There are fewer and fewer providers, and they are drowning in counterproductive regulations.
There are fewer and fewer providers, and they are drowning in counterproductive regulations.
T his week is the last week of child care as we know it, or as we have known it throughout the past two years. The 24-billion-dollar Band-aid known as the Child Care Stabilization Program has been helping centers cover costs in the name of equitable pandemic recovery since March 2021, with other pandemic subsidies in place before then.
The Century Foundation reported in June that in the coming year we can expect to see shutdowns in over a third of the 210,000 child-care programs that have been propped up by stabilization funds disbursed during Covid. The closures would affect up to 3 million kids and their families. The cash was designated to help centers reduce tuition, raise staff pay, invest in professional development, and accommodate pandemic policy changes.
An Alabama provider with whom I spoke said that her employees have been receiving an extra $1,000 every month under the pandemic-era stabilization program, and she expects to lose critical members of her team as September comes to a close. She is faced with a challenging balancing act of retaining employees and retaining customers, all members of a cherished community.
Why do we expect to see centers close? How did they stay afloat before pandemic stabilization packages? First, the overhead costs of running a child-care center are extremely high. Over the past three to four years, providers have seen their margins disappear as food, fuel, and labor costs have increased dramatically.
Additionally, licensed child-care providers are drowning under regulations on the quality of care they deliver. Barriers to entry such as facility requirements, low child-to-staff ratios, and curriculum guidelines keep creativity and innovation out of the industry, especially because existing providers are exempted from many new regulations. Trouble keeping up with wage growth is frequently cited by program directors, and this too is a result of regulations, which require teachers to have extensive training or college degrees in early childhood education.
Diana Thomas and Devon Gorry show that states with more regulations have more expensive child care without delivering better quality. Profits are quite literally absorbed by safety and maintenance costs, and without government funds to help out, many centers will go under.
Even before pandemic stabilization, government funds were being used to support the child-care industry because of the positive benefits to society when parents are able to work and children are being educated during their early years. Broadly, there is support for a complete government takeover, also known as a “universal” child-care system. Jack Salmon argued last year that these solutions only throw more money at the problems, instead of reforming licensing requirements that would address the shrinking supply of caregivers.
Is child care outside the capability of the market? No. Scholars have demonstrated that the idea of “public goods” may not necessitate public provision, not even in the case of lighthouses. Rather than a sputtering, faulty machine, the market is a coordinating process in which individual actors discover how to accomplish more with less. This capability is evident in the vast range of informal care arrangements, which compete with licensed centers on the margins of affordability, flexibility, shared cultural practices, or resources attuned to a child’s needs. We can expect to see more informal solutions emerge following the September funding cliff.
Innovation isn’t only relevant in Silicon Valley. In the face of a crisis, new ways of doing things are discovered. Our government’s narrow definition of high-quality child care is limiting the development of the licensed child-care market. While this is a unique industry involving much human contact, child care is a service with room for innovation, new methods, and potential for growth.
With lower entry barriers, providers can operate with lower costs, and parents can choose according to their preferred emphasis on education, for example, or the outdoors, or play. There is reason for optimism — a functioning market that meets working parents’ needs and priorities is possible.
Child-care regulations are meant to protect kids. Instead, they are constructing barriers to the industry’s expansion and drastically limiting child-care options. If the looming child-care cliff becomes (or worsens) a child-care crisis, it will be imperative to mobilize and celebrate creative and entrepreneurial solutions rather than relegate the industry’s shortcomings to full government control.