Employers are improving their childcare benefits, but it’s not nearly enough to stop the ongoing crisis

Last June, Gina Forbes handed over the keys to the building that housed the Roots and Fruits Preschool and permanently shuttered the childcare program. 

She’s one of tens of thousands of childcare providers who have closed their doors since the start of the pandemic.

“Both of my children were loved and nurtured there, and I myself had found my passion and career at Roots and Fruits Preschool. Yet, I and the members of the board could not, in good faith, run a program with such uncertainty about the financial sustainability of the organization,” Forbes said Wednesday during a congressional hearing. 

Forbes’s experience isn’t unique; childcare operators across the country have faced a whole host of challenges, from higher operating costs to hiring staff. Since the pandemic hit in 2020, open jobs for childcare workers have been up 15%, and employee pay has jumped into the $18 per hour range, according to a recent report released by Emsi Burning Glass. In 2019, the average childcare worker earned less than $12 per hour.

In order to make the necessary hires, Forbes said that the only way forward would be to raise wages, but then she would have had to pass on those costs to families who were already struggling to pay for childcare. That wasn’t a sustainable option, she said. Since closing, she found a job as a part-time preschool teacher and opened a consulting business.

“Every day, I ask myself if I can continue to afford to teach or if I need to remove myself from the workforce to care for our young child. This is far from an ideal scenario for me, and places undue stress on my whole family,” Forbes said. She added that the current crisis was not created by the pandemic, but it was significantly exacerbated by it.

Nearly 16,000 providers across the U.S. have permanently closed, and that scarcity—along with higher operating costs—have driven up the price of childcare. In 2020, the national annual average price increased 5% to $10,174 per child annually, according to Child Care Aware of America.

And while there’s been some federal and state funding provided throughout the pandemic, government support is only one piece of the puzzle. Employers need to step up as well—especially since the lack of childcare is keeping many parents out of the workforce and driving up competition for new hires. By some estimates, the childcare crisis costs the U.S. $57 billion per year in lost earnings, productivity, and revenue.

Moreover, pandemic-related disruptions to childcare have cost parents with young children under 5 roughly $13 billion per year in lost income since 2020, according to a recent analysis released by the Century Foundation, a progressive think tank. Mothers, who are in the prime working years of their lives (ages 25 to 54), are much more likely to quit their jobs when their children are young than fathers, according to a recent report from the Federal Reserve Bank of St. Louis.

Companies are making good on plans to expand care benefits

Employers are working on putting more care benefits in place. Last year, about 50% of HR professionals surveyed reported their companies planned to offer or expand childcare benefits, according to Care.com’s Future of Benefits report released on Thursday. The 2022 survey found that 56% of employers report they offer some form of childcare benefits. 

“Employees are demanding that employers offer care benefits,” says Natalie Mayslich, general manager of Care.com’s consumer and enterprise operations. “Investing in care benefits is now table stakes for many employers. In order to stay competitive in recruiting and retaining employees, companies will need to continue to up their game in this area,” Mayslich argues. 

“There was a concern that this was going to be a bit of a pandemic fad, but what we’re seeing is there is a fundamental shift in how employees view benefits and how employers need to adjust the benefits that they offer in order to provide a competitive environment,” Mayslich says. 

By offering these benefits, Mayslich says, not only can they potentially hire from a broader slice of workers who need childcare in order to work, but there’s a direct correlation between meeting employees’ care needs and employee retention: “If companies are not making adjustments, they need to wake up, look around, and listen, because it’s imperative.”

And that’s not going to change, even as the pandemic winds down, she adds. “The reality is there is no going back for our employers.” Care benefits have a huge impact on talent recruitment, retention, and productivity, and that will continue to be the case even as the labor market eases.

Current employer benefits are not enough

Yet the definition of childcare benefits runs the spectrum, from providing paid maternity and/or paternity leave of any duration to offering caregiver days to building and running on-site childcare programs. And many companies don’t offer benefits that are comprehensive enough to actually curb the current childcare crisis. 

About 10% of workers surveyed by the Harris poll on behalf of Fortune last month reported their current employer offered childcare assistance. The same number, 10%, also said their company offered caregiver days. 

During his State of the Union address Tuesday night, President Joe Biden again highlighted the need for a system that ensures childcare workers are being paid fairly without making programs unaffordable for the average American family. Previously, the Build Back Better plan was set to help provide much-needed support for both families with young children and childcare providers, but the legislative package remains stalled in Congress.

To change the standard of living for hardworking Americans, Biden said the federal government needs to cut the cost of childcare. “Folks, if you live in a major city in America, you pay up to $14,000 a year for childcare per child,” he said. “My plan would cut the cost in half for most families and help parents, including millions of women, who left the workforce during the pandemic because they couldn’t afford childcare, to be able to get back to work,” Biden said. 

And that, in turn, could generate economic growth. In the end, it’s likely going to take comprehensive responses from both the public and private sectors to help solve this $57 billion problem.

“The time is now to invest in childcare providers and families, so that we can build a better, stronger, and more equitable economy,” Rep. James Clyburn (D-S.C.) said during Wednesday’s hearing. “When we support American families and invest in the professionals who help to care for our nation’s children, we are making an investment in both our present and our future.”

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