Recognizing child care as a critical part of our infrastructure is not just a societal necessity; it is an economic necessity.
(Leah Willingham | The Associated Press) A daycare worker pushes toddlers on a teacup carousel at a daycare center in West Virginia on Sept. 25, 2023.
By Mackenzie Genecov | For the Salt Lake Tribune
The expiration of $24 billion in American Rescue Plan (ARPA) funding threatens child care providers and creates significant budget shortfalls. While the country’s child care problem has persisted for decades, the COVID-19 pandemic has not only exposed flaws in the system but also exponentially exacerbated them.
Contrary to popular belief, this is not a problem that the market alone can solve. Shifting responsibility onto the employer is also an inadequate solution. If local, state and federal governments fail to address the child care crisis, we face the grim prospect of an estimated 70,000 child care centers closing, 663 of them in Utah. This results in countless households losing access to childcare and many family members – often women – being forced to forego income opportunities and educational activities. Closing such a large number of childcare facilities would not only destroy individual households, but would also have devastating consequences for the economy as a whole.
A study by the U.S. Chamber of Commerce Foundation shows that Utah currently has $1.36 billion in untapped economic potential and $258 million in tax revenue per year due to a lack of child care. It is estimated that workers who earn $50,000 a year and take three years off work to care for children (typically women) lose more than $500,000 over the course of their careers.
This number will only increase as child care options decrease. Working parents of young children are not the only ones who will suffer from not investing in our child care ecosystem.
The Century Foundations conclude that child care workers could lose 232,000 jobs and 3.2 million children could lose child care. In addition, parents who are then forced to leave the workforce or reduce their work hours could cost the country $9 billion in lost earnings, resulting in states losing $10.6 billion in taxes each year. and loss of corporate revenue. There is already a shortage of staff in the companies. This predicament will compound the problem and lead to a slowdown in economic productivity and growth at a time when our nation’s economy is already fragile.
The economic impact of the child care crisis cannot be underestimated. Daycare centers do not conform to the traditional economic market model because several factors drive up overhead costs, including expensive licensing requirements, insurance, food, equipment, and the need for low staff-to-child ratios, particularly for younger children. As a result, profit margins for child care providers are extremely low. You can’t simply raise prices to match supply and demand; Fees are already approaching prohibitive levels for many families. According to Child Care Awareness of America, the average price of care in 2022 was $10,853. Additionally, increasing the number of children in their care compromises the safety and quality of care and often violates government and insurance regulations.
Another pressing issue is the wages and benefits of child care workers. Most child care positions require a four-year degree. However, due to providers’ low profit margins, workers are typically paid a minimum wage and have no access to benefits.
According to the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics, the average child care worker earned $14.49 per hour in 2022. This low income and lack of benefits make daycare centers unattractive places to work and pose a significant barrier to scalability. Thanks to ARPA funding, providers have been able to increase their wages and retain their staff. For example, a child care facility that receives about $640,000 annually from ARPA grants will face a $1.2 million budget shortfall, reducing its base tuition fees of $1,275 per month for infants to 12 years must increase to $2,000 per month for 3 years. The base price for preschool was $925 per month and is now $1,600. However, the center will still suffer a loss of about $900,000.
Politicians are calling for employers to take a larger role in addressing the child care crisis. While employers can help by offering more flexibility, such as telecommuting options, they cannot solve the crisis – and we should not rely on them to do so. Such an approach could lead to a system similar to our current health insurance system, leaving out gig workers, those in informal employment and those who lose their jobs. Additionally, employers can quickly withdraw these benefits, especially during times of economic uncertainty like today. Furthermore, they cannot effectively address the core issue of providing wages to attract more talent. The responsibility to fill these gaps with funding lies with our government. If government officials had the courage to allocate resources to close these gaps, the long-term return on investment would increase tenfold.
Recognizing child care as a critical part of our infrastructure is not just a societal necessity; it is an economic necessity. As we approach a pivotal moment when significant funding will expire, government officials at all levels must take decisive action to support child care providers and ensure that families, especially women, are not forced out of the workforce due to a lack of accessible and affordable children Care.
Ending funding would not only cripple the child care system, but would also have far-reaching impacts on our economy, potentially costing us billions in untapped economic growth. The consequences of closing daycare centers would ripple across our entire country, hindering productivity and growth at the very time we need it most.
Mackenzie Genecov is an economic development specialist at the U.S. Economic Development Administration; However, your opinions are personal and not representative of the agency. Mackenzie holds a master’s degree from the University of Denver in Global Finance, Trade and Economic Integration. She moved with her family from Colorado to Utah a year and a half ago to be closer to nature. After having great difficulty finding quality, affordable child care and then being on waiting lists for over a year, she became involved in child care.
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