The Covid-19 pandemic worsened a child care crisis, and it’s costing U.S. businesses billions

The Covid-19 pandemic brought to the surface both cracks and resilience in the American economy, with child care taking center stage as day cares shuttered, schools went remote and parents attempted to juggle their children with their jobs.

While employment in the child care sector has made a post-pandemic return to baseline, according to the latest data from the Bureau of Labor Statistics, a shortage of workers and available slots for children in some areas is weighing on the sector.

Costs are also going up for families. A February report from Bank of America showed costs for families increased between 15% and nearly 30% in terms of the average child care payment per household, year on year, during the fourth quarter of 2023. The largest increase was seen among households with average incomes of between $100,000 and $250,000 annually.

Policy advocates argue that child care, including for infants and toddlers, is an economic issue that affects all Americans, not just those with young kids.

Billions in stabilization funds from the American Rescue Plan Act earmarked for the child care sector expired last fall, which could lead to increased costs for families or centers closing their doors.

ReadyNation, an advocacy group of more than 2,000 business executives, lobbies in support of policies and programs at both state and federal levels that support a strong workforce and economy, including child care.

The group released a report in 2023 that found the nation’s infant-toddler child care crisis costs the U.S. an estimated $122 billion in lost earnings, productivity and revenue every year. That is up from $57 billion in 2018, before the pandemic exposed and exacerbated holes in the system for working families and the companies that rely on them.

ReadyNation’s study found a combination of “Covid-19 and insufficient policy action have now significantly worsened the crisis.”

“All taxpayers are impacted by this. We need to realize that the loss of taxpayers is $1,470 every year per working parent because of lower income taxes being paid and lower sales taxes because of lack of purchasing power from people that are unemployed,” said Nancy Fishman, national director of ReadyNation.

Part of the nationwide solution is supporting what the group calls the “workforce behind the workforce” — early child care providers.

“Supporting the early childhood workforce could include such things as making sure child care providers have access to benefits. We all know how much benefits matter, whether it’s health-care benefits, or the ability for them to find high-quality child care for their own children,” Fishman told CNBC. “Programs that support additional training and education for child care providers are important as well.”

In California alone, the economic toll including lost earnings, productivity and revenue is an estimated $17 billion, ReadyNation projects. That is higher than any other state in the country, according to the group’s estimates.

While child care jobs in the state have rebounded to a 2020 baseline as of this spring, according to analysis from the Center for the Study of Child Care Employment, other states have seen larger job gains post-pandemic.

Some child care workers in California organized in 2019, with the Child Care Providers United, which today represents more than 40,000 home-based licensed and license-exempt, friends and family, child care providers. The providers are a part of the state subsidy program in California, and the union is a partnership of SEIU Locals 99 and 521, as well as UDW/AFSCME Local 3930.

The group won its first contract in 2021 and gained access to first-in-the-nation retirement benefits.

The union says child care providers currently get reimbursed at a percentage of what it costs them to provide care in the state. Average child care provider pay is $7 to $10 an hour, with many providers reporting no take-home pay, it said.

Providers are currently advocating through the state budget process to be reimbursed for the full cost of providing care to create more dignity in their work, keep providers open and attract new providers to the workforce.

Deborah Corley-Marzett operates an in-home center for subsidized care in Bakersfield, California. She told CNBC she would like to hire more staff to help support her and the children, but it is difficult to find the right fit and offer competing wages in this environment. Low-wage workers in the state’s fast-food sector, for example, just secured a historic $20 an hour minimum wage, pressuring other sectors to keep up.

“I have a staff shortage problem. I literally can’t afford to hire someone to come in and work in the mornings with me right now. I can’t afford it,” Corley-Marzett said. “I don’t have enough children right now. But I can’t physically take on any more children.”

Lawmakers argue progress has been made, but there is more work to do. State Senator Nancy Skinner, a Democrat representing parts of the Bay Area and chair of the California Women’s Caucus, said the group continues to prioritize early child care and education. The group advocated for a $2 billion increase in the state’s spending over the course of the past two years toward early care and education, for a total of $6.5 billion.

The Caucus’ current focus is maintaining steady rate reimbursement rates for child care providers as the state stares down a budget deficit.

“We have low unemployment, but many sectors of the economy are looking for workers,” Skinner told CNBC. “If your family is in a situation where you can’t go to work because you don’t have adequate child care, or you can’t afford child care, then you cannot fulfill that job that’s sitting there, vacant and waiting for you.”