Unlock the economic power of national child care

In April 2021, we argued on these pages that the lack of national child care policy amounted to a national emergency. We pointed out that all 50 states fail the definition of child care affordability established in 2016 by the Department of Health and Human Services. We reported that surveys have repeatedly identified child care costs as the top reason Americans are having fewer children, driving birth rates to a record low and threatening the nation’s demographic and economic future. We wrote that child care duties fall disproportionately on mothers and that the COVID pandemic had pushed women’s workforce participation to a 33-year low, leading to a severe “shecession.”

A month before our column ran, President Biden signed the American Rescue Plan (ARP) into law, which allocated $24 billion in support to child care providers as part of the policy effort to strengthen the post-COVID recovery. The funding kept tens of thousands of child care providers open, providing care to millions of American children. 

Over the next 18 months, women returned to the labor force in droves. In February of this year, the number of women in the U.S. workforce surpassed the pre-pandemic high for the first time, and in June the share of working-age women 25 to 54 in the workforce hit a record high of 77.8 percent, helping to power much of the economy’s recent momentum.

Unfortunately, that remarkable progress is suddenly in jeopardy. The ARP’s child care support ended on Sept. 30, threatening the continued existence of a third of the nation’s child care centers and quality care for more than 3 million American children. Many child care providers have already begun to lay off workers and raise fees to make up for the lost federal funding. Without affordable care, many women will be forced to be scale back at work or quit altogether.

In response, the Biden administration recently asked Congress for $16 billion in additional child care support as part of a $56 billion supplemental request to fund a number of domestic priorities. The funding would be distributed to all 50 states and would provide a year of additional funding for more than 225,000 child care providers throughout the country.

Congress should approve the additional funding immediately.

The reality is that without government support, the child care business model simply doesn’t work. Quality reliable care is hard to find, industry workers are notoriously underpaid, and costs are exorbitant, surpassing the cost of housing, college tuition, transportation, food, and health care for most families. As Treasury Secretary Janet Yellen has declared: “The free market works well in many sectors, but child care is not one of them. It does not work for the caregivers. It does not work for the parents. It does not work for the kids. Child care is a textbook example of a broken market.”

Most developed countries heavily subsidize child care and early education, recognizing their value in supporting families and enabling parents to participate in the workforce. A global outlier, the United States is the only industrialized nation with no national child care policy, leaving it to families to struggle and improvise on their own. 

This national deficiency is particularly puzzling given the staggering costs to the nation associated with the lack of child care policy, and the compelling educational and economic benefits of child care and early education. According to a study released in February by the Council for a Strong America, the lack of adequate child care currently costs American families $78 billion each year, businesses another $23 billion, while government tax revenues are reduced by $21 billion — for a total annual cost of $122 billion, double the national loss estimated in 2018.

By stark contrast, research by economist James Heckman, Nobel laureate and director of the Center for the Economics of Human Development at the University of Chicago, has shown that high-quality birth-to-5 child care programs deliver a 13 percent per child annual return on investment through better outcomes in education, health, social behaviors and employment, reduced taxpayer costs, and preparing the country’s workforce for a competitive future. 

As members of a Commission on Childcare and Women’s Entrepreneurship organized by United Women’s Empowerment (WE) in Kansas City, Mo., we recently had the opportunity to tour the North Kansas City Schools Early Education Center in in Gladstone, Mo. The 120,000-square-foot facility — previously a Hobby Lobby and Price Chopper — is divided into seven beautifully designed learning “neighborhoods” with four to six classrooms each along wide hallways filled with book nooks and activities stations. The center serves 900 early learners every day, from newborns to 5-year-olds, and is funded by an “it takes a village” combination of successful bond referendums, philanthropic support, and tuition paid by participating families of greater means.

Walking around the remarkable facility, we looked at each other: “Why can’t every county in America have one of these?”

At its most basic level, public policy is a choice. Nations choose to fund and make happen what they value. Want to see first-class roads, bridges, and rail travel — visit Germany, Japan or Singapore. Want to see what universal health care and paid family leave is like — visit any of the more than 70 nations around the world that have chosen to provide both.

American families, women and children — and taxpayers — deserve a national commitment to quality and affordable child care. And we know what works. Support from the American Rescue Plan Act reduced childhood poverty, brought solutions to a broken marketplace, and enabled millions of women to return to the workforce. As policymakers continue to debate longer-term solutions, the key parameters of meaningful reform include: 1) making quality child care truly affordable, especially for low-income families; 2) ensuring high-quality and reliable care; 3) increasing the supply and range of child care alternatives by incentivizing the development of new and innovative child care solutions; and, 4) improving the economic circumstances of child care workers, many of whom are women of color who make less than the minimum wage.

In the meantime, Congress should immediately pass the $16 billion needed to preserve and build on the critical and hard-won progress achieved to date.

Leslie Lynn Smith is the founder and principal of Themis Strategic Partners, a consulting firm focused on the intersection of equity and growth, and a member of the board of the Center for American Entrepreneurship (CAE). John R. Dearie is the president of CAE.