Anika Begay
When Kamala Harris chose Minnesota Gov. Tim Walz, a former teacher, as her running mate, experts noted that he could bring a renewed political focus on child care and early childhood. As governor, Walz expanded state child tax credits and created a paid family leave program. Walz also deployed funds to raise child care workers’ salaries and strengthen provider capacity. Harris is “doubling down” on child care, one expert said.
In the Harris administration’s national economic platform unveiled Friday, restoring expanded federal child tax credits, introduced during the COVID pandemic, is a key priority, and is tied to the financial strain many families with young children to care for are facing.
Describing the current economy as one in which “many families are spending more on cribs, diapers, car seats and more,” Harris proposed an expanded tax exemption of up to $6,000 for families with a newborn. Donald Trump’s running mate, J.D. Vance, also proposed nearly doubling the current child tax credit to $5,000 on CBS last Sunday.
One of the biggest expenses of all is child care support, and it’s not just a concern for government policymakers and candidates for public office. As companies try to sustain recent growth and anticipate long-term labor market tightening, child care policy is a concern for American employers. Child care is less affordable than ever for families across the economic spectrum, with costs 32% higher today than in 2019, according to research from Bank of America. Child care providers are seeing high costs for providing care, costs that are burdening families. Many parents are considering leaving the workforce given the economic situation, and parents are already missing work days when they’re left without access to child care.
According to a recent study by the Boston Consulting Group, only 12% of workers and only 6% of part-time and low-income workers have access to workplace child care benefits. The study found that for every dollar employers spend on child care, the company gets $4.25 in return on their investment. A 2019 study by the nonprofit arm of the world’s largest business lobby, the U.S. Chamber of Commerce, highlighted the importance of employer support for greater child care access.
Jessica Chang, founder of child care startup Upwards, which partners with employers including Amazon and the U.S. military to provide benefits, told Vscek that child care can no longer be considered just a social issue, but must also be considered an economic issue.
Challenges of supply and demand for childcare services
An upcoming Upwards study cites a paradox in the child care industry: both shortages and underutilization. Data from the U.S. Bureau of Labor Statistics shows that 51% of Americans live in areas with three children for every available child care spot, but only 11% of providers were at full capacity at any given time in 2023. Massive pandemic emergency spending has dried up, leaving the child care industry vulnerable, with low wages and a shrinking workforce.
Integrating child care benefits directly into the workplace can help connect workers with the services they need and help child care providers increase their capacity to serve more children and families.
“We just think, ‘Oh, this is really expensive, but what’s the cost if you don’t do it?'” Chang said. “We already know that the cost of replacing an employee can sometimes be four times their annual salary.”
In Upwards’ case studies, retention rates are five times higher for employees who receive child care benefits than for the average employee in the same workplace, which she says reinforces the argument that employers need to focus on the costs and lost benefits that result from not providing child care.
Over $100 billion lost every year
The U.S. economy is losing an estimated $122 billion in earnings, revenue, and productivity annually due to the early childhood care crisis. The cost to families, businesses, and taxpayers nearly doubled from 2018 to 2023. Businesses are also losing billions of dollars in talent recruitment and retention, according to a 2023 study by the national child care advocacy nonprofit ReadyNation.
According to ReadyNation, nearly 85% of parents who care for young children said that difficulties in obtaining child care have hindered their work efforts, and more than a quarter have been reprimanded while dealing with these difficulties. More than half of all parents of young children who face child care difficulties reported leaving early or late and missing work days.
“We all benefit when people who want to work have the opportunity to do so,” said Nancy Fishman, senior advisor at ReadyNation.
The challenges of childcare have a disproportionate effect on mothers, often referred to as the “motherhood penalty,” leading them to abandon the workforce in large numbers and remain there for years after having a child.
According to the latest “State of Motherhood Report,” 66 percent of women in the United States are considering leaving their jobs because of a lack of child care, an all-time high in the annual study. With rising child care costs, that percentage could rise.
The Upwards study finds a multiplier effect on the economic gains of allowing more women to remain in the workforce by supporting and subsidizing child care. It combines a woman’s average annual wage, employers’ absenteeism and production savings, and employers’ average savings in turnover costs, showing the massive impact that child care and working mothers have on the economy.
Government political obstacles
Harris’s goal of an expanded child tax credit won’t be easy. And it looks like getting all employers to provide child care subsidies will be another challenge. The Biden administration’s CHIPS Act, which subsidizes companies to set up semiconductor factories in the United States, required applicants for more than $150 million in funding to provide access to child care subsidies, a policy concept untested in the United States, though common abroad. Commerce Secretary Gina Raimondo has called the politicization of these subsidies in the United States “deeply misguided” and a net negative for the economy.
The Biden administration has repeatedly failed to pass an expanded child tax credit paired with corporate tax relief, even with early bipartisan support for the legislation. With all eyes on both prospective presidential administrations’ policies for working families, private and public actors have yet to resolve the debates over taxes and subsidies that have plagued previous efforts. Inaction and gridlock could continue, even as research shows that financial conditions for working parents with young children are not improving.
