How a Lack of Child Care Affects Small Businesses


This story was originally published by The 19th.

During her nearly eight years in business, Dawn Kelly watched again and again as staff left their jobs at The Nourish Spot, the smoothie joints she owns in Queens and Brooklyn, because they couldn’t find good child care.

Sometimes it was because the care was too expensive, or parents thought there were no quality options for their kids. Whatever the reason, it created retention issues for the small business — issues that Kelly has had to ponder as she considers expanding.

“We’ve not necessarily been able to hire all of the people that we want to hire, because their [child care] hours don’t allow them to work when we need them to work,” Kelly said.

Most of her staff of 10 are single parents who are managing the chaos of a child care system in disrepair, where costs are too high for most. Kelly empathizes: Years ago she was a single mom in corporate America, grateful for an employer that provided care on-site. But as a small business owner, it’s not something she has the capital to afford.

“I feel for them. I try to work around their schedules because I’ve been in their shoes before,” Kelly said. “It’s important that our legislators understand that and make it easier for us to do business and make it easier for us to hire community residents, no matter what their station is.”

In a new survey published Thursday, more than a third of small business owners say that the lack of child care in their communities is preventing them from operating or expanding their business. The survey was produced by Goldman Sachs’ 10,000 Small Businesses Voices program, which advocates for small business owners. The data was first shared exclusively with The 19th.

Goldman Sachs polled 1,259 business owners in 47 states, Puerto Rico and Washington, D.C. in mid-April about their thoughts on child care and its effect on their companies. Nearly 60 percent said there aren’t sufficient high-quality and affordable options in their communities, which is affecting their workforce. About 35 percent of those owners said that a lack of day care slots, as well as their high cost, is forcing employees to cut hours or forgo work entirely.

Another poll earlier this year by the Small Business Majority, an advocacy organization with 85,000 members, had similar findings: A third have lost revenue and earnings because of employees’ child care challenges. About half have seen lower productivity. A quarter of owners said they had to shut down their business because of their own child care challenges.

Particularly since the start of the pandemic, there has been a “groundswell” of employees talking more openly about their struggles with child care, and of employers being more actively engaged on the issue, said Sarah Rittling, the executive director of the First Five Years Fund, an early childhood education advocacy group.

The cost of child care has been rising for years — typically outpacing inflation annually. In 2023, child care cost families $11,582 on average, according to Child Care Aware, a national advocacy organization. That is roughly 10 percent of a married couple’s median income and 32 percent of the median income of a single parent.

Small business owners told Goldman Sachs they’d like to see government support for improving their options. As many as 77 percent would support an increase in federal funding for child care. Past polling has led to similar findings, with small business owners across the political spectrum calling for more federal funding.

Many day cares and home-based child cares are also small businesses that typically operate on microscopic profit margins. Federal funding that could improve their sustainability would support other businesses, said Jen Legere, founder and owner of A Place to Grow, a child care center with three locations in New Hampshire and one in North Carolina. Legere has been working with the Department of Labor to establish the first child care director apprenticeship program.

“Child care is the workforce behind the workforce,” Legere said. “Until we really start to support that child care workforce and increase the level of professionalism across our workforce and create career pathways for them, we are not going to be able to grow more child care centers and to increase capacity across the United States — and then support our businesses.”

Some small business owners are willing to be part of the solution. According to the survey, 62 percent said that if they were able to provide a child care benefit at work, it would have a positive effect on talent recruitment and retention. To help do that, 70 percent said they would support legislation to increase the business tax credit designed to help small businesses that provide care.

Currently, the federal government allows businesses to get up to $150,000 back on their taxes for providing child care for their employees. But owners surveyed said they’d support increasing that amount to $500,000 — a proposal currently on the table in Congress. That bipartisan bill, known as the Child Care Investment Act, would expand the tax credit for the first time since 2001.

The way the credit currently works, a business has to spend $1 million to get the maximum $150,000 tax credit. Under the new bill, the refund would rise as high as $500,000. A small business would get back even more — up to $600,000. Businesses that spend less than $1 million would get more money back as well, a refund of up to 60 percent instead of 25 percent.

Rep. Salud Carbajal, the California Democrat who co-sponsored the legislation with Oregon Republican Rep. Lori Chavez-DeRemer, said the idea came out of roundtables with small business owners conducted in 2022. When asked what the top issue affecting the future of their business was, many said child care.

“I came back with my team and we scoured the child care tax policy area and it became abundantly clear early on that the child care [business] tax credit framework that already exists is a good one, it just needs to be modernized and updated,” Carbajal said.

The bill will also allow small business owners to jointly create child care centers — and still benefit from the credit, a provision not in the current law.

Setting up a new provider could take hundreds of thousands of dollars, something difficult for a single mom-and-pop business. But if all the shops in an area — like a strip mall or a business development district — worked together, that could be a community solution, Carbajal said.

Legere has already benefited from partnering with businesses to provide care. For the past three years, A Place To Grow has partnered with Harmony Home, an assisted-living facility for senior citizens in New Hampshire. Legere’s company manages a small child care center on the property. Harmony Home’s employees can put their children in care on site, and it’s also open to members of the community.

That has solved some of the big challenges she faced with establishing new day care centers. Each time, it has taken her about two years to amass the capital and find the real estate. The promise of business partnerships is that they could increase the overall supply of day cares, instead of trying to find more room in an overcrowded system. Day care closures in the past four years have limited the number of slots available to kids across the country. Waitlists are often years long. Businesses that have tried to offer child care benefits have typically either created an in-house provider or contracted with a local day care. But because there are not enough spots to begin with, other members of the community may lose out. Creating new options helps both groups.

“We need to build partnerships that bring us all together to solve this problem collaboratively,” Legere said. “Businesses keep pointing at child care and [saying], ‘You need to grow.’ We can’t grow without you. You have to help us and support us.”

The Child Care Investment Act has more than three dozen co-sponsors — 31 Democrats and six Republicans — and the endorsement of the U.S. Chamber of Commerce. The bill was introduced last July and likely won’t pass this year, but Carbajal said it has been picking up support and could be included in a tax package expected to go before Congress in 2025.

“It’s an economic issue for our economy, for businesses to be able to thrive. They can’t hire. They can’t retain. They can’t expand,” he said. “I think what this does is really provide some really important tools to be able to succeed more and address a major challenge that now everybody recognizes.”

For years, child care was treated as a fringe topic that was rarely part of the national economic discourse. But its impact on the ability of parents, especially mothers, to participate in the labor force has finally received more attention.

In 2020, at the start of the pandemic, more women exited the labor force than men, a phenomenon that had never occurred in American history. Part of the reason was that child care options disappeared. Many women were forced to quit their jobs to care for their children.

Today, lost work, productivity and tax revenue due to child care challenges costs the U.S. economy an estimated $122 billion a year, according to the Council for a Stronger America, a bipartisan nonprofit of law enforcement and business leaders focused on family policy. Businesses lose $23 billion annually because of lost revenue or hiring costs caused by losing working parents over insufficient care. The U.S. government loses about $21 billion in income and sales tax because parents without child care access typically earn less — and spend less.

It’s an issue small business owners want candidates to discuss this election year. About 55 percent of those surveyed by Goldman Sachs said it has not been sufficiently addressed on the campaign trail. A May poll by the First Five Years Fund found that a whopping 89 percent of voters want candidates to have a plan for helping parents afford high-quality child care, including 80 percent of Republicans, 88 percent of Independents and 99 percent of Democrats.

A presidential debate next week will offer a first test as to whether candidates are listening.

Moms First, an advocacy organization that pushes for child care and other family policies, is circulating a petition asking CNN to ask President Joe Biden and former President Donald Trump about child care at the June 27 debate. “It’s time for our leaders to make bold commitments to moms across the country, and fixing the broken child care system is just the beginning,” the organization wrote.

Kelly, however, is skeptical. “I really haven’t heard any candidates talking about child care at all,” she said. “Child care is inherently important to the fabric of our nation, and it’s not just for small businesses. We should want our families to be protected and covered and placed in environments where they will excel — and that starts with our babies.”



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