A Better Childcare System For Both Parents and Workers Is Possible

We already have a childcare worker shortfall. Without new solutions, the demand for childcare will grow as the workforce continues to shrink.

Imagine: you’re a working parent searching for childcare options. You find centers that prioritize early childhood development and center your family’s culture. What’s more, they have the flexible pickup and dropoff hours you need. It’s affordable, safe, and the staff are happy, healthy, and stay with you from year to year. Sounds impossible, right? What if it wasn’t?

It’s clear from the news that the childcare economy is failing both workers and parents. But since Common Future Director Portfolio Initiatives Melonie Tharpe first wrote about the issue, we’ve seen a major shift in action and attention in the field. From President Biden’s words on the importance of affordable childcare in his State of the Union Address 2023 and in yesterday’s Executive Order on care, to the new requirement by the Commerce Department that any semiconductor manufacturer seeking federal subsidies guarantee affordable, high-quality childcare for workers who build or operate a plant, to the National Domestic Workers Alliance advocating for a domestic workers bill of rights in D.C., to companies such as Amazon pledging to provide family care benefits to all workers, everyone is looking to find solutions that increase accessibility to childcare for the workers of our country.

While this increased level of attention on the childcare sector comes with an increase in policy prioritization and funding into the sector, the childcare worker shortfall continues to grow. Since February 2020, the childcare sector has lost an estimated 100,000 workers—up to 10% of the workforce. Despite demand, as other industries recover their workforce, only 76% of the childcare workforce has returned—reassessing career choices and seeking better jobs.

This means that there’s a disconnect here: policy makers and the tech industry are looking to utilize even more childcare services, but increasingly, a solid percentage of would-be workers are not interested in joining or returning to the field.

If workers are not accounted for as the care economy is reshaped, this windfall of funds will only serve to benefit investor-backed childcare chains—leaving behind workers seeking better jobs, small care providers, and the families they serve. In practice, this looks like the 50 largest for-profit childcare chains opening or acquiring 537 centers in 2022—an 8% increase from the previous year—and the rapid expansion and increased profits for private, high-end childcare centers. While these large childcare chains report new growth and profits, smaller home-based childcare providers closed almost 7,000 programs, reflecting a 10% loss in providers across 36 states.

But that increase in profit for childcare chains doesn’t translate into benefits for parents or childcare workers. Large chains like KinderCare and Bright Horizons can charge upwards of $40,000 per year for childcare, profiting upwards of 15-20% a year. These chains typically expand into high-income neighborhoods—servicing families that can afford their rates. But when that growth comes through the acquisition of smaller businesses, that doesn’t mean the area is being served new childcare options—it means that potentially affordable care has now been converted to a high-end chain. Childcare workers don’t see increased salaries and low-income parents don’t see options they can afford. We are already seeing a drastic increase in childcare worker demand that won’t slow down anytime soon. 

Today, there are over 460,000 families searching for childcare alternatives. In an already depleted workforce, childcare workers are retiring at increasing rates—26% of center-based providers and 38% of home-based providers are over the age of 50. The new workers that would fill this opening don’t have incentives to enter or stay in the sector when wages are so low compared to other industries. Prior to the pandemic, childcare workers earned only $11.65 on average compared to many other industries increasing minimum wage to at least $15. What’s more, less than half of childcare workers received health insurance or other benefits in 2021. Thus, it’s no surprise that we see worker turnover rates as high as 26-40% —at a time when we need more workers than ever.

Now is the moment for action: funders and policy makers need to invest in and support policy ideas that center childcare workers, and small, often BIPOC-owned, businesses in the sector—and not just continue pouring funds into a broken system.

Ideas in Action: Cooperatives and Family Child Care
When it comes to childcare, big chains are far from the only option. Childcare cooperatives are modeling a system that raises wages and benefits for the workers who are the backbone of the workforce, such as Philadelphia’s Childspace and Cincinnati’s Shine Nurture Center Cooperative—recently selected for the Worker Ownership State Advocacy Fellowship. Other options for non-chain childcare include professional home-based care, also known as Family Child Care (FCC), and the small and micro businesses which independently provide childcare—up to 45% of which are BIPOC-led. These small business options are not only better for workers—with higher retention rates, better benefits packages, and higher average salaries—but also for children and parents, as they often provide more culturally sensitive and relevant services, and more often than not, much more flexibility around pickups and drop offs when compared to larger chains.

Despite a dwindling worker base, Family Child Care makes up almost half of all available childcare, and is heavily utilized by low-income families to meet the care needs endemic to irregular work schedules. But for FCCs to be attractive to workers, they need consistent full enrollment and guarantees that revenues will cover per-child costs, while generating enough profits to sustain living wages. 

With the options above, market constraints, lack of public support, and administrative hurdles have made it increasingly difficult for these alternatives to maintain child enrollment and earn sustainable revenue. These smaller scale care providers do not have the notoriety or advertising budget to promote their business as the larger chain centers do, and usually find clients through word of mouth. Like most small and micro businesses, they don’t have the advantage of scale—they are very local and don’t have shared overhead costs like insurance or bookkeeping. And, since the majority of educators are BIPOC women, their access to funding and support is limited by systemic barriers. 

To solve these issues some organizations are stepping up to the plate. Opportunities Exchange is helping connect these smaller entities to provider networks, and coordinating the sharing of resources, educational materials, and even access to healthcare for their workers. Mission Driven Finance’s CARE Trust, a real estate investment trust (REIT), expands the availability of quality child care across the country and provides opportunities for home-based care providers to purchase homes that act as live-work spaces for their businesses. 

Support services to help small businesses and solopreneurs in the care space gain access to insurance, less expensive back-end services and even real estate are a great start, but they aren’t enough. There is real capital on the table via the large-scale government and corporate contacts available to national childcare providers—capital that allows them to edge out smaller players. But policy makers can change that by focusing on how small providers can compete and unlock those often stable, multi-year service contracts. What’s more, contract-based financing offers a solution to the struggles endemic to Family Child Care workers—which could provide educators access to sustainable enrollment and income in the form of large scale contracts. 

It should be noted that contract-based financing is not the end-all answer—with pitfalls including job stability, wage increases, benefits, and other issues in the sector. For example, if a contract suddenly ends, providers can lose most or all of their income. That said, we feel contract-based financing is a promising option for the sector.

What’s Next for Common Future?

In 2022 Common Future made a commitment to explore and invest in the childcare space. A year later, we are excited to share that we have partnered with the Care That Works coalition to explore how Family Child Care providers might be able to access large-scale contracts in an equitable manner. We are starting in Boston with the hope of sharing learnings far beyond Massachusetts and the childcare sector.

If you are interested in funding innovative solutions that center workers, or if you want to collaborate with us in this work, please reach out to sara@commonfuture.co.