Investing in the Economics of Child Care in a Post-Pandemic World

BY SLOANE KAISER

COVID-19 HAS EXPOSED THE NEED for public-private solutions to challenges faced by the modern-day workforce, particularly regarding working parents. Experts agree that one of the best ways to advance economic growth is determined by the number of participants in a region’s workforce, and exactly who is participating in the U.S. labor force has changed over the course of the pandemic.

It is estimated that one-third of the U.S. workforce has a child under 14 in the household. So, when the pandemic disrupted typical child care arrangements, these 50 million workers had to consider alternative solutions and employment arrangements. According to the U.S. Chamber of Commerce Foundation, more than one-third of parents—mostly women—have yet to return to jobs they lost, with one possible reason being because of the lack of available and accessible child care options. How businesses and public entities work together to integrate child care as a component of the workforce infrastructure may serve as the key to keeping working parents, particularly mothers, part of the labor force.

The cost is more than the numbers

There is an economic cost associated with the decisions working parents are forced to make when it comes the employment-or-child care tradeoff. Not having adequate care options can translate into costly challenges for employers, such as higher turnover, greater absenteeism, and lower productivity. Even before the pandemic, the Harvard Business Review estimated that there was an annual $13 billion loss in productivity for employers due to insufficient child care availability accessible to employees.

There is a common misconception that in order for businesses to support their employees’ child care needs, they have to provide onsite child care or fully subsidize the cost of care—but there are other creative ways employers can meet the needs of their employees and the community.

Additionally, the number of women in the labor force has increased greatly since the 1950s, yet available child care supports have not increased relative to the amount of households with all parents in the labor force. For decades, this mismatch has forced parents into difficult decision-making. The choices associated with child care and employment are what many experts attribute to the female labor force participation rate hitting a 33-year low at the end of 2020, after the onset of the pandemic.

A Federal Reserve System simulation that evaluates the economic losses of labor force gender disparities estimates that Delaware’s GDP from 2005 to 2019 would have increased by $3.7 billion annually if those gender gaps were closed. Furthermore, a briefing from the Federal Reserve Bank of Minneapolis states that while both fathers and mothers left the labor force after the onset of the pandemic, mothers are not as likely to return as their male counterparts, threatening workplace diversity in the private sector. With the pandemic underscoring how child care options directly affect how, where, and if parents are participating in the labor force, businesses are making child care their issue.

Where this works

Employers might not realize the extent to which caregiving affects employee performance or the decisions to accept a job or remain at one. The costs of turnover combined with the expense of turnover associated with reduced productivity result in substantial hidden costs for many employers. There is a common misconception that in order for businesses to support their employees’ child care needs, they have to provide onsite child care or fully subsidize the cost of care—but there are other creative ways employers can meet the needs of their employees and the community.

The Missoula Chamber of Commerce in Montana launched a crosssector collaboration to measure and drive toward solutions to address challenges impacting the area’s workforce and businesses. The Chamber increased community and business leaders’ awareness of the primary child care challenges in the region, and it determined seven different models for partners to explore in order to expand child care availability and ease the burden on families and businesses. Some models included creative strategies such as remodeling and occupying available space, business co-ops, and partnerships with local providers to expand existing child care options.

Innovative solutions and partnerships are arising across the nation as the benefits of integrating child care as a component of the workforce infrastructure are realized. The Massachusetts Business Coalition for Early Childhood Education was founded by CEOs and employers who came together to make early childhood education (ECE) more accessible and a point in attracting and retaining a strong workforce across Massachusetts. A group of private sector businesses in Minnesota participated in public advocacy for ECE, which resulted in increases in public grant funding to the sector. Such efforts support the U.S. Chamber of Commerce Foundation’s report, which estimates that company-supported child care can decrease employee absences up to 30 percent and job turnover by as much as 60 percent, and offer a 16-to-1 return on public savings for every dollar spent on ECE.

A U.S. Chamber of Commerce Foundation report estimates that company-supported child care can decrease employee absences up to 30 percent and job turnover by as much as 60 percent, and offer a 16-to-1 return on public savings for every dollar spent on early childhood education.

Be a part of the solution

The Delaware State Chamber of Commerce, the state’s Department of Education, Rodel, and the Federal Reserve Bank of Philadelphia are working in partnership to elevate the benefits of investing in ECE to equip businesses with the information they need to support the region’s current and future workforce. For many businesses, it might start with assessing the local child care landscape and gaining a better understanding their workforce’s child care needs. This can help identify the appropriate first step of engagement as a strategy to improve efficiency and retainment for their current workforce and also to attract new talent. To find out ways you can get involved with this initiative, visit the Philadelphia Fed’s website (https://bit.ly/3ypUQSQ) or contact Sloane Kaiser at Sloane.Kaiser@phil.frb.org.

Sloane Kaiser is an economic growth and mobility project associate at the Federal Reserve Bank of Philadelphia.