During the pandemic, the chorus of voices calling child care an essential service was finally heard above the din. However, the unfortunate reality is that the child care business model was broken long before COVID-19 arrived. Poverty-level wages and unaffordable access for families have long been an accepted norm in our nation’s fragmented child care system.
Sweeping legislation under consideration could address the inequities that have plagued the sector for decades. But without careful implementation, Congress may be recreating a broken child care model and essentially slapping a Band-Aid on a gaping wound.
If Congress is going to make significant new investments, it’s critical that these resources address the real problem and provide sustainable solutions. Having led early childhood systems at the national and state level, we know that one fundamental issue must change before we find ourselves at the breaking point again: Child care providers must have enough money to pay teachers the wages they deserve without increasing the cost to parents.
While there are proposals to require programs to pay teachers more or offer wage bonuses, those will not fix the fundamental problem. Child care administrators who write teachers’ paychecks, frequently at women-owned small businesses, don’t have sufficient and reliable funding on which to base either a raise or a bonus. And requiring programs to pay higher wages could have the unintended consequence of forcing more programs out of business. Bonuses, another idea under consideration, fail to attract and retain talented workers. That’s why Walmart recently decided to move its historically awarded bonuses directly into wages.
To find solutions that will stabilize the child care market long-term, Congress must understand that a significant driver of child care’s high cost/low wage dichotomy is how money makes its way into programs. The federal government, through the Child Care and Development Block Grant Act, is the single biggest purchaser of care. Over 90% of the funds are distributed through certificates issued by states to qualifying families to subsidize their child care costs.
At issue is income unreliability. Child care providers are reimbursed for services; however, it is after they are delivered, leaving upfront and unexpected costs unaccounted for. Because the certificate follows the child, the provider loses income when a child exits a program. Profit margins for child care businesses are already slim. As a result, providers are reluctant to increase teacher pay for fear that if a few children withdraw from the program, they will lose the income and not have enough to cover payroll. Furthermore, for decades, the value of the certificates issued by states has been far below the actual cost to retain high-quality teachers and ensure quality child care.
Parents are maxed out. They cannot shoulder the costs of wage increases. Child care is already unaffordable for far too many families. For example, the average cost of care for infants in Washington, D.C., is already $24,000 per year. To make the business model work, providers are forced to offer extremely low wages for workers, averaging $11.65/hour nationally in 2019. With a workforce comprising 94% women, some researchers have argued that child care is subsidized in part by the low-paid work of women in the classroom.
The pandemic taught us that not only is child care essential, but maintaining reliable funding streams for child care providers and programs can make all the difference between a provider staying in business or being forced to close and lay off staff. The military offers perhaps the strongest model of where this has worked. The Department of Defense adopted a financing system that puts public funding directly into child care programs. Funds were used to pay teachers more while keeping parent fees down. Parents pay a portion of costs on a sliding-scale fee depending on their income level. This approach closes the gap between what parents can afford to pay and what the actual cost of quality care is, including improved wages.
It’s not too late to fix our nation’s child care system, but the policies Congress is considering do not provide the predictable income needed to sustain the increased wages for the workforce. Congress can build a new, more sustainable approach to child care through grants or contracts with child care programs and the American Rescue Plan Act’s child care stabilization grants to meet the shared goal of the Biden administration and Congress.
Child care providers are at a breaking point. Working parents are feeling the pain. Thoughtful solutions that target the root cause of the problem, a broken funding model, will give child care providers, teachers, parents, and children a shot at stability.
Linda K. Smith is the director of the Bipartisan Policy Center’s Early Childhood Initiative and the former director of the Office of Family Policy for the secretary of defense. Suzann Morris is a fellow at the Bipartisan Policy Center and the former Pennsylvania deputy secretary of the Office of Child Development and Early Learning.
