Child Care is an Essential Service – But a New Business Model is Needed

While many governors have closed K-12 schools for the remainder of the school year, child care continues to operate as an essential service in most states. This is certainly true for North Carolina. Why? Because many parents with young children need child care in order to work, and for those individuals who must continue to work during this public health emergency, child care remains an essential service so parents can continue working in hospitals, public safety, grocery stores, child care and other jobs that the public relies on for services or products at this time.

The current child care challenge

The challenge is that theeconomic model for operating child care as an essential service is not themodel that child care center directors and family child care home-basedproviders based their business on when they first opened. Here’s what is known:

• Many child care centers across the country haveclosed. Some have been instructed to close by their governors. Others haveclosed as millions of parents are home and do not need to pay for child care.Sharply reduced payments by parents, which comprise program operating budgets,mean that programs can’t pay staff or meet fixed costs. In North Carolina,since January, more than half (56%) of child care centers have closed. About30% of family child care home providers have closed.[1]

• Some states such as North Carolina are continuing to make subsidy payments for low-income children (whether or not children attend). And, some states are paying for the cost of child care for essential personnel who must continue to work and who need child care (in North Carolina, essential personnel can receive child care assistance if family income is below 300% of the federal poverty level).[2] But, because most programs do not serve either a high volume of children on subsidy or a high volume of children whose parents are essential employees, there is still a large gap between incoming revenue and operating costs to remain viable as a business.

• In some states, the number of children who can be served in each classroom is seriously restricted (e.g., 10 bodies in a classroom, which includes one or two teachers). Such restrictions make sense from a public health standpoint due to the need for social distancing; however, the economic impact of these restrictions on a child care program can reduce operating budgets by thousands of dollars per month (e.g., a classroom of 18 or 20 4-year olds that is now restricted to eight or nine children is an enormous reduction in program revenue that may have previously offset the cost of caring for infants and toddlers, which is typically far higher). While North Carolina is not currently restricting the number of children in child care classrooms, child enrollment is typically far below licensed capacity, which affects the viability of the economic model.

As states begin to re-openbusinesses and the nation slowly ramps up employment levels, the business of childcare will face new challenges. Currently, more than 26 million Americans havefiled for unemployment compensation. In North Carolina, more than 500,000people have applied for unemployment to date. How long it takes for those whoare unemployed to re-enter the workforce is not known.

Three main questions to think about with regard to the economic model for child care

• Whatwill parent preferences be until there is a vaccine that protects againstCOVID-19?
• Whatwill the demand for paid child care be with millions of parents unemployedthroughout the country and how long will it take for parents to gainemployment? And,
• Untilthere is a vaccine, what will the new model for child care be (e.g., socialdistancing and public health protections that may reduce the number of childrenper classroom or setting)? Will parents desire group care settings and willthey be able to afford the cost of fees related to the new model (even iftemporary)?

The Bipartisan Policy Centerrecently released the results of a parent survey throughout the country relatedto child care use and concerns.[3]

Parents with children under age 5 worry that their child care program won’t be open due to post-COVID-19 emergency closures.

• 54% of parents in urban areas, 44% of parents insuburban areas and 37% of parents in rural areas are concerned their child careprogram will not be open.
• 49% of parents with income less than $50,000,47% of parents with income between $50,000 and $100,000 and 40% of parents withincome more than $100,000 are concerned their child care program not be open.

Parents with children under age 5 worry that their child and family will be more likely to be exposed to COVID-19.

• 78% of parents in urban areas, 75% of parents insuburban areas and 68% of parents in rural areas are concerned that their childand family will be exposed to COVID-19.
• 67% of parents with income less than $50,000,79% of parents with income between $50,000 and $100,000 and 74% of parents withincome more than $100,000 are concerned that their child and family will beexposed to COVID-19.

Parents with children under age 5 are worried that they won’t be able to afford child care.

• 53% of parents in urban areas, 44% of parents insuburban areas and 46% of parents in rural areas are concerned they won’t beable to afford child care.
• 58% of parents with income less than $50,000,49% of parents with income between $50,000 and $100,000 and 34% of parents withincome more than $100,000 are concerned they won’t be able to afford childcare.

Until there is a vaccine, and whilechild care is an essential service, the model for how that service is deliveredneeds to be rethought. In the past, the economic model for child care wasfragile, but now it is unlikely to be supported by private pay family feesalone.

As states relax stay-at-homeorders, what will parent preferences be for child care? What will parents beable to afford? Child care is essential; however, a new economic model isneeded to ensure that the supply of child care meets parent preferences,ability to pay and is undertaken in a way that both meets public health safetyneeds as well as the cost of operating a program that supports the healthydevelopment of children.

It is time for those discussions to begin. Simply relying on the past economic model will not work.