When Kamala Harris chose Minnesota Governor Tim Walz, a former teacher, as her running mate, experts noted she could bring a revitalized policy focus on child and early childhood care. As governor, Walz expanded the state’s child tax credit and built a paid family leave program. Walz also distributed funds to boost the wages of early childhood care professionals and build provider capacity. Harris “doubled down” on child care, experts say.
In the national economic platform announced by the Harris administration on Friday, restoring the federal child tax credit that was expanded during the Covid pandemic is a top priority, and is related to the financial stress that many families with young children are facing.
Describing the current economy as one in which “many family expenses are the highest – with cribs, diapers, car seats and more,” Harris proposed increasing tax relief up to $6,000 for families with babies. JD Vance, Donald Trump’s running mate, also proposed nearly doubling the current child tax credit to $5,000 on CBS last Sunday.
One of the biggest costs is child care support, and this is not just an issue for policy makers and potential officials. As companies look to sustain new growth and stay ahead of long-term tightness in the labor market, child-care policies are a concern for American employers. Child care is less accessible than ever for families across the economic spectrum, with costs 32% higher than in 2019, according to Bank of America research. Child care centers see the high costs of providing care – costs that pile up on families. Many parents are considering leaving the workforce due to the economy, and parents have missed days of work when left without access to child care centers.
According to a recent Boston Consulting Group study, only 12% of workers, and only 6% of part-time and low-income workers, have access to workplace child care benefits. The study found that for every dollar an employer spends on child care, the company gets $4.25 in return on investment. Research conducted in 2019 by the nonprofit arm of the largest business lobby, the US Chamber of Commerce, underscores the importance of employer support for greater child care access.
Jessica Chang, founder of childcare startup Upwards, which works with employers including Amazon and the US Army to offer benefits, told CNBC that childcare can’t just be seen as a social issue — it should be seen as an economic one.
Child supply and demand challenges
A forthcoming study from Upwards addresses a paradox in the childcare sector: shortages and underutilisation. Data from the US Bureau of Labor Statistics show that 51% of Americans live in areas where there are three children for every available child care space, but only 11% of providers will have full capacity at any given time in 2023. Major pandemic emergency investments have run out. and leaving the childcare industry vulnerable, with low wages and a shrinking workforce.
Directly displaying child care benefits in the workplace can help connect workers to the services they need, and help child care providers increase their capacity to serve more children and families.
“We just thought, ‘Oh, it’s expensive, but what’s the cost if you don’t do it?’ Chang said. “We already know that the cost of replacing an employee can sometimes be as much as four times their annual salary.”
In the Upwards case study, retention rates were five times higher for employees who used childcare benefits than the average employee in the same workplace, which said employers should focus on the costs, and profits, of not providing for children. take care
More than $100 billion is lost every year
An estimated $122 billion is lost annually by the U.S. economy in earnings, revenue, and productivity as a result of the child care crisis. The cost to families, businesses, and taxpayers nearly doubled from 2018 to 2023. Companies also lost billions related to talent recruitment and retention, according to a 2023 study from the national childcare advocacy nonprofit ReadyNation.
According to ReadyNation, nearly 85% of primary caregiving parents say the challenges of affording childcare hinder their work efforts, and more than a quarter have been reprimanded when faced with these challenges. More than half of all parents of young children are faced with the challenge of caring for children, negotiating leaving early or late, and missing work days.
“We all benefit when people who want to work have the ability to work,” said Nancy Fishman, ReadyNation’s senior advisor.
There is a disproportionate effect of childcare challenges on mothers, often referred to as the “motherhood penalty,” which causes them to drop out of the labor force in large numbers and stay out of it for years after having children.
According to the latest “State of Motherhood Report,” 66% of women in the U.S. are considering leaving the workplace because of a lack of childcare, the highest in the annual study. As childcare costs rise, this proportion is likely to rise.
The Upwards study found a multiplier effect of the economic benefits of allowing more women to stay in the workforce by supporting and subsidizing childcare. It combines the average annual salary of women, the absenteeism and productivity savings of employers, and the average turnover cost savings of employers, showing the large number of childcare, and working mothers in the economy.
government policy barriers
Harris’ goal of an expanded child tax credit won’t be easy. And it seems that taking all employers on board with providing child care benefits will present another challenge. The Biden administration’s CHIPS Act, which subsidizes companies to set up semiconductor facilities in the US, requires applicants for funding of more than $150 million to provide access to child care benefits, a policy concept that has not previously been tested in the US, although it is common overseas. . Commerce Secretary Gina Raimondo called the politicization of these benefits in the US “very misguided” and negative for the economy.
The Biden administration has repeatedly failed to pass an expanded child tax credit coupled with business tax breaks, despite initial bipartisan support for the legislation. As all eyes are on potential presidential administration policies for working families, private and public actors have yet to resolve the tax and subsidy debate that plagued previous efforts. Inaction and gridlock may continue, even though research shows that the financial situation for working parents with young children is not improving.