The United States has long struggled with the challenge of providing quality, affordable child care for working parents. Recent proposed investments in the “care economy”—part of President Joe Biden’s Build Back Better agenda—were left on the congressional cutting room floor. Despite this setback, the administration continues to take steps to address the issue through executive action, as our Brookings Metro colleague Molly Kinder observed recently.
This spring, the Biden administration, through the Department of Commerce, asked semiconductor manufacturers vying for a share of the $39 billion in incentives from the CHIPS and Science Act to include a strategy for workers to access affordable and high-quality child care services. While such actions will not alone buttress a care system that many argue is in crisis, the door has been opened for state and local policymakers, in partnership with employers, to try innovative policies that provide support to families in need.
In today’s modern industrial economy, reliable, affordable, high-quality child care is both a necessity and a mutually beneficial policy for workers, businesses, governments, and children. Workers benefit from higher earnings and a more equitable labor market. Businesses benefit from reduced employee turnover and absenteeism, increased worker productivity, and a larger pool of qualified job applicants. Governments benefit from the increased earning potential of children who attend high-quality day cares as well as an increased rate of parental labor force participation. Most importantly, children benefit by having a safe and supportive environment during the workday.
Yet despite these benefits, even before the pandemic, the child care system in the United States was falling apart. Today it is in even worse shape, putting undue pressure on parents—particularly mothers—who too often must choose between managing unreliable care arrangements while working or leaving the labor force altogether. Conservative estimates suggest that the nation’s inadequate child care system results in an annual loss of $122 billion in earnings and productivity—and that’s solely for parents of infants and toddlers.
Child care workers continue to be some of the lowest-paid professionals and often lack health care and retirement benefits. They earn less per hour than parking lot attendants and animal caretakers. Without concerted efforts to improve the quality and compensation of these jobs, the root causes that have led to a shortage of child care workers will not be addressed.
But paying child care workers more and providing them better benefits is a difficult proposition if parents and guardians are expected to shoulder the full cost. Across the country, the cost of center-based child care is higher than the cost of in-state tuition at a public four-year university. High-quality centers generally cost even more. The Department of Health and Human Services defines “affordable child care” as costing less than 7% of income; however, recent surveys have found that more than half of families spend 20% or their income or more on child care.
Finding solutions to such a widespread problem requires an ambitious approach. The incentives provided to employers and the new regulations introduced by the Commerce Department in implementing the CHIPS and Science Act could serve as the catalyst for implementing such an approach.
The Commerce Department guidelines afford a high degree of flexibility for semiconductor companies and the localities hosting them to develop proposals to receive federal incentives. This creates both risks and opportunities The risks primarily stem from individual companies trying to go it alone—if they create or run their own child care centers, they could potentially harm other businesses and workers by luring workers away from already understaffed and financially strained centers.
Better solutions exist, but they require a coordinated approach involving employers, economic development professionals, workforce developers, educators, and child care businesses. Such solutions involve leveraging state and local governments as partners to direct funds to communities and enable them to offer more, higher-quality, and affordable care to all families.
One solution that grant-seeking employers can implement is to enter into community benefits agreements, which articulate specific strategies for maximizing and sharing the benefits of public subsidies. For example, the Commerce Department might look favorably upon semiconductor manufacturers that propose contributing to community-wide funds for child care, which would go beyond merely assisting their own workers. Community benefits agreements could also be used to support supply-building efforts. For instance, Minnesota’s Child Care Wayfinder program identifies aspiring providers and helps them navigate the business and regulatory process to start new care businesses or expand existing ones. Other community benefits agreements, such as First Children’s Finance and the IFF, focus on helping providers excel through financing and operational success.
In their attempt to leverage semiconductor incentives to build broader industry clusters, state and local governments could also provide additional and sustainable funding for better child care for the entire community. One such mechanism to accomplish this goal is the creation of tax increment financing (TIF) districts, in which a portion of the increased property tax or other revenue in a designated local cluster pays for needed infrastructure improvements, including constructing child care centers accessible to all community members. In some states, it could also be used to expand education and training for child care workers.
Furthermore, state and local governments might also expand models like Michigan’s MI Tri-Share program, in which the cost of child care is divided between eligible employees, employers, and the state. The program is facilitated by hubs that operate out of local community partners, such as child care-focused nonprofits and economic development organizations that alleviate administrative burdens between employers, employees, and child care businesses. The hubs help employers identify employees who are eligible for the program, work with those employees to find licensed child care businesses, and collect payments from employers, employees, and the state to pay those businesses in a timely manner. Under this system, the cost of providing high-quality child care is distributed more broadly within the community, providing a stable source of funding for child care businesses.
The semiconductor incentives outlined in the CHIPS and Science Act were meant to support thriving national and local economies. A variety of functional systems—including local child care, K-12 education, transportation, and housing—are important components of thriving economies. Leveraging this federal investment to enhance support for child care for all workers in a community can ensure that the growth in semiconductor manufacturing will also result in inclusive growth for all of a community’s population.