Lack of childcare costs families, businesses and taxpayers $122 billion: study

If parents can’t find adequate childcare, they may miss work, get laid off, or choose to leave the workforce altogether — all of which not only impacts how much money families make, but also costs businesses and taxpayers. And the situation has gotten worse in recent years. According to the ReadyNation study, the economy is losing an estimated $122 billion a year.

The report found that not having childcare — or adequate childcare — costs individual parents more than $5,500 a year, or more than $78 billion in total. And businesses lose an average of $1,640 for each working parent due to lost revenue and hiring costs due to inadequate childcare, totaling $23 billion annually. And the government loses, too — about $21 billion in lost revenue and sales tax each year, or $1,470 less per working parent because parents without adequate childcare earn less and therefore consume less in their communities.

“We did this four years ago, and it’s bad. We’ve done it now, and it’s even worse, and unless there are real policy solutions to the childcare crisis, this will go on and on,” said Sandra Bishop, chief research officer for the bipartisan nonprofit Council for a Stronger America, which includes three organizations, including ReadyNation.

The $122 billion in losses is more than double what the same study found in 2018, when the economy lost $57 billion a year due to the childcare crisis.

“We found that the effects were more widespread and more severe,” Bishop said of the latest results. “More parents reported the negative impact on their work and in some cases dramatic – I think twice as many people were laid off, more people quit.”

She also called the estimated losses a “gross underestimation” because it only looked at the challenges faced by parents with children under the age of three, while parents have problems with childcare well beyond that age group.

The report found that 85% of primary care providers said childcare challenges are reducing their work hours or productivity, with 64% saying this has caused them to be late for work in the past three months. A majority – 58% – reported missing a full working day; while 53% reported being distracted at work. Childcare has even impacted how many and if parents work: 33% moved from full-time to part-time, while 26% of parents reported leaving their jobs due to childcare issues and a further 23% reported being laid off.

This is because the United States is facing a persistent labor shortage. At the end of last year there were more than 11 million vacancies. Smoking cessation remains above pre-pandemic levels. For many companies, finding qualified personnel remains one of the biggest challenges.

For the production company Contec Inc. in Spartanburg, South Carolina, a staff shortage has been an ongoing challenge — and the company has lost employees to childcare.

“If they need to move to a different service that allows them to take care of their kids when no one is home, we will definitely make those adjustments,” founder and CEO Jack McBride said of the challenges. He said they have also told people who have had to leave because of childcare that they will keep their positions if they find help because they so desperately need workers.

Demand for the company’s cleaning and disinfection products remained high during the pandemic. Having enough employees to meet that demand would mean more sales, but right now they’re paying their existing employees “a ton” of overtime instead. McBride welcomed partnering with other companies to provide childcare, but the cost-benefit ratio for on-site childcare doesn’t make sense for his company alone.

Wat Contel Inc. does have in the works is the implementation of three months of parental leave for both parents starting this summer, which will help new parents bond while covering early expenses. He has also worked in Spartanburg to educate on the importance of early childhood education.

As families grapple with the cost of child care, a growing number of employers have begun providing pre-tax care expenses. Last year saw a 6% increase from 2021, according to HR organization World at Work, which surveyed more than 800 organizations of all sizes. However, most don’t contribute directly to such accounts, so the cost to businesses is quite low. The tax savings from such bills can be a big help, but they were limited to $5,000 in 2022, below the median cost of child care.

A growing number — 49% — are offering childcare resources and referrals to employees, according to data from World at Work. Only 10% of childcare centers offered on-site or nearby – up from 7% in 2016, but down from the peak of 12% in 2020 and 2021. Only 9% offer grants or discounts – which is virtually unchanged since 2016.

For smaller companies, childcare for employees is an even bigger challenge. A survey found that more than half of small business owners said their employees faced childcare challenges during the pandemic, and 80% of small business owners supported congressional intervention to address the improve access to affordable care.

Across the country, the number of daycare centers and home care options have not returned to pre-pandemic levels. And the federal money meant to stabilize the system at the height of the pandemic expires later this year. Experts and business owners are concerned that this will lead to more workers leaving the field.

The United States spends about $2,400 per baby through age 5 on early childhood education and child care, while countries in the European Union spend nearly double that at $4,700 on average, with some countries spending three times that.

“From a business standpoint, I view this as a long-term competitive issue,” said McBride. “We don’t have a culture of education that exists in some of these other countries. In the long run, we’re going to have a problem being competitive as a nation.”

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