Comment: End of pandemic child-care aid will expose huge problem

By Sarah Green Carmichael / Bloomberg Opinion

Pandemic-era subsidies propping up U.S. child-care providers expire on Sept. 30. About 3 million children could lose their spots, leading some to call this a “child-care cliff.” Women’s participation in the labor force, which is at an all-time high, may fall right off with it.

Instead of a sharp, sudden drop, it’s more likely to be a protracted slide that extends the pain. So rather than an immediate economic disruption of the kind that demands policy action, here’s how my Bloomberg Opinion colleague Kathryn Edwards describes the coming fallout: “Families will internalize the cost of child care the way they have for years: by having fewer children and working less.” For employers, the “working less” part of the equation should ring an alarm bell.

Although there are plenty of policies the government could offer to shore up the U.S. child-care system, employers shouldn’t expect the cavalry to come to their rescue. Yes, the U.S. has long accepted that children over the age of 5 have a right to attend a government-funded school — with government-funded transportation — but for kids under 5, care is the employee’s problem, which means it’s the employer’s problem.

Day care has been a long-standing headache in the United States. A 2018 analysis by the Center for American Progress found that 83 percent of parents with kids under 5 agreed that “finding quality, affordable daycare was a serious problem” where they lived, and that half the country lived in a child-care “desert.” In these deserts, the maternal labor force participation rate was 3 percentage points lower. And despite pandemic-era government help, there are still fewer day-care employees now than before covid struck. These jobs simply don’t pay enough to attract and retain workers.

Despite the low earnings of day-care workers, for parents, costs can easily eat up 20 percent of a household’s income, far more than the 7 percent threshold for what the federal government deems affordable. It can take years to get off the wait-list for full-time care, and even when you get it, care can be unreliable. Also, quality can vary widely, as the recent death of a toddler from fentanyl at a Bronx day care — which had just passed a surprise inspection — makes horrifyingly clear.

Many large employers offer some assistance with child care, but much more is needed. The most common benefit, offered by 59 percent of employers according to the Society of Human Resource Management, is a flexible spending account for dependent care. These programs allow workers to pay for care with pretax dollars but is not as valuable as it might seem. Dependent care FSAs are capped at $5,000 year, a level set in 1986 when the annual cost of care for a toddler was about $3,300. Today, the annual cost is closer to $14,000 and can easily be higher in major cities.

Some employers go further, offering workers a child-care subsidy. Others will help arrange backup care, often through an agency. Both are valuable, but they fall short of addressing the other big problem parents face: Getting their kids a regular spot with a reliable, high-quality provider. Thus, perhaps the most valuable benefit is for employers to offer day care close to the workplace. Yet only about 6 percent offered on-site or “near-site” child care in 2022, according to SHRM.

I understand the reticence: Opening a day-care center is expensive. And the benefit helps employees in a particular phase of their lives; only about 11 percent of workers are parents of a child under the age of 5 (although perhaps this number would be larger if care were easier to find). And yet there are benefits to offering on-site care, which might be the only viable solution for employees whose jobs require odd hours, such as airport workers.

And for employers pushing strict return-to-office policies, on-site care could be a powerful magnet for young parents; precisely the group of workers most resistant to returning. Clothing company Patagonia offers child care at its headquarters, and although it has a three-day-a- week in-office requirement, parents who use the day care tend to show up all five days. Patagonia has also noticed a 25 percent lower turnover rate among workers who used the benefit.

In a tight talent market, generous child-care benefits can be a differentiator. A recent McKinsey survey found that among job-hunting moms with kids under the age of 5, 69 percent said they’d be more likely to choose an employer that offered on-site day care or financial assistance for child care. And over 80 percent of both men and women told the consultancy that child-care benefits would be an important factor in their decision to stay with their existing employer. There’s no need for companies to shoulder the burden for building, staffing and populating a day-care center on their own: When Cisco Systems discovered it had extra spots at its San Jose day care, it offered them to employees nearby at Adobe.

After working moms got hammered by day care and school closures early in the pandemic, a combination of day care and school reopenings and the flowering of remote, flexible work helped spur the highest-ever workforce participation rate for women with kids. It would be shortsighted to shove that progress off a cliff.

Sarah Green Carmichael is a Bloomberg Opinion editor. Previously, she was managing editor of ideas and commentary at Barron’s and an executive editor at Harvard Business Review.