Investing in the Future of Child Care: Building Workforce and Economic Resiliency

Millions of Americans are out of work or working from home as a result of restrictions put in place to slow the spread of the coronavirus. The economic impact has been devastating. Mary Daly, president and CEO of the Federal Reserve Bank of San Francisco, shared that when the coronavirus hit the United States “a decade of economic progress was erased in a matter of months.” In an effort to regain some of that economic progress, many leaders are focused on reopening businesses and getting people back to work with measures in place to protect public health. But for working parents, a critical question looms: Who will care for the children?

“At the Federal Reserve, child care access, quality, and affordability have been on our radar as a community development issue for many years,” says Naomi Cytron, a Community Development Regional Manager at the San Francisco Fed. “But the COVID-19 pandemic has generated unique challenges for the child care sector and has heightened urgency for the field to apply swift, bold actions that support both providers and seekers of child care. The resiliency of our workforce and our economy depend on it.”

With that resiliency in mind, our Community Development team is launching Investing in the Future of Child Care, an initiative in partnership with the Low Income Investment Fund (LIIF) that takes a deep dive into the challenges facing the child care market as well as the investments and partnerships needed to support child care providers.

In Fall 2020, we will start with a series of webinars designed to advance understanding and action in the field. We will also work with communities across the Twelfth Federal Reserve District to support stakeholders who are working to boost the capacity of the child care ecosystem with an emphasis on child care providers as businesses. Shared learning will focus on multi-sector solutions that advance equitable access to child care for lower-income families and people of color.

“One of our key strengths in the community development department at the SF Fed is our ability to bring people from various sectors—like health, housing, and finance—together at the regional and local levels to build partnerships and develop integrated solutions to complex community challenges. Some partners call us the ‘neutral convener,’ but we just call it public service,” said Joselyn Cousins, District Manager of Community Development at the San Francisco Fed. “Through our connections and resources in support of a strong child care sector, we can advance parents’ ability to participate in the workforce now, and we’re also creating early education opportunities for the workforce of tomorrow.”

Supporting workforce participation through child care

A recent Connecting Communities webinar, designed by Cytron and a team of community development colleagues from around the Federal Reserve System, explored some of the fundamental challenges facing the child care ecosystem. It also looked at the roles that public, private, and nonprofit sector partners can play in closing gaps in access and affordability that have been exacerbated by the pandemic.

Panelist Julia Barfield, Senior Manager of Policy and Programs at the U.S. Chamber of Commerce Foundation, highlighted findings from their recent survey of working parents, which found that

• 75% of working parents currently have children with them at home, and
• a majority of parents using alternative child care solutions see their arrangements as unsustainable.

Their survey of employers revealed that 40% of employers are concerned that some employees will not fully return. And 25% of employers are concerned that some employees will leave the workforce entirely.

“If we have child care providers either closed permanently or operating at limited capacity, many parents may not be able to bring their children to their previous child care program,” Barfield said. “Parents are making tough calls, and any of those decisions have implications on employers’ return-to-work strategies.”

Simply put, before parents can return to a workplace, they need reliable, affordable care for their children.

Child care operators are businesses

Key to addressing the workforce’s need for child care is understanding that child care providers are businesses—predominantly small businesses. Like so many businesses, they are struggling to keep their doors open. At the same time, they’re incurring new expenses for protective equipment, enhanced cleaning, and other mandated modifications. With high expectations, low margins, and minimal public investment, their operating model was under financial strain even prior to the pandemic.

“The operating model as it exists is not financially sustainable for the typical provider, which often looks like a small business, single-site operator who more frequently than not is also a woman of color,” said Bevin Parker-Cerkez, Managing Director of Program Services and Senior Director of Early Childhood Education at Reinvestment Fund.

Parker-Cerkez shared a sample financial viability assessment for what a previously profitable child care operator is faced with if its enrollment decreases by as little as 25%. The result is a sizable loss for the year. The same modeling shows that when enrollment dips to 50%, it wipes out even the prior year’s cash balance. Neither example accounts for the addition of pandemic-related expenses.

Strengthening the child care system will require additional investment and a reimagined funding model. Centering the child care needs of lower-income families and people of color, however, is critical to achieving equity in any new model.

We need a child care system that works for everyone

“Early care and education is influenced by the same social, economic, and political systems and institutions that have helped to perpetuate racism and inequity in the U.S.” said Eric Buchanan, Director of Strategic Partnerships for the Buffett Early Childhood Fund. “COVID has been awful, but it creates an opportunity to build back better.”

Addressing known challenges with the operating model offers the chance to reimagine the child care system with racial equity goals in mind. Child care for working families has often been considered a public investment issue, but the pandemic is forcing many employers to address the child care needs of their workforce if they hope to return to pre-pandemic productivity levels. It’s an important step, but for those efforts to succeed, we need a child care workforce to fill the need.

“As we reimagine the operating model for child care providers, we need to emphasize the importance of the child care workforce, traditionally women of color,” says Jessica Coria, a Community Development Regional Manager at the San Francisco Fed. “This rebuilt system must recognize their vital work.”

Supporting the child care system through community development

Seizing the opportunity to strengthen the child care system with lasting, equitable solutions will require partners from across sectors to work together toward that shared goal. That work will take various forms across different communities and regions. Here are some ways community partners can wield their resources and expertise in support of a stronger child care system:

• CDFIs and philanthropic organizations can provide grants and patient, flexible capital;
• Banks can direct Community Reinvestment Act (CRA) investments;
• The private sector can use its influence to inform policy decisions in their communities;
• Communities can adopt co-location approaches where child care operations are offered alongside other community services such as housing developments, health centers, and libraries;
• Local chambers of commerce can include child care providers in efforts to support local businesses;
• Small Business Development Centers can provide training and technical assistance;
• Researchers can highlight bright spots in available data that help identify promising approaches;
• Policymakers can work to ensure policies and programs are designed to reach the people who may need the most support.

While we’ve identified critical roles for a variety of sectors, our collective work will be stronger and more impactful if we work together. To get started, join us on October 1 for Investing in the Future of Child Care: Supporting Small Business Providers to learn more about the operational challenges facing small business child care providers and the systemic changes needed to support them.

Related

“Briefing on Childcare Funding and Policy Considerations in Response to COVID-19.” Federal Reserve System. August 27, 2020.

“Who Will Mind the Children? The Impact of COVID-19 on the Childcare Market,” a Connecting Communities webinar from the Federal Reserve System held August 6, 2020.

Strong Foundations: The Economic Futures of Kids and Communities. Federal Reserve System Community Development Research Conference. March 23 – 24, 2017. Washington, D.C.