Wells Fargo Economists: ‘Child Care Industry’s Problems Are Every Employer’s Problem’

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Earlier this month, economists for Wells Fargo Bank released a report on the impact of child care for employers and the U.S. workforce. The report highlights both the importance of child care to families and to businesses and the need for public and private investments in the child care system.

Below are the top-level findings. For the full report, authored by Sarah House, Michael Pugliese and Karl Vesely, click here.

  • Child care is essential to keep women in the workforce. Access to affordable child care boosts labor force participation among mothers and supports longer-term labor supply. Women also account for a higher share of employment in child care than any other industry (96 percent).
  • The child care industry’s challenges make hiring more difficult and expensive for all industries. Employment in the child care industry remains 12.4 percent below pre-COVID levels, which means approximately 460,000 families are searching for alternative care arrangements. From the report: “For employers struggling to find workers now and facing a future of dismal labor supply growth, improving child care options for parents means a larger and higher-quality workforce to draw upon.
  • Cost is the main issue. Child care is labor-intensive. While child care costs are unaffordable for most families, caregivers are still paid too little. From the report: “One daycare center spot runs about $11,000 per year on average, or 14 percent of the median income of a household with a child under age 6. Yet, the average pay for a childcare worker in the industry registered just $12.05 an hour in 2020, or $25,060 per year.”
  • On a per-child basis, U.S. public investment in child care and early education is half the average for countries in the Organisation for Economic Cooperation and Development (OECD).

“We all pay one way or another. Childcare is unaffordable for many parents, but what often gets overlooked is that it carries a high price for the country as well. A system that does not work well for parents or providers means that we all pay through lower labor force participation, greater hiring difficulties for employers, slower potential growth, smaller tax bases and ultimately smaller families. A rethinking of policy, if done thoughtfully, could offer a substantial return on investment.”

From Who Cares? How the Childcare Industry’s Problems Are Every Employer’s Problem, by Well Fargo economists Sarah House, Michael Pugliese and Karl Vesely