Running a child care business has long been a very difficult math problem: Many providers can barely afford to operate, yet many parents can’t afford to pay more.
During the pandemic, there was temporary relief. The federal government spent $24 billion to keep the industry afloat. Many providers were given thousands of dollars a month, depending on their size, to pay for expenses, the biggest of which was salaries.
But that funding, which started in April 2021, ended in September. Five months later, the business is more precarious than ever.
In addition to the end of monthly checks, provider costs have risen with inflation — for food, supplies, and liability and property insurance. Rising wages in food and retail jobs have made it harder to hire child care workers, one of the lowest-paying jobs in the country.
And families’ use of child care has changed, making it difficult for providers to maintain the required number of workers and collect a steady income. Some parents are now using care less consistently because they are working from home more often or have found alternative arrangements, such as having family members or nannies care for children, during the pandemic.
The result is an industry on the brink, new data shows.
In a survey released Sunday by the National Association for the Education of Young Children, more than half of 3,815 child care owners or managers said they were enrolling fewer children than they were licensed for. Mainly it was down to staff shortages – they said they couldn’t afford to pay workers more because parents couldn’t afford to pay more.
Half of the providers said they had increased fees. Of a broader group of more than 10,000 child care workers surveyed, 55 percent said they knew of at least one program in their community that had closed after federal funds ended.
Many parents are feeling the stress of rising costs and shrinking availability. On average, a recent survey by Care.com found that they spend a quarter of their income on child care (the Department of Health and Human Services says that for child care to be affordable, it should cost no more than 7 percent of the cost of a family’s income). The majority said tuition fees had risen and waiting lists had grown since the funding ended.
Some have tapped into their savings or taken on more jobs to pay for care. Others asked family or friends to care for their children or cut back on their work hours to do so.
“As these funds disappear, they’re just pushing programs that were barely holding together beyond the point of unsustainability,” said Elizabeth Ananat, an economist at Barnard College.
The Biden administration has asked Congress for $16 billion in one year of additional funding for child care, and a group of Democratic senators has backed it, though it is unlikely to get the Republican approval needed to pass.
Meanwhile, some states, including some led by Republicans, have invested state funds to make up for the loss of federal funds. For example, Vermont will spend $125 million a year on major expansions of eligibility for subsidies for low-income families, and Kentucky spent $50 million in grants after federal funds ended.
That’s not enough, said Sondra Goldschein, executive director of the political action committee for the Campaign for a Family Friendly Economy, which is spending $40 million to support President Biden and Democratic candidates who support child care. “We want child care to be seen as permanent infrastructure and to have maintained significant investment in the sector at the federal level,” she said.
Subsidizing child care for most providers, as the administration did during the pandemic, or for most families, as the Biden administration failed to do in its social spending bill, is politically unlikely. Republicans did not support the bill’s family-friendly policies, including widely subsidized child care and universal pre-K.
But there was bipartisan support for other ideas. One is increasing funding for the block grant that helps low-income families pay for child care. It received an additional $15 billion during the pandemic, but it expires this fall, and before this expansion, it served only 14 percent of eligible families. Another is to give employers tax breaks or other incentives to help workers pay for child care.
Policies that target low-income families and focus on how employers are more likely to win bipartisan agreement, said Patrick Murray, vice president of government affairs at KinderCare, a chain of 2,300 child care centers, who worked on the block grant as a political adviser to former Tennessee Republican Sen. Lamar Alexander.
This year has been the toughest in three decades for Rebecca Davis, who runs an Arkansas child care center from her home in the Little Rock area.
She used to care for children from six weeks old until they entered kindergarten, but since the pandemic, the turnover has been higher. Pandemic grant taxes are coming.
But she can’t raise tuition: “It’s a Catch-22: I’d love to be able to give my employees a bonus or a raise in their hourly wages, but I can’t because the cost of everything has gone up and parents just don’t they can pay.”
After expenses — payroll, utilities, mortgage payments, food and supplies — Ms. Davis’ pay is often about $2 an hour.
“You don’t make a living doing childcare,” she said. “Why should I do it; Because I like to make a difference in a child’s life.”
Before the pandemic, Shineal Hunter, like her mother, grandmother and great-grandmother before her, worked in childcare, running a center for 55 children in Philadelphia. It focused on caring for children with behavioral challenges and helping families find services such as housing or food assistance.
After the pandemic, however, the business became unsustainable, with rising costs, inconsistent attendance and understaffing.
As federal funding nears its expiration, it has closed its center.
“It’s heartbreaking that all the energy and effort I’ve put into the last 15 years, the services provided to my community, has been wasted,” he said. “I think about the kids who will now fall through the cracks.”
She watches a child at home, before and after school, and works part-time as a therapist. But she would like to get back into childcare and is making plans to reopen.
