Does a struggling child care sector hurt employers? Some research indicates expensive, inaccessible child care costs employers billions by causing worker absenteeism, loss of productivity, and a diminished talent pool.

In this episode, Federal Reserve Bank of Boston senior policy analyst Sarah Savage discusses the case to get employers more involved in child care, and why they haven’t been a big part of the conversation before. She also talks about the impact employers could make, what they can’t be expected to do, and what employers are already doing to try to ease the child care burden on their employees.

JAY LINDSAY:

Hi, I’m Jay Lindsay, and I'm your host today on Six Hundred Atlantic. Today, we're talking to my colleague Sarah Savage about the child care crisis. And, at the top, it’s probably a good idea to define what we mean by the “child care crisis.”

So, I’ll be as brief as I can. It’s really the fact that child care is so inaccessible or expensive that people either can’t find it, or they have real trouble paying for it. Some parents struggle through, some work less than they would, and some can’t work at all because it just doesn’t make financial sense.

All this is fueled by a vicious cycle of the high costs for parents and notoriously low pay for teachers. It’s very tough for child care providers to give teachers more money, because the sector is mostly parent-funded. They’d have to charge parents more, and the parents are already stretched thin. So, there’s extremely high teacher turnover, quality suffers, and a status quo persists that really nobody is happy with.

Now, Sarah and the Fed pay a lot of attention to child care for a simple reason: Access to child care affects people's ability to work, and that obviously has huge implications for the economy.

Today, we're going to be talking about the child care crisis as a business issue. People often think about it as an issue for families or working parents only, but because this really is a business issue, there's another group getting deeper into the mix, employers. And here's the question: Should employers be doing more to alleviate this crisis? It's a big topic, so thanks for taking time with us today, Sarah.

SARAH SAVAGE:

Thanks, Jay.       

JAY LINDSAY:

Let's start with a fundamental question. The people struggling to pay for care or schedule work around care, most of these people are employees of somewhere. So, this issue, it really seems like it always has had an impact on employers. Why haven't employers been seen as a bigger part of this mix before?

SARAH SAVAGE:

I think one of the biggest reasons is that while women are in the workforce in large numbers, they're here to stay, we haven't seen employers keeping up with that in terms of their response to the reality, that in many two-parent families, one person cannot necessarily stay home with a child, let alone the number of single-parent families that we have.

JAY LINDSAY:

So, it really wasn't an employer issue maybe decades and decades ago, and that's why it hasn't been, and we haven't adjusted to the reality that it really is. Is that correct?

SARAH SAVAGE:

I believe that is partly the case. It was seen as a family issue. Families could take care of this by having, potentially, like I said, one parent stay at home with a child. In today's economy and for the economy for I would say decades now, it isn't necessarily possible if you are in a two-parent family to have only one parent working. The reality is that if both parents have to work, the idea of one parent staying home with a child isn't necessarily feasible. So, if that's the new reality, how do we better support that?

JAY LINDSAY:

One point you've made, and others have made, is that child care reform is ultimately a matter of self-interest for employers. It benefits them. Why is that? What are some of the costs of inadequate child care, because I know the research says it can cost employers billions of dollars a year.

SARAH SAVAGE:

There are a number of ways this can cost employers, whether it's reduced productivity, absenteeism, the inability to recruit and retain talent. And then I think even things that are much harder to measure, just around advancement or who doesn't do something, who doesn't pursue something because of a child care issue and being unable to fully meet a child care issue. Even if somebody uses child care, are they using the amount that they actually need? Are they using what they need to participate fully in the economy?

JAY LINDSAY:

Do you think employers, and it's maybe a silly question in a sense, but do you think employers know how important child care is? We've talked about how maybe we aren't used to thinking about employers in the mix. Do you think that they know how important it is for their businesses at this point?

SARAH SAVAGE:

I think it varies. I think some employers may not necessarily know how big of an issue it is for their workers, but it's hard to ignore what we learned during the pandemic because that was so public when we saw stories of parents leaving the labor force or trying to juggle things at home during shutdowns. It became so visible. If you had asked that question before the pandemic, my answer would be different. But at this point, even if employers vertically within their organization might not be as aware of how big of a challenge it may be for their workers, I think on a more public level, societal level, it's pretty obvious now.

JAY LINDSAY:

You’ve said something before that I think is interesting, you’ve said child care should really be seen as part of the workforce infrastructure. Can you talk about what you mean by that?

SARAH SAVAGE:

Of course, we know the importance of needing roads and public transit to get to work, but we also, many of us, many with caregiving needs also need a place for their children. And this is really obvious to say, but I don't think we consider child care as much as a part of the workforce infrastructure as we do some of those other more obvious things like roads and bridges and public transit. And we need to start thinking of child care in the same way because there are parents that will not be able to show up to work, they will not be in the labor force because of this. And that's a choice that we're making as a society to either recognize that this is a critical infrastructure or not, and how we decide to solve this problem is a reflection of how much we acknowledge that or not.

JAY LINDSAY:

Well, what can employers really do? We know that no one's really asking them to supply the billions of dollars it would take to maybe solve the child care crisis. So, what can they do to step in and really make a difference on this issue?

SARAH SAVAGE:

You have to take in occupation and industry into consideration because one size certainly does not fit all. There are some employers that can't necessarily be as flexible with hours or remote work. And so, figuring out what their workers need within the context of what an employer can and can't do, I think would be a first step. And then there's such a range of what employers could do from … on one end, you have informational resources. There are turnkey solutions that can try to gather information about providers in a particular area and make that available to their employees, to something on the other extreme, like onsite child care.

And then so many things in between, whether it's stipends to help cover costs. I think there's a real value in having a group of employers to talk about, What's the potential? How are you thinking about return on investment in a particular effort? How are you doing that? Because we want to do something similar, and we don't know where to begin. To have other employers to, I think, share about potential solutions is really valuable.

JAY LINDSAY:

We're asking employers to do more, but I think we probably do need to acknowledge there's some limitations, don't we?

SARAH SAVAGE:

A hundred percent. So, there are gaps. Those that aren't attached to the labor market, how do employer efforts help them? So, that is a concern, and figuring out how to manage that gap is important. That's important to surface and acknowledge that.

JAY LINDSAY:

Let's talk about a few things that we know that employers are involved with now, specifically examples I'm going to give that have to do with funding. We've seen some things like this model in Michigan where an employer and employee and the state share costs, and I know there's other examples like that out there. Can you talk about what's being done, what's working right now, or what has some promise?

SARAH SAVAGE:

Absolutely. I think these are real innovations. Michigan, Kentucky, the state of New York, all have these public-private partnerships in different stages of pilots, and the idea is for employees and employers and the state to contribute to the costs of covering child care. And, theoretically, I think they make a lot of sense because they're splitting the cost, they're bringing in new funding. They could potentially alleviate some funding constraints on providers as well. I think it's a bit too soon to tell what is the real potential of this? What is the real scalability potential for this? But it's interesting to see these innovations. I think public private partnerships, they potentially hold a lot of promise, and I think it also could lead to more innovations around what employers can do in this space.

JAY LINDSAY:

I know you've talked about a possibly important role for employers as a voice in this debate, the voice for this push for major reform that people have been after really for decades. It's a ton of money. The public largely hasn't bought into large-scale reform yet. How could employers make a difference in this debate?

SARAH SAVAGE:

Lending their voices to change, I think is a pretty major way they can get involved as advocates. I think also once they try efforts themselves, that gets them involved. There's no unknowing, there's no unlearning what you learn once you actually do something around child care with your workers. But I have to say, I think the funding source is less important than acknowledging it can't continue to be funded the way it's funded. It's primarily through parents paying tuition, and that doesn't work. And that's also essentially subsidized through child care workers' low wages. That model doesn't work. How can this be solved and not continuing to put it on both parents and child care workers to solve?

JAY LINDSAY:

Because it's simply not enough, right?

SARAH SAVAGE:

It's not, yeah.

JAY LINDSAY:

We know that the child care crisis has gotten a lot more attention now than it did before COVID because of the pandemic. And I'm wondering, is that momentum carried through? Is there pressure where employers might step in here?

SARAH SAVAGE:

Right. I mean, I think we saw a lot of momentum for federal change, especially given how tight the labor market was in the recovery.

There was unprecedented funding for child care in Build Back Better, but it didn't pass, as we all know. And I think that was a moment when, okay, if nothing is going to happen at the federal level, something needs to happen. And the private sector is an opportunity, just like we have employer-sponsored health insurance. There was a real business case for health insurance. It was a major way to recruit and retain workers at the time. And so, fast-forward, and again, the business case for doing something around child care is much clearer now.

We had this big effort that had momentum, potential federal legislation that had momentum. It didn't pass, and now we're again seeing, well, what could the private sector do? What can states do? But also we're seeing things like the CHIPS Act that passed. It's federal funds for semiconductor manufacturers, and it includes a stipulation for offering affordable, quality child care to workers in exchange for pursuing those federal funds. So that's the federal government signaling that they see there's potential for the private sector to do something in this space. So, I think the timing is right.

JAY LINDSAY:

We've talked about limitations employers have, but we also talked about potential. And I'm wondering if you can characterize it in any way how important, how big of a player they can actually be if they really were to become a lot more involved in this issue?

SARAH SAVAGE:

Again, I keep thinking of the role that employers have in health insurance. We've seen what can happen when the private sector gets involved in supporting things that workers need to show up to work, and this is one of those things. So, I think there's incredible potential there.

I think taking the learning from how employers have sponsored, the different ways in which employers have sponsored other needs that their workers have, we just need to lean into that to figure out what's the potential for them getting involved in child care. What are the different options to try to entice employers to do something here and to make it beneficial to them and worthwhile to them as well?

JAY LINDSAY:

Great. Well, that's all I've got, Sarah. It's an important issue. It's good stuff here. I really thank you for joining us.

SARAH SAVAGE:

Yeah, thanks for having me.

JAY LINDSAY:

So, check out our website for more on everything discussed today. In fact, I spoke to Sarah for an article on this very topic, and you can find it on bostonfed.org. And please visit bostonfed.org/sixhundredatlantic. You can check out other interviews as well as our podcast seasons.

And while you're there, we would love it if you would subscribe to our email list to stay informed of upcoming episodes. And we'd really, really love it if you would rate, review, share, and subscribe to Six Hundred Atlantic on your favorite podcast app. Five-star reviews only, please. I'm Jay Lindsay signing off another episode of Six Hundred Atlantic. Thanks for listening.