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Market-Based Solutions to Vital Economic Issues
Kenan Insight
Mar 9, 2022

The Business Case for Childcare

When it comes to funding child care, the United States spends about $500 per child – a significant drop compared to the $14,000 spent by similar wealthy countries – according to a recent New York Times article. The Biden administration sought to bridge that gap in the Build Back Better plan, but even with its passage, the U.S. will remain a significant laggard.

In this Kenan Insight, UNC-Chapel Hill Professor and Director of the Equity Research Action Coalition Iheoma Iruka and Urban Investment Strategies Center Director Jim Johnson explain why the U.S. should prioritize and fund early childhood education and care, while paying special attention to underserved communities, and how this is not just a win for families but also for the continued health of our economy.

Why is access to affordable early child care important for both child development and the long-term health of their families?

Iheoma Iruka: We know that early care and education opportunities are critical for children and families. We know that children who access high-quality care have a strong start and foundation to their school trajectory. High-quality means care and learning happen in a safe and healthy space with well-trained and compensated education professionals who provide an environment that meets children’s unique social, emotional, cognitive, physical and cultural needs. Parents benefit in many ways, including their ability to go to work and know that their children are safe, healthy and engaged in meaningful interactions. Furthermore, the early care and education space can also be helpful to families, as it provides a space to understand what and how their child learns and engages while also providing resources, supports and social networks. Early care and education is likely the first organized learning environment that children and families become acclimated to and set the tone and tenor of their future schooling experiences. It needs to be available, affordable, inclusive and affirming for both children and their families.

Jim Johnson: Affordable and quality child care is a two-generation workforce issue. As the U.S. Chamber of Commerce Foundation correctly notes, the nation’s child care industry “provides essential support for the workforce of today and is vital to the development of tomorrow’s workforce.” Yet the U.S. invests far less money in child care and early childhood development than most other developed nations and even some developing countries. Because of inadequate investments, far too many American youth enter elementary school ill-prepared to learn—a situation that, unfortunately, has long-term negative consequences for their overall health and wellbeing.

Exacerbated by the pandemic, parents – especially mothers – struggled to balance both work and child care. Now, coupled with a worker shortage, families seem to be hit extra hard by the high price and scarcity of reliable child care. What is one federal-level policy – new or existing – that you think would make a significant difference for families?

Iheoma Iruka: We need to provide universal access to early care and education, starting at birth. This strategy is one of the 10 policies that the Equity Research Action Coalition and the National Black Child Development Institute called for in their Black Child National Agenda released in November 2021. Creating a universal system will ensure the right infrastructure, funding and workforce pipeline. At this time, many families, especially low-income families, can’t afford to not go to work and can’t afford the high cost of child care, which could cost more than college tuition in many communities. The lack of federal investment also places the burden of cost on families, program operators and the workforce, especially a workforce that is also likely to live in poverty due to the low wages and limited benefits. However, we must ensure that universal access is equitable and quality as we often see that even in universal systems, Black and Brown children are often in lower quality care with a high-turnover workforce. We must also ensure that families are economically stable and upwardly mobile by providing a basic income, especially for families with limited economic and low wealth and assets.

Jim Johnson: I am in agreement that the federal government needs to be part of solution of addressing the growing lack of child care, especially for very young children. In particular, the federal government should enact legislation to ensure universal preschool so that all children have access to free early childhood education. Universal preschool would improve the long-term economic outcomes for millions of children and provide much needed relief for working parents eager to re-enter the workforce after many tumultuous years during the pandemic.

However, it is important to note that the implementation of such legislation is as important as the legislation itself. Even prior to the COVID-19 pandemic, 51% of the U.S. population lived in a child care desert, defined as areas where the demand far outstrips the supply of available child care slots; existing child care facilities (especially in-home operations) are barely sustainable financially; and, staff turnover is high because child care workers do not earn a living wage. This situation has only worsened during the pandemic. Therefore, the government will need to address this supply issue by investing in innovative solutions. One such solution is to invest in child care business incubators and accelerators for existing and aspiring child care entrepreneurs. The American Rescue Plan allocates $39 billion to states to expand and improve child care in the U.S. Additional dollars may be forthcoming if Congress enacts President Biden’s Build Back Better plan. 

We have seen policies like paid parental leave stall in Congress. This policy (among others) would seemingly help many families, increase labor force participation and have a greater long-term benefit than the short-term cost. Why are some policies directed to support families difficult to pass? What are policymakers failing to see?

Iheoma Iruka: We recognize policies currently exist that benefit families, such as expanding income eligibility for health insurance that narrows maternal mortality rates for Black mothers or earned income child tax credits that promote babies’ physical and developmental health. However, policymakers need to understand the critical importance of ensuring that healthy family development policies are crucial for healthy child development. Policymakers may need to see the return of investment in policies that benefit families, especially low-income families and families without children. There is a benefit to society in many ways when parents can have time to bond with their children, address any postpartum needs and take care of a sick family member without a negative recourse.

Access to family policies such as paid family leave is even more critical for racial and ethnic minority families who are likely to benefit the most since they are less likely to work in jobs and positions that offer such benefits. If we are committed to Americans being healthy starting early and throughout their life course, we must begin early and continue ensuring their health through their life course. The lack of access to these supports to families could impair their ability to prosper and contribute to the economic engine.

Jim Johnson: Access to child care needs to be strategically positioned as a business imperative and all levels of government, in all sectors of the economy, and in the public sphere need to be on board in order for meaningful policy to take place. We are experience the real world business implications of inadequate child care now. The child care crisis is partly responsible for the Great Resignation and the workforce challenges companies are facing as they attempt to implement return-to-office policies and hybrid models of work environments. Faced with a dwindling supply of accessible and affordable child care during the pandemic, more than 2 million working mothers have been forced, as schools transitioned to fully online learning, to stay home and take care of their children. Hopefully more stakeholders come to realize the real business and societal implications of not having strong child care systems, and then advocate on the behalf of parents and young children – and, in turn, policymakers will take note and enact more pro-parent policies.

What could be the long-term economic benefits to the government’s investment in early childhood education, care and development? Why is this a win for the economy?

Iheoma Iruka: We should recognize that that investment in early childhood education is, precisely that, an investment. We should also be careful that this investment is not seen as a silver bullet to address society’s ills from racism to poverty. However, based on evidence from studies that started in the 1960s and 1970s, we know that access to high-quality early education from birth to age 5 has a 13% return over the lifetime. Society could expect to reap about $6.30 from future educational attainment, employment and healthy outcomes for every dollar spent on high-quality early education. A portion of this benefit is a win for our economy when we have more educated, employable and healthy adults.

Furthermore, we must continue to invest in children, their families and communities in equitable and meaningful ways. This means that early care and education investment must be made equitably. This can only be done by addressing historical under-investments in, particularly marginalized communities, ensuring that children and families who need it the most can access the quality of programs that meets their needs, and the workforce is valued and adequately compensated. It is also critical that communities see early care and education as essential to community infrastructure, leading to thriving and productive businesses – including early education providers – and economic growth.

Jim Johnson: Beyond many long-term benefits to both children and their families, I would also note that there is also a great opportunity to help provide really good jobs in the child care sector. We need to advocate for additional and better continuing education programs for child care workers. Strengthening their educational background and training will enable them to move away from providing basic child care to rendering culturally- and age-appropriate child development services — an important step given the increasing diversity of U.S. births. This will go a long way toward ensuring all children enter elementary school ready and excited to learn, especially children of color from low-wealth families and economically marginalized communities. Additionally, we need to engage in the ongoing livable wage campaign for the nation’s child care workforce. Sound early childhood development for the next generation of talent is honorable work and should be compensated accordingly.

As Iheoma Iruka’s research shows, Black families “feel the weight of racism, discrimination, economic strain and other inequities, which is compounded by the global pandemic.” What recommendations do you have to policymakers to make a positive impact on Black families with children?

Iheoma Iruka: I have three words: protect, promote and preserve. These are called the 3Ps of antiracist policymaking for Black children. This policy framework is also the basis for the 10 policies in the Black Child National Agenda: America Must Deliver on its Promise, released by the Equity Research Action Coalition at UNC and the National Black Child Development Institute. Policymakers must ensure that Black children and families are protected from racism, discrimination and material hardship; their health, wealth and access to affirming educational experiences are promoted; and their cultural heritage and history, language, family unit, and communities are preserved.

Excerpts of Jim Johnson’s remarks were originally published in the Daily Yonder.

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