When reliable child care is unavailable, parents may miss work, lose their jobs or leave the workforce altogether. The consequences extend beyond family finances, affecting employers and taxpayers as well. The crisis has deepened in recent years: According to a ReadyNation study, inadequate infant and toddler care is costing the U.S. economy an estimated $122 billion each year.
The report estimates that parents bear more than $5,500 in annual costs when they cannot secure sufficient care — more than $78 billion nationwide. Businesses lose an average of $1,640 per working parent through lost revenue and hiring expenses, adding up to $23 billion a year. Government agencies also lose roughly $21 billion in annual income and sales tax revenue, or about $1,470 per working parent, because families with inadequate care earn less and spend less in their communities.
“We did this four years ago, and it’s bad. We did it now and it’s worse, and absent any real policy solutions to the child care crisis, this is just going to go on and on,” said Sandra Bishop, chief research officer at the bipartisan nonprofit Council for a Stronger America, which includes ReadyNation and two other organizations.
The latest estimate is more than twice the $57 billion in annual economic losses identified by the same study in 2018.
“We found that the impacts were more widespread and more severe,” Bishop said. More parents reported that child care problems were disrupting their work, including what she described as a roughly twofold increase in the number who said they had been fired, along with a rise in those who quit.
Bishop said the $122 billion figure is likely a “gross underestimate.” The analysis focused only on parents with children younger than 3, even though families commonly face child care challenges well beyond that age.
The report found that 85% of primary caregivers said child care difficulties had reduced their work hours or productivity. Within the previous three months, 64% said they had arrived late to work, 58% had missed an entire day and 53% had been distracted on the job. The impact also changed parents’ employment decisions: 33% moved from full-time to part-time work, 26% quit a job and 23% said they had been fired because of child care problems.
The findings come as the U.S. continues to contend with a labor shortage. More than 11 million jobs were open at the end of last year, while quit rates remained above pre-pandemic levels. Many employers are still struggling to find qualified workers.
Contec Inc., a manufacturing company in Spartanburg, South Carolina, has experienced that challenge firsthand. The company has faced persistent worker shortages and has lost employees because they could not find suitable child care.
“If they need to go to a different shift which would enable them to take care of their children when nobody’s home, we’ll certainly make those accommodations,” said founder and CEO Jack McBride. He added that the company has told employees who left because of child care issues that their positions would be held if they can later find the help they need — a reflection of how urgently Contec needs workers.
Demand for Contec’s cleaning and disinfectant products stayed strong throughout the pandemic. With more employees, the company could increase sales, but for now it is paying current workers “a ton” of overtime. McBride said he would welcome a child care partnership with other businesses, although operating an onsite center alone would not make financial sense for his company.
Contec is preparing to introduce three months of child care leave for both parents this summer. The benefit is intended to give new parents time to bond with their children while helping cover expenses during the earliest months. McBride has also been working in Spartanburg to raise awareness of the importance of early childhood education.
As child care costs continue to pressure families, more employers are offering pre-tax dependent care spending accounts. World at Work, a human resources association that surveyed more than 800 organizations of various sizes, reported a 6% increase in these plans from 2021 to last year. Most employers do not contribute directly, keeping costs relatively low for companies. Still, the tax benefit can help families, although the accounts were capped at $5,000 in 2022 — below the median cost of child care.
World at Work data also show that 49% of employers provide child care resources and referrals. Only 10% offer onsite or near-site centers, up from 7% in 2016 but down from a 12% peak in 2020 and 2021. Just 9% provide child care subsidies or discounts, a share that has changed little since 2016.
The problem is especially difficult for small businesses. In one survey, more than half of small-business owners said their employees faced child care challenges during the pandemic, while 80% supported congressional action to expand access to affordable care.
Child care centers and home-based providers across the country have yet to return to pre-pandemic levels. Meanwhile, federal funding that helped stabilize the industry during the height of the pandemic is scheduled to begin expiring later this year. Experts and business owners worry that the change could drive even more child care workers out of the field.
The U.S. spends about $2,400 per child from infancy through age 5 on early education and care. By comparison, European Union countries spend an average of nearly $4,700, while some invest three times as much.
“From a business standpoint, I look at this as a long term competitive problem,” McBride said. “We don’t have a culture of education that exists in some of these other countries. Long-term we’re going to face a problem being competitive as a nation.”
