Can employers play a larger role in solving the nation’s child care crisis? Can employers play a larger role in solving the nation’s child care crisis?

Child care woes a drag on the economy, but business leaders are seeing the benefits of helping Child care woes a drag on the economy, but business leaders are seeing the benefits of helping

March 20, 2024

The child care crisis has historically revolved around a few key players: those trying to access care, those who provide it, and those that regulate it and supply funding. But another party is getting deeper into the mix: employers.

Some business associations and public policy groups have been pushing the idea that employers can play an important and far bigger role in increasing access to high-quality child care. And they say that greater involvement could be motivated by self-interest, since research indicates inadequate child care costs employers billions annually by limiting their worker pool, reducing employee productivity, and fueling turnover.

Sarah Savage, a child care expert at the Federal Reserve Bank of Boston, said no one expects employers to cover the billions in funding, services, and infrastructure that those in the field say the sector needs.

But she said employers could make a major impact by helping subsidize or supply child care for workers. Employers can also be powerful advocates for addressing the market failure that plagues the sector, she added.

“I don't think that level of systemic change is going to be possible without employers,” Savage said.

Data indicate inadequate child care brings huge costs to employers

The child care sector’s weaknesses were broadly exposed during the pandemic-era lockdowns, as providers shut down, people couldn’t work as much – or at all, and employers felt the pain. President Biden eventually proposed a $225 billion package to revamp the sector, but it didn’t pass.

Savage said inadequate child care hasn’t traditionally been seen as a big employer issue, but statistics indicate it should be:

The need for and potential benefits of increased employer involvement in child care have been studied and promoted by business associations like the U.S. Chamber of Commerce, the National Association of Manufacturers, and the Massachusetts Business Coalition for Early Childhood Education. It’s also a focus of policy groups like the Massachusetts Taxpayer Association.

Savage said high-quality, accessible child care should be seen as another critical piece of the infrastructure that employees need to get to work.

“I think it’s fair to liken it to good roads or reliable public transit for your employees,” she said.

But what, specifically, can employers do?

Savage: No cure-all exists, but some solutions have shown promise

Savage said there is no “one-size-fits-all” child care solution for employers, due to varying individual worker and industry needs. But employers have shown they can still do plenty.

For instance, they can help with benefits like supplying “backup care” on days when an employee’s regular care is unavailable. They can also offer stipends or allow workers to set aside tax-free dollars to pay for child care, Savage said. Remote work and flexible schedules may enable employees to better balance child care and work. And some larger companies offer onsite care. That comes with significant complexities and liabilities, but a federal tax credit is designed to help.

Some states, meanwhile, are doing more to incentivize employers to help cover child care costs:

  • The “MI Tri-Share” pilot program in Michigan shares child care-costs between the employer, the employee, and the state.
  • A new business incentive grant in Iowa allows employers to purchase child care slots for employees at local child care providers.
  • A tax-incentive package in Kansas grants businesses a tax credit for providing child care or helping their employees pay for or access child care.

At the Boston Fed, Savage is leading analysis of a broad, Bank-conducted parent survey that sought to gather information about child care that employers would find relevant. The Bank followed up the survey by co-sponsoring two regional events that targeted business leaders: A “Policy and Practice Solutions for Addressing Child Care Shortages” conference in Maine, and a discussion with business leaders in New Hampshire called “Ideas for Supporting Child Care Solutions.”

Such events can give employers a voice in reforms while helping them see what’s at stake, Savage said.

“I feel like it’s kind of a win-win,” she said. “They’ll see the benefits for their own workers if they act now, and the workforce at large could also benefit if employers become invested in larger reforms that need to happen.”

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