EntreWorks Insights, April 2023: Our Childcare Crisis

Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

EntreWorks Insights

Volume 20, Number 1

April 2023

HIGHLIGHTS:     It’s About the Kids (and their Caregivers and their Communities)

                               What’s New at EntreWorks Consulting?

It’s About the Kids (and their Caregivers and their Communities))

For American businesses and their home communities, there is no bigger issue today than talent.  Because of the pandemic’s impacts and massive demographic shifts, businesses around the US (and the world) are struggling to find talented employees, managers, and leaders.  This is likely to be our dominant economic development challenge over the next decade.  

This demographic drought has many causes. Baby boomers are retiring, birthrates are declining, and poor working conditions in many fields hamper recruitment and retention.   We are responding in multiple ways with various experiments related to training, education, job quality, job design and the like.  These efforts should continue, but we also need to aggressively address problem areas that have direct impacts in reducing labor force participation.  Childcare needs to be at the top of this list.

Let’s not sugarcoat it.  We are in the midst of a childcare crisis.  Care costs too much, and the quality of care is often poor.  Kids suffer as a result, as do their parents and caregivers. These effects ripple into the wider community and economy.  Lack of affordable childcare forces parents to scramble every day and keeps many caregivers out of the workforce. 

The economic impacts of this crisis are profound.  According to Ready Nation, a business advocacy group, the childcare/toddler care crisis may be costing the US as much as $122 billion in lost earnings, productivity, and revenue every year.  Eighty-five percent of prime caregivers report that childcare problems impede their commitment to work. According to 2022 data from McKinsey, 35% of working moms and 20% of working fathers who left work during the pandemic did so due to childcare cost and availability issues.

This economic toll is not theoretical, as any parent or caregiver can tell you. The basic task of finding childcare is tough, especially for the 51% of Americans who live in “childcare deserts,” defined as areas where there are more than 3 children under age 5 for every licensed childcare slot. In rural America, 60% of people live in childcare deserts.

If you can find childcare, good luck paying for it!  Ready Nation estimates average childcare costs at around $5,500 per year. This number seems low to me.  A 2018 study here in Arlington VA found that the average family with two children could pay as much as $42,000 per year for childcare. In all cases, this is serious money.  In fact, annual childcare costs typically exceed the cost of in-state college tuition.  For many working families, childcare is their number one household expense.

These are longstanding problems that we have chosen to ignore. But, as the talent wars heat up, it’s time to face reality. Robust and affordable childcare services are essential infrastructure for any community that seeks to attract and retain a talented workforce.  Better childcare will be a lifeline for families, but it will do even more.  It will help spur economic growth, improve educational outcomes for children, and improve the lives of parents and caregivers. Frankly, the arguments for doing this are so strong it seems ridiculous that we haven’t acted already.

Fortunately, it seems like some regions are finally getting the message. In many cases, corporate leaders are stepping up and investing in improved in-house childcare.  But, more comprehensive solutions are needed and this will likely require action and investment from state and local governments.  Thanks to American Rescue Plan Act (ARPA) funding, many states invested in childcare stabilizations programs that addressed some of the core challenges facing the industry, such as low wages and business/operational challenges for providers.  For example, in Virginia, grants were used to help providers increase pay, improve training, purchase equipment, pay rent, and many other uses.

These grants were a lifeline, but they are a temporary fix. Many regions are now embracing more long-term solutions. In Nebraska, the Community for Kids effort works with counties across the state to improve local access to child care.  New Mexico can rightly be considered a national model on this front. In 2022, residents approved a constitutional amendment to guarantee a right to early childhood education and to provide a stream of funding (around $150 million per year) to ensure childcare availability for all.

While it’s still too early to assess results from New Mexico, this type of bold action is going to be needed in other regions, too. Federal action may also be forthcoming as several related bills have been introduced in Congress.  For example, the recently introduced Child Care for Every Community Act would provide expanded federal supports for local childcare services.  While the bill faces many obstacles to passage, its introduction is a hopeful sign.  Investing in childcare is not only a smart economic development decision, it’s the right to do as well!

What’s New at EntreWorks Consulting?

As Spring continues its march, we’re busy and engaged on many interesting projects.  Current work includes an evaluation of the Southern Virginia RISE Collaborative and a capital access assessment for the North Central Pennsylvania Regional Planning and Development Commission.  We’re also continuing to support the multiyear Building Resilient Economies in Coal Communities (BRECC) initiative, led by the National Association of Counties. Thanks to these projects and other work, Erik Pages of EntreWorks Consulting is back on the road.  Look for me in Roanoke VA (April 12), Bristol TN/VA (June 6-9), and at the Rural RISE Summit in Waterville, ME on June 22. Finally, Erik will also be teaching the IEDC Entrepreneurship and Small Business training course on May 3-4 (virtually) and will be in person teaching part of UNC-Chapel Hill Basic Economic Development Course on August 3rd.

You can find reports and other great resources at our website; we encourage you to check it out. The website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  In addition, you can still access blog updates at our Facebook and LinkedIn pages.  We look forward to connecting in person in 2023.