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America’s childcare crisis has real consequences for employers

March 4, 2022, 2:30 PM UTC

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Good morning, Broadsheet readers! Employers are expanding childcare benefits, the daughters of Russia’s elite take their protests to social media, and a new study shows how inadequate access to daycare service affects employers. Have a great Friday!

Fortune leadership editor Ruth Umoh here, filling in for Emma.

Let’s talk about daycare’s domino effect.

The U.S. childcare sector is a relatively small industry, with a market size estimated to be about $54.3 billion. But its unique challenges are rippling across the entire labor market, and making hiring more difficult and expensive for all industries.

That’s according to a new report by Wells Fargo analyzing how the reduction of child daycare services affects working parents and, more broadly, businesses. 

Employers are currently facing one of the toughest hiring markets in decades as work force participation declines. Consider this: despite soaring consumer spending and an economic rebound, the U.S. labor force has nearly 900,000 less workers today compared to the start of the pandemic.

While daycare services haven’t been immune to widespread staffing shortages, the pandemic has laid bare the industry’s importance to the U.S. workforce, particularly in facilitating employment among women.

“Parents are being forced to find alternative arrangements and, for many, that means they’re not coming back into the job market,” Sarah House, senior economist at Wells Fargo, tells Fortune. “Of course, that’s coming at a time when employers are struggling like never before to find workers.”

The childcare deficit has very real consequences for businesses, who not only have fewer workers to draw from in the present, but also face a future of dismal labor supply growth. It also affects employers’ ability to hire experienced workers—and at what cost—resulting in a potential loss of productivity and a drop in gender diversity. Moreover, House says, companies are “missing out on sales and business opportunities altogether because they can’t find enough staff and because parents, in turn, can’t find reliable, consistent care.”

As we’ve come to expect when the topic of caregiving rears its head, the availability of daycare services and its exorbitant cost have a gendered impact, strong-arming mothers into career breaks that can be costly in future earnings and retirement savings. The labor force participation rate for women with children under age six is 28 percentage points lower than for men with children under six, and 10 percentage points lower than women with school-age children. In fact, if the participation rate of mothers with young children was raised to match the participation rate of women with school-age children—never mind that of men—roughly 1 million more workers would be in the labor force today, according to the Wells Fargo report.

House notes that the tradeoff between paycheck and childcare also contributes to a lower fertility rate, which weighs on employers’ future labor pool and customer base. “If you think about how fast the economy can grow over time, it’s ultimately a function of productivity growth as well as labor,” she says. “If you’re not seeing labor supply grow as quickly and you have a given productivity rate, you either have to raise labor force participation or you’re going to see slower growth over time.”

Still, employers aren’t without recourse to address an inadequate and often unaffordable childcare system. “They need to recognize that given the limited childcare options, parents with young children will need some flexibility in their scheduling and where they work,” House says. 

Employers should also be more forgiving of resume gaps and understand that women are largely the ones to take time out of the labor market to care for young children. “Make sure they’re not penalized for that, and help bring them back into the workforce by updating their skills,” House says.

Emma will be back in your inboxes on Monday. Have a great weekend!

Ruth Umoh
ruth.umoh@fortune.com
@ruthumohnews

The Broadsheet is Fortune’s newsletter for and about the world’s most powerful women. Subscribe here.

ALSO IN THE HEADLINES

- A helping hand. Employers are offering and expanding childcare benefits as part of their recruitment and retention strategy. But that’s not enough, writes Fortune’s Megan Leohnardt. Childcare assistance ranges from paid parental leave to building on-site childcare programs, and many companies simply don’t offer comprehensive enough benefits to curb the childcare crisis. Fortune

- Acquitted. Brett Hankison, the only officer to be charged for the fatal police raid on Breonna Taylor’s apartment, was found not guilty on three counts of wanton endangerment on Thursday. Hankison had been charged with endangering Taylor’s neighbors by firing bullets into their home during the botched operation. Associated Press

- What women want. A Gallup study delves into what U.S. employees want from their next jobs, and it spotlights some meaningful differences along gender lines. Just over half of women say diversity and inclusion is very important to them when considering a new job vs. one in three men. And at 66%, greater work-life balance topped the list for what women considered most important in a new job, vs. men’s No. 1: compensation. Washington Post

- Image overhaul. In a Thursday call with investors, Victoria's Secret CEO Martin Waters said there’s been a surge in mail from customers, mostly men, who disapprove of the company’s branding shift away from scantily clad, racy models. Female customers, however, have responded well to the rebrand so far. Insider

- Title sponsor. Hologic, a medical device and diagnostics company focused on women’s health, has signed a multiyear deal to sponsor the Women’s Tennis Association. The women’s tennis tour has been without a title sponsor since 2010 when its previous title sponsorship with Sony Ericsson ended. New York Times

- Infrastructure. Siemens' CEO, Barbara Humpton, is expected to announce at an event with President Joe Biden on Friday that the technology firm is investing roughly $50 million to expand domestic production in the U.S., a source tells Fortune

MOVERS AND SHAKERS: Heather von Zuben is exiting Goldman Sachs to become a senior managing director at Blackstone. Netflix has promoted Marian Lee to CMO, replacing Bozoma Saint John. “The Daily” podcast has a new host in Sabrina Tavernise.

IN CASE YOU MISSED IT

- Family ties. The daughters of Russia’s elite, many of whom comprise Putin’s inner circle, are using Instagram to slam the country’s invasion of Ukraine. Sofia Abramovich, the 26-year-old daughter of Chelsea FC owner Roman Abramovich, said in an Instagram story that the “rhetoric of Russia wanting war was Kremlin propaganda.” Fortune

- Tricky exit. Shell’s incoming CFO, Sinead Gorman, will face a host of issues, including navigating its exit from joint ventures with Russian energy giant Gazprom. Shell holds a 27.5% stake in Sakhalin-2, an offshore gas project in Russia, as well as three other projects in the country. Gorman will succeed Jessica Uhl on April 1. Wall Street Journal

- Do as you wish. The Supreme Court cleared the way for Kentucky’s Republican attorney general to intervene and defend a controversial state abortion law that had been abandoned by another government official. Per CNBC, “the ruling dealt with the technical aspects of the legal battle over Kentucky’s law, rather than the merits of the statute itself.” Still, abortion rights supporters say it could lead to the resurrection of a law that further limits when women can terminate pregnancies. CNBC

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PARTING WORDS

“I’m guided by what I’m really outraged about and what I think I can actually try to influence. And it may be that I can only influence things one case at a time, but ultimately, the plan is always to try and improve the system.”

Human rights attorney Amal Clooney on how she selects her cases.

This is the web version of The Broadsheet, a daily newsletter for and about the world’s most powerful women. Sign up to get it delivered free to your inbox.