The clock is set to run out at the end of September on $24 billion in government aid, hurting child-care providers already struggling with soaring costs and labor shortages. Some 3.2 million children could lose their spots, according to a recent estimate by the Century Foundation.
The centers that survive could resort to decreased staffing, reduced operating hours or higher tuition to plug the financial hole. That upheaval threatens to push parents — especially women — to work fewer hours, switch to less-demanding roles or leave the labor force entirely.
A high cost for child care “alters that calculation of whether going back to work, or continuing work, is worth it for a lot of parents,” said Sarah House, a senior economist at Wells Fargo & Co.
Labor-force participation among women aged 25-54 climbed to a record high this summer, and companies have more women on their payrolls than ever before.
Their progress was in part made possible by the reopening of daycare centers, which used American Rescue Plan funding to give wage increases, offset rising costs and make other improvements to steady their businesses.
A retreat by women from the workforce could exacerbate labor shortages in roles ranging from air traffic controller to teacher and, over a longer time horizon, make it difficult to replace older employees that are exiting the workforce. The Century Foundation estimates the disruption from the so-called child-care cliff could cost U.S. states $10.6 billion in tax and business revenue per year, and lead families to lose some $9 billion in earnings annually.
“To maintain the labor force participation gains that we’ve made among prime-aged women, we need to ensure that women don’t lose access to child care,” said Sara Estep, associate director of the Women’s Initiative at the Center for American Progress.
In a 2022 survey of U.S. child-care center directors, about 43 percent of respondents said their programs would have to raise tuition when the pandemic stabilization funding ends.
Maria Amado, who runs a home child-care center in Hartford, Connecticut, has already seen how even small price hikes can lead families to make big changes.
She now charges $300 a week, up from $280 before the pandemic, as she shoulders higher utility bills and food costs. Amado said two families have left her daycare because they couldn’t keep up with the payments.
On the other side of the country in Bakersfield, California, child-care provider Sandra Segura said she used at least $12,000 in federal funding she received to hire two assistants who she pays $16 an hour. She worries that, in the worst-case scenario, the child-care cliff will leave her without money to pay her new hires. That would have a domino effect: forcing her to cut staffing, and, in turn, reduce the number of children she serves.
“The majority of my parents, they don’t have family here, so I am basically the only person they can rely on,” Segura said.
Studies have underscored the relationship between affordable, accessible child care and women’s workforce participation. Even for those who were able to work from home during the pandemic, the increase in hours spent on child care for both mothers and fathers led to widely reported struggles with stress, mental health and productivity.
“The importance of child care for women’s work cannot be, I think, overstated,” said Claudia Olivetti, an economics professor at Dartmouth College who focuses on women in the labor market.
If child care gets pricier or scarcer, it could show up in ways beyond women cutting their hours or dropping out of the workforce.
They may be resigned to take jobs that don’t match their economic potential, said Reshma Saujani, founder of Girls Who Code and Moms First, an advocacy group for working mothers.
“You saw this during the pandemic — moms that were nurses had to become Uber drivers because daycare centers were shut down,” Saujani said.
Widespread daycare closures would not just weigh on women who count on the facilities for their services: They would also be detrimental for those who work in the industry. The sector disproportionately employs women, and the Century Foundation estimates the coming cliff could end up costing 232,000 jobs.
The American Rescue Plan Act, passed in 2021, included a child-care stabilization program that the White House has said reached every state in the U.S. and helped more than 200,000 providers stay afloat.
Democratic Representative Ro Khanna and Republican Representative Nancy Mace are forming a bipartisan caucus focused on the issue, but, for now, there does not appear to be widespread enough support in Congress for legislation that would prevent or address the coming cliff.
After the Sept. 30 cutoff for funding, closures and other changes may not arrive immediately, but will likely pick up in the six to 12 months after that, according to Julie Kashen, director for women’s economic justice at the Century Foundation.
“Providers are going to try to make it work as long as they possibly can. They’re going to hope that states will step in, that communities will step in, they’re going to see if they’re able to raise tuition and keep people coming,” Kashen said, noting closing would be a “last resort.”
Still, the situation compounds challenges for parents and businesses alike in what was already a broken market.
In a recent survey of 215 parents with kids under 5, 59 percent said they or a member of their household had to cut back on work hours or leave a job because they couldn’t find reliable child care within their budget, according to advocacy group ParentsTogether Action.
Bella Magana, 27, is one parent already feeling squeezed by child-care costs. A resident of Tinley Park, Illinois, she receives $500 a month through a pilot local guaranteed-income program that she puts toward the expense of her son’s care. Yet she still spends around three-quarters of her paycheck to cover the rest of her $2,000 monthly child-care bill.
She had to pull her son out of a daycare last year that was closer to her home, but too expensive.
“I get that sense of security and safety knowing that my child is with someone, he’s getting fed, he’s having fun and for me, that’s the most important thing,” she said. But “it’s hard to be a working parent in today’s world.”
The picture isn’t much sunnier for daycare providers. Attracting and retaining staff has been a key difficulty, given a recent run of rapid wage growth in other historically low-paid sectors. The average hourly pay for child-care workers was $14.22 last year. Starting pay at Target Corp., for instance, ranges from $15-24 an hour.
More than nine in 10 voters nationwide said it’s important for working parents to be able to find and afford quality childcare, according to a poll by the First Five Years Fund.
The lack of affordable, accessible and flexible child care is “a stunning oversight in our economy and by policymakers,” Commerce Secretary Gina Raimondo said at a Moms First event in July. “It is a huge drag on our economy.”
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