Child Care Is an Industry on the Brink

Running a child care business has long been a very challenging math problem: Many providers can barely afford to operate, yet many parents cannot 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, which they used to pay for expenses, the biggest of which was wages.

But that funding, which started in April 2021, expired in September. Five months later, the business is more precarious than ever.

In addition to the end of the monthly checks, providers’ costs have increased along with inflation — for food, supplies and liability and property insurance. Rising wages at food service and retail jobs have made it harder to recruit 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 requisite number of workers and collect a stable income. Some parents now use care less consistently because they work from home more often or found alternative arrangements, like 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, over half of 3,815 child care owners or directors said they were enrolling fewer children than they were licensed for. Mostly it was because of staffing shortages — they said they could not afford to pay workers more because parents could not afford to pay more.

Half of the providers said they had increased tuition. 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 shut down since the expiration of federal funds.

Many parents are feeling the stress of rising costs and shrinking availability. On average, a recent survey by Care.com found, they spend one-quarter of their income on child care (the Department of Health and Human Services says for child care to be affordable, it should cost no more than 7 percent of a family’s income). A majority said that tuition had increased and that wait lists had grown since the funding’s expiration.

Some have tapped their savings or taken more jobs to pay for care. Others have asked family or friends to care for their children, or cut back their work hours to do so.

“As these funds disappear, it’s just pushing programs that were just barely staying together over the edge of unsustainability,” said Elizabeth Ananat, an economist at Barnard College.

The Biden administration has asked Congress for $16 billion for one year of additional funding for child care, and a group of Democratic senators has supported it, though it is unlikely that it would get the Republican approval needed to pass.

In the meantime, some states, including a few 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 for large expansions in eligibility for subsidies for low-income families, and Kentucky spent $50 million on grants after federal funds expired.

That is 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 back President Biden and Democratic candidates who support child care. “We want child care to be thought of as permanent infrastructure and have sustained substantial investment in the sector at the federal level,” she said.

Subsidizing child care for most providers, as the government did during the pandemic, or for most families, as the Biden administration was unable to do in its social spending bill, is politically unlikely. Republicans did not support the bill’s family policies, including broadly subsidized child care and universal pre-K.

But there has been support from both parties for other ideas. One is increasing financing for the block grant that helps low-income families pay for child care. It received an additional $15 billion during the pandemic, but that expires this fall, and before that expansion, it served only 14 percent of eligible families. Another is giving employers tax breaks or other incentives for helping employees pay for child care.

Policies targeted at low-income families and focused on how child care benefits employers are more likely to get bipartisan agreement, said Patrick Murray, vice president for government affairs at KinderCare, a chain of 2,300 child care centers, who worked on the block grant as a policy adviser for the former Tennessee Republican senator Lamar Alexander.

This year has been the most challenging in three decades for Rebecca Davis, who runs a child care center in Arkansas 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, turnover has been higher. Taxes are coming due on the pandemic grant money.

Yet she can’t raise tuition: “It’s a Catch-22: I would love to be able to give my employees a stipend or an increase on their hourly wages, but I can’t because the cost of everything has went up, and parents just can’t pay.”

After expenses — payroll, utilities, mortgage payments, food and supplies — Ms. Davis’s take-home pay is often around $2 an hour.

“You do not make a living doing child care,” she said. “Why do I do it? Because I love making a difference in a child’s life.”

Before the pandemic, Shineal Hunter, like her mother, grandmother and great-grandmother before her, worked in child care, running a center for 55 children in Philadelphia. It focused on caring for children with behavioral challenges and helping families find services like housing or food assistance.

After the pandemic, though, the business became unsustainable, with rising costs, inconsistent attendance and a staffing shortage.

With the expiration of the federal funding looming, she closed her center.

“It’s heartbreaking, that all the energy and effort that I’ve had for the last 15 years, the services provided in my community, those are gone,” she said. “I’m thinking of the children who are now going to fall between the cracks.”

She watches one child at her home, before and after school, and is working part-time as a therapist. But she would like to return to child care again, and is making plans to reopen.