Floundering Child Care Industry Will Have Far-Reaching Implications, Economist Says

As resignations, closures and COVID-19 risks continue to plague the child care industry amid the pandemic, some are warning of far-reaching implications beyond dwindling access to the essential service, the Associated Press reported. Betsey Stevenson, an economist at the University of Michigan, said that the impacts of changes in the industry today could be felt for years.

“The decisions we make about the availability of child care today will shape the U.S. macroeconomy for decades to come by influencing who returns to work, what types of jobs parents take and the career path they are able to follow,” Stevenson said.

Child Care Aware of America estimates that 9 percent of child care programs in the U.S. shut doors since the onset of the pandemic, according to the AP. Many people without access to reliable and affordable child care, especially women, have been forced to leave their jobs as a result.

The more people who leave their jobs in an already stretched economy, the worse the labor shortage will become. Businesses without enough workers can suffer, and access to goods and services can become more sparse, the AP reported.

For more reporting from the Associated Press, see below.

Child Care Services
As resignations, closures and COVID-19 risks continue to plague the child care industry amid the pandemic, some are warning of far-reaching implications beyond dwindling access to the essential service. Above, Amy McCoy reads a book to preschoolers as they finish their lunch at her Forever Young Daycare facility on October 25 in Mountlake Terrace, Washington.
Elaine Thompson/AP Photo

The child care business has for years operated in a broken, paradoxical market: low wages for workers and high costs for consumers. Yet the critical service somehow managed to limp along.

Now, the pandemic has made clear what many experts had long warned: The absence of reliable and affordable child care limits which jobs people can accept, makes it harder to climb the corporate ladder and ultimately restricts the ability of the broader economy to grow.

“Early learning is no longer seen as just a women’s issue or a children’s issue. It’s really seen as an economic issue. It’s about workforce participation,” said Mario Cardona, policy chief for Child Care Aware of America. “It’s about employers who don’t have to worry about whether they’ll be able to rely upon employees.”

President Joe Biden has pledged an unprecedented burst of federal spending in hopes of fixing the child care market. At a recent town hall in Baltimore, he assured parents they would “not have to pay more than 7 percent of your income for child care.” Federal money would go directly to care centers to cover costs in excess of the 7 percent cap. This means the median U.S. family earning $86,372 would pay $6,046 annually for child care.

Biden’s plan also includes universal pre-kindergarten, which could further reduce child care expenses for families. The expanded monthly payments from the child tax credit approved in Biden’s $1.9 trillion coronavirus relief package would be extended for another year. The president also proposed increasing the size of a tax credit for the cost of child care, all of which should help improve access for families.

The Congressional Budget Office has yet to score the costs as the measures are still being negotiated ahead of Biden’s departure Thursday for the G-20 conference in Rome. But Donald Schneider, a former chief economist for the House Ways and Means Committee who now works for the consultancy Cornerstone Macro, estimates the child care and pre-kindergarten support would cost $465 billion over 10 years. The one-year price-tag of the expanded child tax credit would be around $120 billion. The credit would cost an additional $940 billion if renewed for nine more years.

It remains to be seen what survives in the brutal negotiations in Congress for Biden’s broad family services agenda, but the pandemic is proving to be a make-or-break catalyst for the future of the child care industry.

At Forever Young Daycare in the Seattle suburb of Mountlake Terrace, Amy McCoy is burning out fast.

She’s spent half of this year trying to hire a new assistant for her in-home child care, but until then, the former public school teacher works 50 hours a week caring for children herself, and more doing the cooking, cleaning and administrative work needed to run her business.

“At what point is my day care more important than my own family?” McCoy asked.

One of McCoy’s assistants, who worked there for five years, quit the $19-an-hour job in April for a $35-an-hour job nannying. McCoy has posted the opening for an entry-level assistant on Indeed and Facebook, offering $16 per hour—nearly 20 percent more than the state minimum wage. She’s gotten few responses, and all turned her down over pay, making hiring impossible without a tuition increase.

“Nobody wants to work for what I can afford to pay right now,” McCoy said. “I absolutely believe these are $20-an-hour employees, but I hate that, most likely, I will have to raise tuition.”

The U.S. Treasury Department noted in a September report that child care workers earn on average $24,230. More than 15 percent of the industry’s workers live below the poverty line in 41 states and half need public assistance. The sector has high levels of turnover, with 26 percent to 40 percent leaving their job each year. Nor is there much room to give among child care centers that tend to operate on profits of 1 percent or less.

In nearby Edmonds, Briana McFadden shuttered her business, Cocoon Child Care Center, last month due to the stress of the pandemic, though McFadden thinks she would have stayed open if there were government subsidies to stabilize the industry.

In 12 years in business, McFadden said she never raised tuition and was the rare day care in the affluent northern Seattle suburbs to accept low-income families on a state subsidy. In pre-pandemic times, Cocoon employed seven people to care for 37 children. Now McFadden plans to open a convenience store.

“It really wasn’t worth it to continue,” McFadden said, her voice quivering with emotion. “Day care is a hard business.”

Tatum Russell’s livelihood depended as much on McFadden’s day care as the restaurant that employs her to hand-bread seafood.

During a COVID-19-related day care closure in August, the single mom could only stitch together help from relatives for some of the time. Russell ultimately had to miss four days of work.

“It’s been a nightmare, and it’s not over,” Russell said.

Pandemic Impacts Child Care
Each teacher resignation, coronavirus exposure, and day care center closure reveals the child care to be an industry on the brink, with wide-reaching implications for an entire economy’s workforce. Above, Amy McCoy serves lunch to preschoolers at her Forever Young Daycare facility on October 25, in Mountlake Terrace, Washington.
Elaine Thompson/AP Photo

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