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Childcare Challenges

How childcare challenges are impacting the current labor market

April 7, 2022 by Cassondra Martinez

The current childcare dilemma is two-pronged. First, childcare facilities are struggling to fully staff their centers with qualified employees. This staffing problem directly affects the number of children they can serve. In addition, child care expenses can undercut the economic benefits of returning to work, especially for lower-wage workers. Ultimately, employers who offer creative solutions will recruit and retain top talent despite the childcare challenges these employees face. 

Childcare challenges

The childcare challenges experienced by centers, families, and providers are defined by a low supply of childcare workers, cost inflation for both staff and services, and a persistent shortage of affordable childcare options for families. This has created a dilemma where working parents must choose between accepting a job that can’t accommodate their schedules or paying high costs in order to access quality childcare. 

breakdown of regional and national hourly wages

Childcare workers are at ground zero of the problem we face nationally regarding the shortage of workers for jobs that pay less than $20/hr. Since early 2020, postings for childcare workers are up 15%, and pay rates have crept up into the high $18/hr range, according to Emsi Burning Glass job posting data. Without workers, childcare options are harder for parents to find. In addition, childcare becomes more expensive as these centers pass their labor costs on to their clients. 

These increased costs wipe out earnings for many lower-wage workers. It simply costs more for care than many workers can afford. For example, an employee making $7.25/hr (the national minimum wage) earns gross wages of $2,511 per month. The national average monthly cost for full-time care at a daycare center is $1,324 per month. With two infants, that price quickly rises above the total income of said employee. This means some lower-wage workers simply cannot afford to return to work. To illustrate further, for a single parent with 2 children paying housing and food costs, hourly pay would need to be well north of $22-25/hr after taxes.  

breakdown of national cost for childcare

A report by Child Care Aware sheds light on average annual household expenses by region. The data shows that child care costs exceed housing costs in three out of four regions of the US. With families spending upwards of 20% of their annual income on childcare, it’s clear that the cost of childcare is a huge factor to consider when deciding where to work (or whether to work at all).  

How childcare challenges are contributing to labor market issues

Previous research by Emsi Burning Glass, The Demographic Drought, shed light on the grim implications of living below a replacement level of a 2.1 total fertility rate. Millions of people are absent from the labor force because they were never born. It is clear that we have a lack of people problem coupled with a low labor force participation rate. Compounding this problem is a lack of affordable childcare. In short, we need people to have babies, but when they do they struggle with the availability and affordability of childcare, resulting in fewer parents being able to work, or at least it making less financial sense to work. Eddie Beaver, research team lead at Allegis Group states, “Soaring daycare costs, not enough workers, and fewer operating daycares mean our labor force recovery remains behind schedule and employers will continue to struggle to hire”. 

adverse labor market due to lack of childcare graphpic

What can employers do to offset childcare challenges for employees?

Employers can help with some creativity. One approach is for employers to partner with their local organizations and/or other employers to fully fund daycare centers. This approach would combat the issue from both ends: availability and costs associated with daycare. On the other hand, offering flexible hours and remote work opportunities allow parents to determine the best arrangement for their family. Overall, addressing childcare challenges parents face can help bring numerous people back into the labor force.

text quote graphic reading "Childcare and the lack thereof has become a major pain point for working parents and has been exacerbated due to the lasting impact of COVID-19. With so much uncertainty still ahead, the best and most attractive employers are supporting their working parents like never before. This type of empathetic leadership and support of their working parents is what is needed to help ease the burden of childcare for their employees. Employers are offering flexible schedules, remote and hybrid options, child care assistance, and more to ensure they attract and retain a diverse, family-friendly workforce. The Mom Project is committed to connecting our community of over 500,000 moms to those companies that value working moms in the workplace." Chandra Sanders, The Mom Project

Some staffing agencies are specializing in only advertising postings from employers that offer comprehensive benefits packages as well as flexible work options. One agency, The Mom Project, connects talented professionals with employers who understand that no one should have to choose between family and career. Chandra Sanders, Director of RISE at the Mom Project, shared how the Mom Project is connecting over 500,000 moms to companies that value working moms in the workplace. 

Ultimately, everyone has to do their part to combat the challenges that working families face in regard to childcare costs and availability. Employers and communities can work together to form creative solutions for childcare challenges that families face. This could result in more parents getting back into the workforce, increasing the US labor force participation rate. We dive into childcare challenges and the overall labor market challenges we are facing in The Demographic Drought: Bridging the Gap in our Labor Force. 

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Cassondra Martinez

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