Understanding America’s Labor Shortage: The Scarce and Costly Childcare Issue

The struggle to find childcare that many parents currently face is also a major concern for the business community. Businesses and policymakers are paying close attention to our nation’s child care situation because a robust child care system supports a healthy workforce and economy.

In the wake of the COVID-19 pandemic, the scarcity and high cost of childcare has become even worse and is a significant factor in the ongoing worker shortage crisis, as childcare interruptions prevent parents from returning to work.

To help make sense of childcare’s impact on the workforce, our Data Deep Dive: A Decline of Women in the Workforce examines data on women in the workforce and childcare interruptions.

The Child Care Economy

The child care industry is a critical point for the American economy. Not only does the sector generate its own economic output, but as childcare ensures that working parents can go to work, the industry also acts as a support for every other industry. In other words, when the childcare industry is strong, it boosts other sectors as well.

Unfortunately, even before the COVID-19 pandemic, the child care system in this country was in need of serious attention and reform. There has long been a shortage of accessible and affordable child care centers in the US, meaning that many working parents have been left without the support system they need to go to work each day.

In the past two years, the pandemic has only magnified this issue with 16,000 childcare centers closing forced to close their doors, and many suppliers who have to work at limited capacity.

Collapses in the childcare industry affect families, business and the economy in many ways:

  • Parents struggle to find quality childcare and to balance caring for children at home with work

  • Children miss out on educational opportunities and social interactions

  • Child care providers are fighting to stay open

  • National, state and local economies are blowing millions, if not billions of dollars, as the industry struggles to fully support the workforce.

The nationwide worker shortage crisis has also taken a toll on the childcare industry. Before the pandemic there were 920,000 workers in the childcare sector. Child care employment fell by more than 30% at the height of the pandemic and is still 7% lower today.

The impact on working parents—especially women

The challenges that plague childcare too disproportionately affect women, who make up a super-majority of the child care workforce, 40% of whom are women of color.

As providers have reduced capacity and hours over the past two years, many parents have been forced to leave work to care for their children. According to a US Chamber of Commerce Foundation study, 58% of working parents reported leaving work because they could not find childcare solutions that met their needs. Furthermore, 32% of women cited the need to be at home to care for family members as a barrier to returning to work.

The childcare barrier is one reason why the US currently has six million unemployed workers and counting1.4 million marginally connected workers. It also prevents many parents from returning to work. Dropping out of the workforce to care for children greatly disadvantages women, often in the form of lower wages and missed promotions.

An expensive problem

In 2019, childcare accounted for 0.3% of US GDP with a gross output of $63 billion– and that number could be even higher if the system is working as it should. Additionally, an American Chamber of Commerce Foundation study found that child care interruptions cause states to lose an average of $1 billion in economic activity annually. Part of the lost income stems from the cost of parents missing work because quality child care was unavailable—or unaffordable.

To that second point, even when parents can find a child care provider, high costs prevent many children from enrolling. The national average cost of child care ranges from $11,000 to $29,000 per year. Averages in high-cost areas like Washington DC can reach $35,000 per year. In some cases, it is more cost-effective for a parent to stay at home than to pay for childcare.

The lack of childcare affects more than just parents. Because of gaps in the childcare system, businesses are unable to fully re-staff their operations, leading to more closures and reductions in working hours across all industries. Absenteeism and employee turnover cost employers anywhere from $400 million to $3 billion a year, according to an American Chamber Foundation study.

The lack of accessible, affordable childcare is unsustainable for everyone. The U.S. Chamber of Commerce Foundation has said for many years that access to child care is a workforce issue — and has developed solutions for businesses and working parents. The Foundation’s Employer Roadmap: Childcare Solutions for Working Parents suggest ways businesses can lead to solve this crisis.

Businesses can improve their childcare offerings by creating clear lines of communication with employees. Surveying employee needs provides an opportunity for employers to learn more about the most immediate issues facing working parents and to create solutions that will address those challenges. Internal changes and investments can also support working parents, including flexible scheduling, on-site child care, and vouchers or subsidies.

Public advocacy also remains an important tool in encouraging state and local governments to invest in community-based programs that will support child care.

The American Chamber and the American Chamber Foundation’s America Works initiative mobilizes industry and government to rapidly address America’s growing workforce shortage crisis by providing research on underlying workforce issues, policy recommendations and practical workforce solutions for businesses.

About the authors

Stephanie Ferguson

Director, Global Employment Policy & Special Initiatives, US Chamber of Commerce

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