The childcare crisis is costing American businesses

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The Covid-19 pandemic exposed both cracks and resilience in the US economy, with childcare taking center stage as child care centers closed, schools went remote and parents tried to juggle their children with their jobs.

While employment in the childcare sector has returned to baseline levels post-pandemic, according to the most recent data from the Bureau of Labor StatisticsA shortage of workers and available places for children in some areas is weighing on the sector.

Costs are also going up for families. a Bank of America February report showed that costs for families rose between 15% and almost 30% in the fourth quarter of 2023 in terms of the average child care payment per household, year-on-year. The largest increases were seen among households with a median income between $100,000 and $250,000 per year.

Supporters of the policy argue that child care, including for 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 intended for the child care sector expired last fall, which could mean higher costs for families or centers that close their doors.

ReadyNation, an advocacy group of more than 2,000 business leaders, lobbies in support of 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 that found the nation's child care crisis is costing the U.S. an estimated $122 billion annually in lost earnings, productivity and revenue. 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.

ReadyNation's research shows a combination of “Covid-19 and insufficient policy measures have now significantly worsened the crisis.”

“All taxpayers are affected by this. We must realize that the loss to taxpayers amounts to $1,470 annually per working parent because of lower income taxes and lower sales taxes due to a lack of purchasing power of people who are unemployed,” Nancy said. Fishman, national director of ReadyNation.

Part of the national solution is supporting what the group calls the “workers behind the workforce”: child care providers.

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

Solutions in the Golden State

In California alone, the economic toll, including lost income, productivity and revenue, is an estimated $17 billion, according to ReadyNation Projects. That's higher than any other state in the country, according to the group's estimates.

Although child care jobs in the state have recovered to 2020 baseline levels since this spring, other states have seen greater job growth after the pandemic, according to an analysis by the Center for the Study of Child Care Employment.

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

The group won its first contract in 2021 and gained access to the best pension benefits in the country.

The union says child care providers are currently reimbursed at a percentage of what it costs them to provide care in the state. The average wage of a child care provider is $7 to $10 per hour, with many providers reporting no take-home pay, the report said.

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

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

Lawmakers argue that progress has been made, but more work remains to be done. 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 child care and early childhood education. The group called for an increase in state spending over the past two years by $2 billion on early care and education, for a total of $6.5 billion.

The Caucus' current focus is on maintaining stable reimbursement rates for child care providers while the state monitors a budget deficit.

“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 childcare, or you can't afford childcare, then you can't fill that job that's sitting there vacant and waiting for you. “

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