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The parent trap: Making child care cheaper could help fix labor woes

The parent trap: Making child care cheaper could help fix labor woes

Ashlee Xiong was six months pregnant when she turned in her last assignment at the University of Wisconsin-Madison, earning her a bachelor’s degree in social welfare.

It was August 2020, and Xiong had already taken care of the ceremonial part of graduation, having walked across the stage to the cheers of a packed Camp Randall stadium the year before.

Now her thoughts were on her budding career. She’d just accepted a full-time job as a parent educator at nonprofit Family Services Madison, a position she hoped would help her decide whether to get a master’s degree in social work.

But soon after giving birth in December 2020, Xiong found herself in another career-shaping role: that of a parent whose paycheck barely exceeded the cost of child care.

Xiong isn’t alone. In Wisconsin, the average cost of infant care is 18.5% of median family income — more than average rent or in-state university tuition. In Dane County, the cost averages $16,000 a year.

Some parents run the numbers and decide working just isn’t worth it.

Meanwhile, Wisconsin’s longstanding labor shortages are only getting worse, as the pandemic puts new strain on a state where the birth rate and net migration have been declining for decades.

Economists say Wisconsin will need a variety of answers to its labor challenges, including attracting workers to move to the state, growing the birth rate, and drawing people off the sidelines of the workforce. One way to do that: Make child care cheaper. It’s an idea gaining support from Wisconsin business owners, child care providers and economic development experts alike. Whether it’s through federal legislation, changes to state subsidy programs or employers taking matters into their own hands, they say, fixing child care is key to strengthening Wisconsin’s economy.

Math problems

Xiong planned for eight weeks of maternity leave. Her job was already remote thanks to the pandemic, so as she prepared to return, she figured she might be able to work and care for her daughter Audrey at the same time.

For weeks, she tried scheduling appointments with clients around her daughter’s naps, hoping to be a mom and an employee simultaneously.

“It was a never-ending multitasking job,” Xiong said.

It wasn’t long before she and her partner, a self-employed landscaper, discussed whether she should quit. Xiong never imagined herself as a stay-at-home parent, but when she researched child care centers, she discovered they charged nearly as much as her monthly take-home pay.

“Either way, I felt like it would be a loss. If I continued with my job, I felt like I was going to drive myself to exhaustion. And if I did send her to daycare, most of my income would be towards daycare anyways,” Xiong said.

Wisconsin offers subsidies for child care costs through its Wisconsin Shares program, but Xiong doesn’t know whether she would qualify. She’d previously applied for FoodShare, the state food assistance program and been denied. A family of three would need to make less than $42,606 a year to qualify.

About two months after returning from maternity leave, Xiong quit.

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Emilie Amundson, secretary of the Wisconsin Department of Children and Families, listens to her 7-year-old daughter Elie Steffes read a book as their dog Sugar crawls onto her lap.

Emilie Amundson, secretary of Wisconsin’s Department of Children and Families, knows firsthand that the math doesn’t always work out for working parents. Each year after her children were born, she and her husband, a teacher, would crunch the numbers to figure out whether it made sense for him to work that school year.

One year, when her youngest was 1 and her oldest was 3, it didn’t. “His entire paycheck would have gone to pay for child care,” Amundson said. “So he dropped out of the workforce for that year.”

Meanwhile, the people paid to care for children are barely getting by: The average early childhood education teacher in Wisconsin makes just $10 to $13 an hour.

Child care centers’ margins are tight in part because state regulations limit the number of small children an adult can supervise. In Wisconsin, child care providers must have one adult for every four children under age 2, while some states require one adult for every three babies. That means spots, especially for infants and toddlers, are scarce – and dwindling each time a provider shuts its doors. Shift workers who need child care outside of the 9 to 5 workday have yet fewer options.

For parents, it’s a dual challenge, said Amundson, who put her name on waitlists at infant care centers before she told some of her closest friends she was pregnant.

“You have to fight tooth and nail to pay double your mortgage for a spot in a child care center because there are so few of them.”

'A textbook example of a broken market'

The pandemic has amplified those factors, as providers have cut capacity to allow more social distancing or to compensate for employees who’ve left, making slots scarcer and stretching tight budgets even further. Now, Amundson thinks, the issue is finally getting the attention it deserves.

In September, U.S. Treasury Secretary Janet Yellen called child care “a textbook example of a broken market.”

“The price does not account for all the positive things it confers on our society,” Yellen said, noting that children who receive quality child care stay in school longer and get higher-paying jobs. Studies have found that each dollar invested in high-quality child care programs yields between $7 and $17 in net benefits to society. A 2019 report by the Council for a Strong America found that insufficient child care is costing families $37 billion a year and costing employers $13 billion a year.

“When we underinvest in child care, we forego that; we give up a happier, healthier, more prosperous labor force in the future,” Yellen said.

Last year, as federal lawmakers proposed major investments in infrastructure and social programs, it looked like the U.S. might be on the brink of a major child care overhaul. In his $1.75 trillion Build Back Better bill, President Joe Biden proposed spending $390 million to reduce the cost of care for many families, let every child attend preschool for free, and require that child care workers earn a “living wage.” It was a plan that could save families billions, proponents said.

But the proposal has been stalled in Congress for months as Democrats try to convince the most conservative members of their party to sign on. Last week, Biden said he believes he can win enough support for some components — including some early childhood education measures — if they’re repackaged as separate bills. West Virginia Senator Joe Manchin, the key Democratic holdout who broke off negotiations in December, has previously backed universal pre-K. He told reporters Saturday that he’d return to the table. “We’ll just be starting from scratch,” he said.

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Shirmiel Duncan, co-owner of Journey Together Child Care, looks at a collage showing a student’s family.

Women missing from labor force

Women’s labor force participation leveled off in the 1990s and has been declining since the turn of the century, a trend economists think may be tied to the rising costs and declining supply of child care. As the pandemic upended lives — closing businesses, schools and daycares — data from the Bureau of Labor Statistics shows women’s labor force participation dropped to levels not seen since the 1980s, and it largely hasn’t recovered.

To Tessa Conroy, an assistant professor of agricultural and applied economics at UW-Madison, that makes child care not so much a women’s issue or family issue as an economic development issue.

She said it’s hard to say exactly how many parents might be sitting out the job market because of child care challenges, so she looks at a number she can measure: how many more women would be working if women and men participated in the workforce at the same rate.

By her calculations, somewhere around 100,000 Wisconsin women were “potentially missing from the labor force” in 2020. “We can’t assume that all of them are missing because of child care,” she said, but “we’re talking about a pretty big pool of people … that we might be able to access through more readily available and affordable child care.”

In many other countries — including France, Belgium and Canada — the government covers or shares in the cost of caring for children before they reach school age.

Fifty years ago, the U.S. was poised to enact a similar plan. The Comprehensive Child Development Act, passed by Congress in 1971, would have created publicly funded child development centers across the country for 3- and 4-year-olds. The proposed centers would offer free care for the poorest families, while middle- and upper-class families would pay on a sliding scale based on their income.

The bill had strong bipartisan support. But President Richard Nixon, despite having declared early childhood education a top priority, vetoed it following pressure from conservatives who called the bill communist. In a statement explaining his veto, he argued for a “family-centered approach.”

“The Federal Government's role wherever possible should be one of assisting parents to purchase needed day care services in the private, open market, with Federal involvement in direct provision of such services kept to an absolute minimum,” Nixon wrote.

That’s left U.S. parents footing the bill for care costs until children turn 5, as well as for after-school and summer care, unless they qualify for state subsidies or live in a school district that offers universal 4-year-old kindergarten. And that bill has skyrocketed, rising nearly 50% in inflation-adjusted dollars between 1993 and 2018 alone.

Meanwhile, the average number of children a woman is expected to have in her lifetime has been dropping for nearly 15 years. The country’s fertility rate hit record lows in 2018, 2019 and 2020, falling well below the rate needed to replace the country’s population. In a 2021 Pew Research Center poll of childless adults aged 18 to 49, 44% said they were not likely to have kids, with financial factors among the most common reasons cited.

Economists debate how important it is for a country to maintain replacement-level fertility, but they agree that a shrinking population can put added pressure on future generations of workers, create a smaller tax base and leave older generations short of workers to provide the care they need as they age.

“It's only going to get worse, in terms of worker shortage. We don't have to guess this. Our demographics are clear,” said Gene Dalhoff, vice president of talent and education for the Madison Region Economic Partnership.

Those who work in the child care sector have been sounding their own alarm for years, said Amundson of the Department of Children and Families, noting that “razor thin margins” have forced providers out of the industry at an alarming rate. The state lost more than 16,000 child care slots between 2011 and 2020, and Amundson said half of Wisconsin’s zip codes are considered “child care deserts” without enough slots for the children born.

It’ll take a major investment to save child care from becoming “a dying industry,” she said, and she thinks the Build Back Better plan shows that federal policymakers are finally on board.

“The inclusion of child care as a kind of Main Street infrastructure, critical puzzle piece – that's brand new, I would say, and that is so exciting.”

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Bianca Shaw, who now serves as director of the Office of Urban Development at the Department of Children and Families, is shown at a 2018 press conference at the Wisconsin state Capitol. In testimony before the Legislature, she spoke of about struggling to make ends meet after losing her child care subsidy.

Aid can be hard to get, keep

Through the Wisconsin Shares program, families making up to 185% of the federal poverty level can apply for government subsidies for child care. Around 17,000 families are currently enrolled in the program, but the Department of Children and Families believes far more families are eligible.

The agency raised monthly subsidy amounts last January by an average of $190, a move it anticipates will encourage more families to apply. It says the new levels will let families afford care at 80% of child care facilities, up from 35%. It’s also trying to encourage more providers to begin accepting the subsidy.

Recipients pay copays based on their income. A family with two kids in full-time care could pay anywhere from $50 per month to $500 or more. And some parents say it can be hard to meet the requirements. Parents must show proof that they’re working, in school, have a job offer or are participating in another approved activity. But some parents say it can be hard to secure a job or enroll in school without first having someone to watch their kids. Once they qualify, many find themselves scrambling to get their applications approved before the first day of work or school.

A policy proposal currently before the state’s Joint Finance Committee could ease that transition. If approved, the agency would spend nearly $30 million in federal pandemic relief dollars over two years to pilot an alternative child care subsidy that parents who already receive public benefits could apply for with minimal extra paperwork.

In addition to trying to smooth the onramp to child care assistance, the department has worked to improve the offramp. Traditionally, parents would abruptly lose child care subsidies when their income rose above program limits. That’s one example of what’s often called the “benefits cliff,” the sharp drop off in government assistance that comes as people begin to climb the ladder out of poverty.

It’s like “a rug being snatched from beneath your feet, causing you to tumble to the ground,” said Bianca Shaw, now director of the Office of Urban Development at the Department of Children and Families, who fell off the cliff several years ago. As she moved from living in a Milwaukee domestic violence shelter to working in a hospital and then as a legislative staffer, she watched as the safety net fell away. First she lost Medicaid coverage, then food stamps, and then, around the time her wages passed $17 an hour, the child care subsidy that paid for her daughter Olivia’s child care at the YMCA’s Northwest Early Childhood Education Center.

“That was the most detrimental because (it) was going to this place that essentially helps me raise my daughter,” Shaw said.

In 2018, Shaw recounted the experience in testimony before the Wisconsin Legislature, which was considering a variety of changes to the state’s welfare laws. “I thought I was getting somewhere when I obtained a job that paid well above minimum wage,” she said.

But her new income – a take-home pay of $2,100 per month – put her $374 over the limit for child care assistance. To keep Olivia in daycare, she’d have to pay $1,100 per month out of pocket, $400 more than her rent. The only option, she decided, was to give up her car to save on car payments and insurance.

“So that supposedly ‘good’ job I got meant that I put myself in a position of having to choose between reliable transportation and quality child care,” Shaw testified.

Today, due to a 2017 rules change, enrolled parents can remain in the program as their incomes grow. Once a family’s income exceeds 200% of the federal poverty level – $46,060 a year for a family of three – its subsidy drops by $1 for every additional $3 in monthly income until the family is making 85% of the area median income. It’s part of an ongoing effort to allow recipients to “embrace” promotions and better jobs “without fear of that benefit just shutting off like an on-off switch,” Amundson said.

Meanwhile, some providers are making it their job to help families navigate the aid system – or even offer scholarships of their own. In November, after four decades of running after-school and summer programs in Dane and Waukesha counties, the Wisconsin Youth Company hired its first family outreach coordinator, a full-time employee tasked with helping families qualify for assistance.

“We knew that there was a need, but we know that there are a lot of barriers for families applying,” said executive director Rebecca Carlin.

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A pair of 3-year-olds at Journey Together Child Care finish their morning snack.

The other worker shortage: child care teachers

It’s impossible to talk about child care and worker shortages without talking about the worker shortages plaguing the child care sector itself.

Shirmiel and Jimmie Duncan opened Journey Together Child Care in Madison’s Allied Drive neighborhood in 2018, inspired by their own struggle to find quality, affordable child care for their six children.

“If we can provide that support to other families, maybe they wouldn't have to go through what we went through,” Shirmiel said.

They currently have four employees who care for around 21 children, and they’re looking to add more than a dozen teachers to their pool. They raised the starting wage to $15 to $17 per hour and offer dental and vision benefits, with health insurance in the works. Still, they say, it’s hard to draw applicants.

“We are getting people trying to place their kids in here, but we’re struggling because we don't have enough teachers to fill these positions. So we’ve had to turn parents away or put them on a waiting list,” Jimmie said.

At Yahara River Learning Center in DeForest, owner Macy Buhler is facing a similar hiring challenge. She thinks her teachers deserve far more than the $16 to $17 an hour she offers. But while her expenses dropped by about $5,000 a month when she bought her 7,400-square-foot building, mortgage payments and her 20-person payroll still keep the margins tight. “There’s no reason they shouldn’t be making 40 grand plus a year, but I can’t afford that and parents can’t afford that … The biggest growth period of a brain is birth to age 6, and we pay those teachers the least,” Buhler said, noting that the average early childhood educator makes less than a third of the salary of a college professor and around half the pay of a school teacher.

“We’re never, ever going to get over our staffing crisis when my staff can go work and make more at Kwik Trip or Target or Walmart.”

It’s not just the staff who are underpaid. Buhler’s own family relies on her husband’s income to pay the bills. She’s paid from the business’ profits and doesn’t draw a salary. 2021 was the first year in her five years of operation that she took home more than $11,000.

Family child care center owner Corrine Hendrickson isn’t doing much better. She opened Corrine’s Little Explorers in her New Glarus home in 2007 as her own solution to the child care shortage. She had a 10-month-old son, a degree in education, a job as a retail manager at Bath & Body Works, and three pregnant friends who couldn’t find infant care.

“I said, ‘Well, if I quit my job and use my degree, would you come to me?’” Hendrickson recalled.

Today she cares for up to eight children at a time, and she’s built an addition so she’s not climbing over playpens in her living room. But though the overhead costs of her one-woman operation are lower than those of many facilities, by her calculations, she makes just $8 an hour.

Raising rates would mean losing families, she said, explaining that providers set prices based on what they think families can afford.

“No other business model does that,” Hendrickson said. “You would take that plan into a bank and ask for a loan and they would laugh you right out of the office.”

Hendrickson knows multiple veteran child care providers who are on their “last batch” of kids before getting out of the business, and she understands why. The usual strains have combined with the special challenges of the pandemic: She’s become a licensed COVID tester in order to carry out a weekly regimen of rapid testing known to her young charges as “Booger Day,” and Hendrickson herself finally caught COVID around Christmas, shutting down the center for weeks.

“Child care programs are being run by this incredible, resilient group of women who are willing to keep losing out because they want to provide this amazing service to their communities and to the families that they've supported for so long. And as a country, we take advantage of that,” said Ruth Schmidt, executive director of the Wisconsin Early Childhood Association.

“What you've seen is this breaking point, this tipping point that child care is at: We've done this as long as we can do it this way.”

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Promega employee Katie Herbrand says goodbye to her son Mack Herbrand as she drops him off at Woods Hollow Children’s Center at Promega's campus in Fitchburg.

Could Madison fix the child care market?

Zach Brandon, president of the Greater Madison Chamber of Commerce, thinks of the local economy as a tent that can’t stand up without all of its poles, the major industries like health care, technology and government. But when the pandemic hit, his eyes shot to a different piece of the tent, one that holds the others together.

“There might be a little tie at the top that you just forget about, (until) a gust of wind blows the whole thing over,” Brandon said. That tie is child care, something most people don’t think about unless they’re currently using it, he said. He sees the pandemic as that first gust of wind, presenting both a warning and an opportunity.

Back in March 2020, he and his colleagues started to wonder whether the Madison area could manage to hold onto its child care slots as the pandemic began to shut things down. What would happen if providers closed for good?

“Restarting an economy is going to need to start with child care,” Brandon said.

So when Dane County Executive Joe Parisi asked the Chamber how the county should spend a limited amount of county funds – prior to the infusion of federal pandemic relief dollars – Brandon’s answer was simple: child care. Parisi put $3.5 million into a fund designed to stabilize the child care industry by offsetting providers’ losses.

The issue would come up again in fall of 2021, when the Chamber and United Way of Dane County convened three focus groups to discuss what was causing the ongoing labor shortages. One group was made up of economists and demographers, another of industry leaders, and one of workers and potential workers, including those earning low wages.

“There was only one common thread across all three, and that was child care,” Brandon said.

Today, the Chamber and United Way are bringing together members of all those groups to devise immediate solutions to the child care dilemma. They’re mulling ideas like whether businesses with brick-and-mortar locations can offer unneeded space for child care centers, allowing providers to avoid one of their biggest costs besides payroll: rent.

But Brandon thinks a long-term fix will require something bigger: admitting that “the model is broken.”

“This is not just an acute problem – this is a chronic problem,” Brandon said. He thinks the proposals in Biden’s Build Back Better plan would be a key step, but he’d also like to see local leaders in business and government work together to improve the system further, including by drawing more people into careers in child care.

“There's certainly the potential that this region could become an example of how you fix the market failure, and that should help us recruit and retain talent.”

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Shirmiel Duncan, co-owner of Journey Together Child Care, puts boots on a child as the class gets ready to play outside.

Wisconsin employers seek solutions

Every month, Forward Service Corporation holds a graduation for its four- to six-week training programs designed to prepare participants for jobs in call centers, logistics or office administration. Every month, at least a few graduates say that they won’t be entering their new field yet because they can’t find child care.

“That's a particularly hard, emotional thing for me,” operations director Brian Covey said. “They are very excited to start their career, they've attained the skills, but they can't start because child care is holding them back.”

Traditionally, employers have played only a limited role in helping their workers find or pay for child care. Many offer workers the option to pay into flexible spending accounts, saving pre-tax dollars for child care as they would for medical expenses. American Family Insurance told the Cap Times it’s negotiated a lower rate for its employees at some local child care centers. Some allow employees to set work schedules to fit their child care responsibilities, and some subscribe to services that help employees search for providers.

Madison-based biotech company Promega went a step further in 1991, sponsoring the creation of the nonprofit Woods Hollow Children’s Center on the company’s Fitchburg campus. Promega employees get priority when slots open up at the 150-child center, though they pay the same rate as non-employees, around $2,000 per month for infants and $1,500 to $1,900 per month for older children. Though the nonprofit is not part of Promega, the company provides additional funding when needed to keep up the center’s cash flow, and staff provide expertise by serving on the nonprofit’s board.

The company advertises Woods Hollow in its job listings, and applicants often call the center to inquire about availability while they’re still interviewing. But human resources director Gayle Paul said Promega thinks of Woods Hollow as an asset not just to its employees but to the community. “If employers are looking for ways to both benefit their teams and give back to the community, this is a great way to do it: to build a relationship with a center and to provide some support.”

Now, as companies struggle to find and retain workers, other business leaders are considering what role they ought to play in solving child care challenges. So too are labor unions: Plumbers Union Local 75 wants to build a child care center inside its forthcoming Madison training center in a former east side Menards.

In October, Sachin Shivaram, CEO of Wisconsin Aluminum Foundry in Manitowoc, penned an op-ed on the “complexity and gravity of the childcare conundrum.” Shivaram told the story of one employee, a single dad who drops his 3-year-old daughter at a different friend’s home each night so that he can work the night shift.

“Without a childcare solution, we have no hope for resolving the national labor shortage,” Shivaram wrote. His company now reimburses employees $400 a month for child care, and they’ve begun planning to open their own child care center. The company plans to charge employees just $100 a week, but care would cost the company $40,000 per child each year, Shivaram said.

That, he wrote, is why he backs Biden’s Build Back Better plan. “As a businessperson with a distaste for higher taxes, I would rather see a private-sector solution. But I recognize that piecemeal initiatives like what our company is doing will not get us there.”

In Madison, Patrick DePula is lobbying for Biden’s plan too. The restaurateur behind Salvatore’s Tomato Pies still thinks back on 2011, when he and his wife opened their first pizzeria in Sun Prairie. Their oldest child was 3 and their youngest just 3 weeks, and their only viable child care was 45 miles away – at DePula’s parents’ house in Janesville.

“We spent four hours a day driving back and forth to Janesville ... because there was no possible way we would have been able to afford child care while working in a restaurant.”

Today, he sees his employees facing the same sorts of challenges, which keeps them from taking on additional hours and makes it hard for his managers to schedule consistent shifts. Servers at his downtown Madison location make $7.25 an hour plus tips – more than three times the $2.33 state minimum for tipped workers – and receive benefits, but he said small businesses like his can’t offer adequate child care benefits without government help.

He thinks business owners in the hospitality industry should push for child care changes, which he believes will help stabilize an often-unstable line of work and “really give our industry hope for the future.”

Child care is now part of the cost of doing business, said Gene Dalhoff of the Madison Region Economic Partnership. “We can't point to child care and say, ‘That's somebody else's issue,’” Dalhoff said. “If (businesses) want to be fully staffed, they need to expand (benefits) beyond what they're used to thinking about.”

Meanwhile, the Department of Children and Families is trying to mobilize concerned employers. In February, the agency will launch Project Growth, a $20-million initiative designed to grow “innovative partnerships” between businesses and child care providers. The program follows the Partner Up grant program, which has awarded $10 million in grants to employers who purchased child care slots for essential workers.

Amundson is hopeful. “We've seen a lot of interest from chambers of commerce and affiliated business groups who say, ‘We have a stake in solving this problem.’”

Parents weigh work options

In December, Ashlee Xiong hung decorations around her Sun Prairie home, and she cut cake to celebrate her daughter’s first birthday.

Now, as Xiong nears the end of her first year as a stay-at-home parent, she’s still not sure when she might rejoin the workforce.

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Ashlee Xiong holds her 1-year-old daughter Audrey Paque at their home in Sun Prairie. Faced with child care costs nearly as high as her paycheck, Xiong quit her job last year to become a stay-at-home mom.

One thing she’s sure of: Until something changes, she’s not ready to have more kids.

“Considering how much it is just for one child now, I think adding a second one to the mix would definitely bring up costs. And I don't think my partner and I are in a position where we’re financially ready for that, and also mentally and emotionally ready for that.”

For now, she’s reflecting on life as a stay-at-home mom and trying to find her own identity, outside of being a parent.

Before having a baby, she didn’t base her career goals on a salary. But now, to shoulder the cost of child care on top of her student loan debt, she knows she’d need to choose a job where she makes significantly more than she did before.

It’s just what parents do, she said. “Ultimately, you just want what's best for your children. So I think, at the end of the day, you just have to do the job in order to afford what you can in life and get by.”

Editor's note: This story has been edited to note that United Way of Dane County worked with the Greater Madison Chamber of Commerce to organize the focus groups and work groups described here. 

This story has also been corrected to reflect that 200% of the federal poverty level is $46,060 per year, not per month.

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