high, may fall right off with it.

Instead of a sharp, sudden drop, it’s more likely to be a protracted slide that extends the pain. So rather than an immediate economic disruption of the kind that demands policy action, here’s how my Bloomberg Opinion colleague Kathryn Edwards describes the coming fallout: “Families will internalize the cost of child care the way they have for years: by having fewer children and working less.” For employers, the “working less” part of the equation should ring an alarm bell.

Although there are plenty of policies the government could offer to shore up the US child care system, employers shouldn’t expect the cavalry to come to their rescue. Yes, the US has long accepted that children over the age of five have a right to attend a government-funded school – with government-funded transportation – but for kids under five, care is the employee’s problem, which means it’s the employer’s problem.

Day care has been a longstanding headache in the US. A 2018 analysis by the Center for American Progress found that 83% of parents with kids under five agreed that “finding quality, affordable daycare was a serious problem” where they lived, and that half the country lived in a childcare “desert.” In these deserts, the maternal labor force participation rate was three percentage points lower. And despite pandemic-era government help, there are still fewer day care employees now than before Covid struck. These jobs simply don’t pay enough to attract and retain workers.

Despite the low earnings of day-care workers, for parents, costs can easily eat up 20% of a household’s income, far more than the 7% threshold for what the federal government deems affordable. It can take years to get off the wait-list for full-time care, and even when you get it, care can be unreliable. Also, quality can vary widely, as the recent death of a toddler from fentanyl at a Bronx day care – which had just passed a surprise inspection -- makes horrifyingly clear.

Many large employers offer some assistance with childcare, but much more is needed. The most common benefit, offered by 59% of employers according to the Society of Human Resource Management, is a flexible spending account for dependent care. These programs allow workers to pay for care with pretax dollars but is not as valuable as it might seem. Dependent care FSAs are capped at $5,000 year, a level set in 1986 when the annual cost of care for a toddler was about $3,300. Today, the annual cost is closer to $14,000 and can easily be higher in major cities.

Some employers go further, offering workers a child-care subsidy. Others will help arrange backup care, often through an agency. Both are valuable, but they fall short of addressing the other big problem parents face: Getting their kids a regular spot with a reliable, high-quality provider. Thus, perhaps the most valuable benefit is for employers to offer daycare close to the workplace. Yet only about 6% offered onsite or “near-site” child care in 2022, according to SHRM.

I understand the reticence: Opening a day care center is expensive. And the benefit helps employees in a particular phase of their lives; only about 11% of workers are parents of a child under the age of five (although perhaps this number would be larger if care were easier to find). And yet there are benefits to offering onsite care, which might be the only viable solution for employees whose jobs require odd hours, such as airport workers.

And for employers pushing strict return-to-office policies, onsite care could be a powerful magnet for young parents -- precisely the group of workers most resistant to returning. Clothing company Patagonia Inc. offers child care at its headquarters, and although it has a three-day-a- week in-office requirement, parents who use the day care tend to show up all five days. Patagonia has also noticed a 25% lower turnover rate among workers who used the benefit.

In a tight talent market, generous child-care benefits can be a differentiator. A recent McKinsey survey found that among job-hunting moms with kids under the age of five, 69% said they’d be more likely to choose an employer that offered on-site day care or financial assistance for child care. And over 80% of both men and women told the consultancy that childcare benefits would be an important factor in their decision to stay with their existing employer. There’s no need for companies to shoulder the burden for building, staffing and populating a daycare center on their own: When Cisco Systems Inc. discovered it had extra spots at its San Jose daycare, it offered them to employees at Adobe Inc.

Share this articleShare

After working moms got hammered by day care and school closures early in the pandemic, a combination of day care and school re-openings and the flowering of remote, flexible work helped spur the highest-ever workforce participation rate for women with kids. It would be short-sighted to shove that progress off a cliff.

VBlogG

The Child Care Cliff Is Upon Us. Look Out Below.