The Business Case for Child Care | MomsFirst Report

Moms cannot work without child care – period. And yet, child care too often is seen as a personal problem for families to solve.

A new report with original data developed by the MomsFirst and their knowledge partner McKinsey that shows amid the Great Resignation, expanded child care benefits can help companies attract, retain and advance women in the workforce.

Not only can you download the PDF for your own resources, but you can review the full report below!

The Business Case for Child Care

How parent-focused employee value propositions help companies win the war for talent

This report seeks to understand the impact of the U.S. child care support ecosystem on companies and workers and how the private sector can address child care needs and help companies win the war for talent. McKinsey & Company served as a knowledge partner for this report, providing research, data, and analysis, including insights from a survey of 1000+ American parents with children ages 0-5. Survey details can be found in the Methodology and Disclaimers sections.

COVID-19 and the Reduction of Women’s Labor Force Participation

Disruptions to school and child care during the COVID-19 pandemic caused working mothers to leave or lose their jobs at a higher rate than fathers—and many have not returned. Single mothers of color have been particularly affected with the highest unemployment rates among different parent populations. Even before the COVID-19 pandemic, household labor was already imbalanced. In fact, women in the United States spent 37% more time on unpaid household and care work than men, with insufficient policy attention focused on meeting the needs of working mothers.

1.1 MILLION– The number of women still out of the labor force as of January 2022. By the same  point, men had recouped all pandemic-related job losses, even ganining an additional 100,000 jobs.

3:1 – Ratio of women who lost their jobs relative to men since February 2020.

U.S. Child Care in Crisis

The U.S. child care system not only often fails working families—it is also contributing to long-term trends that could imperil American competitiveness. Other countries are increasingly investing in child care as a lever for economic competitiveness. For example, China provides tax exemptions for the cost of raising children under three and for day care providers, while Germany guarantees day care spots for all children over the age of one.

PARENTS IDENTIFIED 5 PRIMARY CHALLENGES IN THE U.S. CHILD CARE SYSTEM

1. AFFORDABILITY: For 80% of families, child care exceeds Department of the Health and Human Services (HHS) recommended affordability level.
2. ACCESSIBILITY: 51% of Americans live in child care deserts.
3. CONVENIENCE: 28% of parents said that convenience was their greatest concern.
4. RELIABILITY: Only 6% of hourly workers surveyed have access to emergency back-up care.
5. QUALITY: Only 13% of families attend child care rated “high quality.”

$840B – Amount in economic output that the U.S. is potentially losing out on with women’s labor force participation muted, according to Mckinsey Global Institute.

Making the Business Case for Child Care Benefits

Providing child care benefits can improve recruitment and retention rates, which may increase worker productivity and reduce burn-out.

• RECRUITMENT: 69% of women with children ages 0-5 looking for employment stated that benefits that help with child care expenses or on-site child care would make them more likely to choose an employer.
• RETENTION: 83% of women and 81% of men with children ages 0–5 said that child care benefits would be a very important or somewhat important factor in deciding whether to stay at their current employer or switch employers.
• ADVANCEMENT: 53% of women with children ages 0–5 cited child care as one of the reasons they left the workforce temporarily, took on fewer hours, or moved to a less demanding job.

88% OF WOMEN WITH CHILDREN AGES 0-5 LOOKING FOR A JOB SAID THAT HAVING WORK FLEXIBILITY, PREDICTABLE HOURS, OR CHILD CARE SUPPORT WOULD MAKE THEM MORE LIKELY TO CHOOSE AN EMPLOYER

The emergence of COVID-19 in late 2019 and early 2020 threw the global economy into a tailspin and held up a mirror to our systems, culture, and values. The pandemic revealed hidden truths and invited Americans to question long-held assumptions about what types of labor—and whose labor—was seen as valuable, and why.

When what felt like overnight, schools, day cares, and child care programs closed, working mothers stepped in to fill the child care gap, leaving—or being forced to leave—their jobs at a higher rate than fathers. In fact, more than 1.4 million moms left the labor force in 2020 alone, adding to the dramatic drop in employment now referred to as “The Great Resignation.” Single mothers of color have been particularly affected with the highest unemployment rates among different parent populations. Even before the COVID-19 pandemic, women in the United States spent 37% more time on unpaid household and care work than men, with insufficient policy attention focused on meeting the needs of working mothers.

As of May 2022, many working mothers still have not returned to the workforce, confirming what a U.S. Census study warned in 2021: that the economic recession hitting working mothers would become prolonged and increasingly severe. Our survey of 1000+ parents with children ages 0-5 found that child care was one of the reasons most commonly cited as to why they had left the workforce. The detailed survey methodology is outlined in the Methodology section of this report.

Even before the pandemic, women earned more than 50% of undergraduate degrees in key sectors, such as healthcare, which is critical to American economic output. However, women also faced disproportionate household and care responsibilities and insufficient child care infrastructure, creating barriers to both entering and advancing in the workforce.

Lessons from the Child Care Crisis Could Boost Economic Output

During COVID-19, the U.S. child care sector underwent a systems failure brought about by decades of underinvestment. The COVID-19 pandemic focused the nation’s attention on the patchwork caregiving ecosystem made up of day care (center-based, home-based), nannies/ babysitters, family and friends, private pre-K, and afterschool care that parents are required to navigate.

PARENTS IDENTIFIED 5 MAIN CHALLENGES RELATED TO THE CHILD CARE ECOSYSTEM:

1. AFFORDABILITY: For 80% of families, child care exceeds the Department of Health and Human Services (HHS) recommended affordability level of 7% of household income.
2. ACCESSIBILITY: 51% of Americans live in child care deserts, across both rural and urban areas. (A child care desert is any census tract with more than 50 children under age 5 that contains either no child care providers or so few options that there are more than 3x as many children as licensed child care slots.)
3. CONVENIENCE: 28% of parents with children ages 0-5 in our survey say that their most important concern with paid child care is convenience; this was particularly true for Black and Native American respondents, compared to other races and ethnicities.
4. RELIABILITY: 35% of child care centers that closed early in the COVID-19 pandemic have remained closed one year later,13 while only 6% of hourly workers with children
   ages 0-5 in our survey indicated they had access to emergency back-up care.
5. QUALITY: Only 13% of two-year-old children attend child care that is rated as “high quality.”13 48% of parents with children ages 0-5 reported that the quality of child care was their main concern.

Access to suitable child care is key to helping women return to the workplace and stay there long-term. Unfortunately, the opposite is also true: when families cannot find suitable care, women’s employment is disproportionately impacted.15 Our study found that states with fewer child care deserts have higher maternal labor force participation. This is particularly true of parents with lower incomes: 67% of respondents with children ages 0-5 making less than $30,000 and 50% of those earning $31,000-$50,000 selected child care as a key reason they are not currently working. For many workers, their pay may not cover the cost of child care. And yet, working parents have only limited access to child care benefits in the workplace. Across the board, hourly workers have fewer child care benefits than salaried workers, and employees in rural areas have fewer benefits than those in urban areas.

1 in 11 parents reported having access to financial subsidies to pay for child care or on-site child care at their employer.

With women’s labor force participation muted, the U.S. is potentially losing out on up to $840 billion in economic output annually. That means 40% of the incremental GDP can be obtained from higher female labor force participation. Meanwhile, many countries are investing in child care as a lever for economic competitiveness, such as China, Japan, Canada, and Germany.

$840 Billion – Amount in economic output that the U.S. is potentially losing out on with women’s labor force participation muted.

Child Care, the Great Resignation, and How Businesses Can Bring Back Workers

Corporate America is in the midst of a talent crisis, with insufficient child care support for employees as one contributing cause. Nearly 4.3 million people quit their jobs in January 2022 alone, following a record year for resignations, in which almost 48 million people quit their jobs.

Employers that provide child care benefits can improve recruitment and retention of women, increase worker productivity, and in turn, boost overall American competitiveness.

Employers can do more to provide child care across 5 solution areas to create a more sustainable, equitable workplace for working parents. 

AFFORDABILITY
Options fit within parents’ spending means and do not create outsized cost burdens

POTENTIAL EMPLOYER OFFERING

• Subsidies for child care costs (e.g., full or partial subsidies, for centers, at-home or friends, family or neighbor care)
• Creative financing models for child care (e.g., interest-free or forgivable loans to cover immediate child care costs)
• Dependent-care flexible spending accounts (FSA)

ACCESSIBILITY
Locations provide an adequate number of spots and sufficient child care workers to serve children’s needs

POTENTIAL EMPLOYER OFFERING

• On-site day care (on-side or in-building, child care workers on company payroll)
• Demand guarantees for centers in child care deserts (e.g., companies collaborate to provide financial guarantees to centers, encouraging
  center operations)
• Provision of company real estate at a low-cost lease for new child care centers

CONVENIENCE
Options align with parental lifestyle including location and operating hours

POTENTIAL EMPLOYER OFFERING

• Flexible hours or working arrangements
• Telework or “bring baby to work” programs
• Support to cover individual care arrangements (e.g., center-based, in-home or friends, family or neighbor care)

RELIABILITY
Coverage that is reliably open, including when primary child care is unavailable

POTENTIAL EMPLOYER OFFERING

• Predictable scheduling (e.g., providing schedules in advance to hourly workers, keeping schedules consistent)
• Back-up child care options (e.g., emergency coverage through center or home-based care)
• Paid emergency care days (e.g., dedicated child care leave days)

QUALITY
High-quality child care that is equitably available to employees in different roles and companies

POTENTIAL EMPLOYER OFFERING

• Child care census to understand employee needs
• Expansion of child care benefits to hourly workers and contractors (directly or though contractor requirements)
• Pooling of resources for child care benefits among small businesses to distribute costs

Marshall Plan for Moms Recommends a Four-Step Approach for Businesses to Create their Own Child Care Benefits Solutions

Companies can better meet their employees’ child care needs by diagnosing the problem, designing feasible solutions, and driving adoption. Organizations that are just beginning their journey to better support working parents with child care can follow this four-step approach—one that centers employee feedback, accounts for different life experiences, and creates practices that work best for all employees:

1. UNDERSTAND EMPLOYEE NEEDS:
   Taking a market-research approach to employee benefit planning can result in higher employee motivation and satisfaction with the benefits package that is developed. Leaders can start by conducting employee surveys, individual interviews or focus groups, and more in-depth research to better understand their employees’ current child care challenges, needs, and ideas about how the company can best support those needs. If a current benefits plan exists, undertake a corporate audit to understand the level of support for working parents and review existing child care benefits to measure uptake, satisfaction, barriers, and limitations. Lastly, conduct affordability assessments to uncover gaps in support across hourly-wage and salaried workers. As indicated in our data, these two groups have different needs that should be addressed.
2. RECOGNIZE THAT ONE SIZE DOES NOT FIT ALL
   Leaders must be mindful of varying circumstances and life experiences when creating global policy changes. Analyze survey results by race, ethnicity, and household make-up to ensure solutions are designed to meet different employees’ needs. For example, in our survey, Black and Native American workers were more interested in child care convenience factors (e.g., aligning work hours with irregular work hours, distance, and availability of back-up care) than other racial and ethnic groups. You should also consider how race and parental responsibilities co-mingle in workplace cultures. For example, 34% of Black primary caregivers felt that they have been penalized at work because of their caregiving responsibility, more than respondents from other racial or ethnic backgrounds. Furthermore, approximately a quarter of children in the U.S. live in single-parent households, over 80% of whom live with their mothers. A study conducted prior to the COVID-19 pandemic estimated that single moms spend an average of 36% of their income on child care, making affordability a primary concern.The same sensitivity to variance goes for hourly and salaried employees. Hourly workers with children ages 0-5 were over three times more likely than salaried workers to value on-site child care when deciding between employers. Fiftyeight percent of hourly workers with children ages 0-5 said predictive scheduling would make them more likely to select one employment offer over another, while flexible working arrangements were the benefit most likely to lead both salaried and hourly workers to choose one employer over another. If your organization employs parents making low or minimum wage, you may consider sliding-scale solutions that provide support to those who most need it. These types of insights can help employers accurately distribute resources and make decisions that will benefit the most workers.
3. DESIGN IN CONSIDERATION OF BUSINESS FACTORS
   The right child care benefits solutions for any company that meet employee needs contextualized within their company’s operational, financial, and resource realities.First, when it comes to operational considerations, leaders must assess how the child care interests of employees can work within an organization’s existing business model. For example, if offsite work arrangements are not practical for hands-on professions, predictive scheduling may be a viable alternative.

   Second, evaluate how child care benefits could influence your bottom line from a holistic perspective. For example, some companies may recoup much or all of the expenses related to the cost of child care benefits through improved employee retention.

   Third, review your capabilities and assets. This calls for critical and creative thinking. Pooling resources for child care benefits among small businesses could help distribute costs. Consider what underutilized corporate assets could be brought to bear. For example, vacant or under-used real estate could be a viable location for worker child care centers.

4. BUILD AWARENESS OF BENEFITS AND DRIVE ADOPTION
   Educating employees about the available programs and normalizing their use is critical for securing employee retention, supporting recruiting efforts, and capturing important data that informs a longer-term child care benefit strategy. Senior executives can emphasize the importance of child care in their own lives. Leadership can also help remove the hesitance some workers might have about seeking help with child care by speaking out in town halls and public events about how important child care is to meeting company goals.

How Companies are Supporting Working Parents

Bank of America

Bank of America provides child care subsidies to make child care more affordable for all employees. Employees can receive up to $275 per month, per eligible child, through the Child Care Plus program. The benefit is offered for employees making less than $100,000 per year. It can be used for both formal and informal child care (e.g., nanny, neighbor), is applicable to children under 13 years old, and is available for full and part-time employees, as well as salaried and hourly wage workers.

Patagonia

Patagonia’s on-site child care centers are available to both retail and corporate employees. The organization provides on-site child care at headquarters in Ventura, CA, and a distribution center in Reno, NV. The tuition is assessed on a sliding scale based on household income. Spaces are available to both hourly and salaried workers and to retail workers at locations near the child care centers. Patagonia recoups ~90% of the cost of the child care center through tax benefits, employee retention, and employee engagement.22

Synchrony

Synchrony credits its approach to supporting families through the pandemic for how well they weathered the storm as an institution. Synchrony assessed child care needs for both corporate and call center employees through surveys and listening sessions to empower employees to identify the most pressing needs and solutions. Synchrony offers a package of benefits including 60 days of back up child care, virtual afterschool/summer camp programs and tutoring, flexibility in hours and in working from home. Synchrony’s back-up care benefit made it easy for their employees to choose the best provider for their situation (e.g., family member, home-based care or child care center), ensuring employees could access backup care on short notice.

CONCLUSION

MomsFirst is a national movement to center mothers in our economic recovery and value their labor. Download the full report to learn how your business can support mothers and secure a more prosperous economic future for all.