The child care sector was struggling long before COVID-19 hit, and experts say the pressures caused by the virus are continuing to chip away at its fragile foundation – despite hopes the crisis might actually prompt improvement.

To better understand what’s behind and ahead, Beth Mattingly of the Federal Reserve Bank of Boston teamed up with Jess Carson from the Carsey School of Public Policy at the University of New Hampshire to address the pandemic’s impact on this vulnerable sector.

The challenges they see include new guidelines that stretch already thin profit margins, worsening staff shortages, and mounting costs that have forced some providers to permanently close and threaten those that survive.

When the crisis started, some experts hoped it was a wake-up call for policymakers about the importance of accessible and affordable child care to a fully functioning economy. Some solutions were floated to address the sector’s chronic problems, but Carson noted nothing concrete has happened.

“I'm a believer in put your money where your mouth is, and I don't see any money,” said Carson, a researcher at the Carsey School.

Four major concerns are ahead for providers and parents

Mattingly and Carson outlined the state of the sector in a publication co-released by the Boston Fed and the Carsey School, and in subsequent interviews. They see four major concerns for parents and providers as the economy reopens.

1. Uneven access to government assistance and loans. Federal and state money was available to help providers outlast the pandemic, but it wasn’t universally accessible, so providers who were highly skilled at securing funds may have gotten more assistance. In addition, states had different rules about tapping funding sources, so funding distribution may not have been uniform nationally.
2. Worsening staff shortages. The combination of low pay and demanding work is a constant obstacle to staff retention in child care, and the pandemic could be making things tougher. Some workers may not have been willing to wait for centers to reopen and may have moved on to new jobs. Others have their own children, and as many schools open remotely, may choose to stay home because they can’t afford the child care they’d need to return to work. Finally, older workers, who are more vulnerable to the virus, may feel unsafe returning.
3. Accrued costs are pushing center-based programs to the brink. Expenses like rent and utilities kept mounting, even when centers were closed. Meanwhile, additional expenses were added, including required new protective equipment for staff or making changes to facility configurations to support social distancing rules. The thin reserves at many centers may have been depleted even before children returned.
4. Continuing and potentially fatal pressures on centers that survived. Even providers that have emerged intact from the worst of the lockdowns still face tough and expensive sanitation guidelines they must follow to remain open. And they must fund these measures even as revenues drop due to new regulations that cut the number of students per classroom.

Mattingly and Carson: The answer is more public funding, but the dollars haven’t come

While the supply of formal child care has been diminished by the virus, Mattingly and Carson note that post-pandemic demand is also uncertain. For instance, many parents today are working from home, and if that continues at similar levels, overall demand for formal child care could drop. Persistent higher unemployment could also drive down demand. But they add that if the unemployment rate starts to fall toward pre-pandemic levels, it’s likely that demand will rise again and supply will be insufficient.

As the battered sector works to find a way forward, Mattingly and Carson said the solution for child care remains obvious – an increased investment of public tax dollars, similar to how school is funded in grades K-12.

Carson said the price tag may be scaring people, but that’s a case of being “penny-wise and pound foolish.” The long-term benefits of healthy child care sector and its link to a healthy and just economy are clearer than ever during the pandemic, she said.

Mattingly added, “We know how to fix childcare, people have been studying this for years. There’s one way, and that’s with more money. Without increased investment, the sector is at risk.”