Americans are Calling for Federal Assistance to Save a Failed Private Child Care Market  


April 13, 2022

Editor’s note: CHN Intern Anu Adetola is a junior studying Policy, Analysis and, Management at Cornell University. 

High-quality child care plays an essential role in children’s development, allows working parents to remain employed, and provides an income for child care workers. However, child care centers have become endangered species.   

For years, working parents and child care providers have pleaded with the federal government to further invest in the child care industry as it has ultimately failed as a majority private market. In fact, economists are calling the child care crisis a perfect example of a market failure. For years there has been a severe shortage of child care providers unable to meet parents’ increasing demand for child care services.   

An annual survey by ChildCare Aware reported from 2018 to 2019, 53 percent of states showed declines in the number of child care centers. Even more frightening, 79 percent of states announced declines in the number of family care centers.  

Now, two years after the worldwide spread of COVID-19, the child care market has continued to fail. 

On a phone call with a New Jersey child care center employee, I asked him to share his experience working in the child care industry during the pandemic. He told me, “We had a private day care site that had 64 kids enrolled. When the Governor lifted the restrictions on day cares, only 18 parents wanted to bring their kids back. They had many safety concerns because of the virus. For the next six months, we tried to keep the day care open, but it only got worse. We decided that if there was no improvement by the end of the year, we’d shut the program down and let all staff go. We had to shut it down. We lost $150,000 from that one site.”  

Sadly, this story is not unique.  

Since 2019, over 16,000 child care and family centers have permanently closed. For the centers that have remained open, prices have soared for parents and providers.  

Child care in America is unarguably unaffordable. The Department of Health and Human Services defines affordable child care as not exceeding 7 percent of a parent’s household income. Yet, married-couple families spend more than 10 percent of their median income on child care, and single parents more than 35 percent.  

But is it entirely child care providers’ fault or are they also victims of a failed private market?  

Hiring problems are the root of the child care supply shortage. Providers are desperate for qualified educators but are at their wits’ end trying to find employees. According to a survey of 7,500 providers by the National Association for the Education of Young Children (NAEYC), 80 percent of respondents experienced staffing problems. Of that 80 percent, 50 percent of respondents now serve fewer children and one-third have longer waitlists. The biggest turn-off that prevents people from working in the child care industry is low wages. The average child care worker makes $13.00 per hour: an unpersuasive compensation that fails to recruit and retain workers.  

In an interview with Time, Deborah Vandergaast, the director of Tipton Adaptive Daycare in Iowa said, “My employees have to rely on food stamps and child care assistance themselves, because…I can’t pay them a living wage.” 

Heather Mossefin, the owner of Heather’s Family Home Child Care in Ohio, raised wages from $9.00 to $9.25 per hour, but still struggles to find employees. In an interview with Los Angeles Times, she said, “I can’t compete with sign-on bonuses and paying $20 an hour at the amusement park. Even fast-food places are hiring at $12 to $15 an hour here. I can’t because I can’t raise prices on my parents because we are all hurting.” 

To address the child care shortage, wages for child care workers must increase to recruit and retain the industry’s workforce, so centers can take care of more kids.  

Now, to the readers who feel unbothered because they neither have kids nor work in the child care industry, the reality is the child care crisis affects all of us.  

The United States can’t efficiently function without affordable and available child care. With nowhere to place their kids, many parents — predominantly mothers — quit their jobs to care for their children full time. According to a Seramount survey, one in three mothers in the workforce has cut back working hours, plans to leave the workforce, or left work entirely.  

That’s a loss of about 8 million workers.   

A report from ReadyNation estimates that the dramatic decrease in parents’ participation in the workforce annually costs parents, businesses, and taxpayers $57 billion in lost earnings, productivity, and tax revenue. Out of this $57 billion, the child care crisis costs taxpayers $7 billion.  

It’s clear that the child care crisis is a huge problem for the U.S. So how is the Biden Administration addressing the child care crisis?  

On March 28, President Biden released his FY 2023 proposal with details on his plans for child care and early education. The new budget proposes $20.2 billion for early care and education programs within the Department of Health and Human Services, a 19 percent increase from the 2021 level. The budget allocates $7.6 billion toward the Child Care and Development Block Grant to expand access to quality, affordable child care for families (up from $6.16 billion enacted in FY 2022). 

Young children will be more prepared to enter kindergarten with the $12.2 billion allocated for Head Start (up about $1.2 billion from the FY22 enacted level). Additionally, $450 million in funding for the Preschool Development Grants program (up from $290 million in FY22) will help states and territories improve their early education programs. President Biden also voiced his support for continuing expanded monthly Child Tax Credit payments, which expired in December 2021. These payments can help with child care or other family needs. 

Beyond the significant one-year increments proposed in the budget, Biden’s plan for major economic and health investments (formerly called “Build Back Better”) would make far greater child care investments over a ten-year period. Families with incomes up to about $300,000 would see their child care costs capped at no more than 7 percent of their income; families with lower incomes would pay on a sliding scale, with child care free to families with the lowest incomes. Preschool for three- and four-year-olds would be free. Pay for child care workers and teachers would rise. Because early childhood education is a public good, the proposal uses government subsidies to sustain an essential service. This far-reaching legislation passed the House, but has been unable to secure enough votes in the Senate. Advocates continue to press for enactment. 

Parents and child care providers are asking that the government make investments in three areas: more affordability, different child care options that meet families’ unique needs, and increased wages for child care workers. Only time will tell if the Senate can muster the votes necessary to adopt the long-term Biden’s provisions that would be a giant step towards accomplishing all three. 


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