Briefing: The Child Care Crisis

Part 2 The Bookends

Note, this is a series I’m doing about childcare in the US, motivated by the upcoming cliff in childcare funding. You can read Part 1 The Set Up to learn more about that.

If childcare is such a good idea, why don’t we have it? Today’s stack is an introduction to the bookends.

1 The Iceberg

2 Disparate Leave

3 Disparate School

4 The Cookies

Get excited! I’d decided to write part of this as quasi role playing where you are assigned the role of the federal government!

1 The Iceberg

There’s a dizzying array of statistics that you could point to that illustrate how the private provision of childcare in the US is failing families. It is overpriced, undersupplied, unstable, and it results in women having fewer children than they want to and working less than they want to, not to mention the foregone returns to investing in early childhood education. So why don’t we fix it?

Put differently, the government has been spending billions of dollars over the past two and a half years to prop up the fledgling industry, so why doesn’t it keep on doing that?

Some would cite costs and say it’s too expensive. I am always deeply skeptical of this reason as binding. We choose what we can afford. It’s not a constraint but a preference. If we wanted care, we could afford it. Saying we can’t afford is just saying we don’t value it, and it’s again the same question put differently, why don’t we value it?

From a policy design perspective, this is a classic iceberg problem, above water it looks tractable, but there’s a lot under the surface that is much more difficult to figure out. Specifically, what to do about the bookends.

Children are put in childcare between the period of time after birth when they are home with their parents (leave) and when they are eligible for public education (school). Those bookends are not clearly defined. Very high earners can have quite generous paid lead, lasting months, for both mothers and fathers, but the vast majority of Americans have no paid leave and receive nothing from employers. School districts may have preschool for all children but even free, full-day kindergarten is not required or guaranteed in half of states.

More importantly, those bookends are ruled by non-federal actors—employers on one side and local school districts on the other. A bridge investment between them must now coordinate with the incentives, preferences, and capacity of every employer and school district in the US.

Like I said, iceberg.

2 Disparate Leave

There’s a lot.

Paid family leave is a workplace benefit in which a worker receives some portion of their usual paycheck to stay at home to care for a family member for some period of time. The US doesn’t have it, meaning that it is neither provided by the federal government nor required to be provided by employers. Employers can choose to offer it, and the vast vast majority do not. About a quarter of workers have paid family leave, but even among the highest 10 percent of wage earners, fewer than half have paid family leave (per the BLS).

Separate from paid family leave is short-term disability insurance (STDI or TDI, for temporary). This is a policy that employers hold. Workers who are covered by the policy receive a portion of their paycheck for a certain period of time when they have a longer-than-sick-days but recoverable illness. A lot of policies kick in on the 8th day of illness and extend for up to six months. Delivery is a covered condition—6 weeks for vaginal and 8 weeks for caesarian. About 40 percent of workers have STDI.

The Family Medical Leave Act (FMLA) guarantees workers who meet certain requirements based on time spent with an employer and employer size can have job protection in the event of family leave or medical leave. You can think of it as unpaid leave, but it’s really just that their employer has to have their job waiting for them.

Some states have stood up their own programs run through a payroll tax social insurance system. California’s is the largest, though Rhode Island’s was the first. They range from offering 6-12 weeks of benefits, and the replacement of wages during leave is also highly variable.

If the federal government were going to provide free or near-free childcare, when should it begin? At zero, which is the number of weeks most people have of paid leave? At six, the disability insurance minimum for delivering moms? At twelve, the end of mandated leave in some states?

If you’re thinking (and of course in this scenario you are the federal government):

Hey just give money to childcare providers through a grant system and they’ll offer whatever is appropriate based on the laws and norms in their area.

There’s a hitch. Not just a hitch, but more like

If you give a mouse a cookie…

Infants are very expensive to care for. In most localities, there are ratio mandates for caregivers that varies with age. For infants, it can be 3-to-1, compared to 14-to-1 at older ages. If there were no requirement on what centers had to provide, they’d have a lot easier time refusing infants.

Okay well if that’s the case, you can just require them to offer care to all ages.

But, if you require care to be provided at all ages, now there’s a host of incentive problems. Parents get free childcare the day their kid is born—this reduces the incentive for employers to offer any leave or extended leave. And it reduces the incentives for workers with partially paid or unpaid leave to stay at home—they’d get more money if they worked. So now you’ve reinforced that only rich people get to stay home with their kids and poor people are expected to drop off their kids on the way home from the hospital.

Okay okay okay, so how about some other minimum acceptance age, like 12 weeks, the FMLA cutoff???

It’s probably the most reasonable in the confines of the current system, but about half of workers don’t have any FMLA coverage, so there will be unmet need for care before 12 weeks.

And there’s the political issue. States that have paid leave are taxing employers in their state to ensure parents have a funded period with their new children. As a result, they have reduced their overall need for infant care outside of the home aka the thing that you, federal government, are now willing to pay for. So now you are giving more money to states without paid leave, rewarding them with federal dollars and eroding their incentive to have a paid leave program.

There’s no way to do it that doesn’t create 1) gaps 2) inequity and 3) bad incentives for 3a) states and 3b) employers. And it’s also just gross that we don’t have guaranteed paid leave. If the federal government is going to pay for childcare, it has to create a federally uniform and universal paid leave program to provide seamless and equitable care and investment to all workers. Otherwise there’s a bad actor making out like a bandit.

Okay so no need to panic, let’s have paid leave, how hard can that be??? I can do that, right???

Sweet summer child, there’s a bit of a hitch here too. The most efficient and effective way to provide paid leave is to add it to Social Security. Workers and employers would split a payroll tax, just like they do for old age benefits; everyone who works in the US would be covered; there is no additional administrative burden for employers; coverage is universal, portable, and equitable; and there are already a thousand application centers distributed through the US, you just need some more and more staff.

Sounds great!

Doesn’t it? The hitch is that this would require amending the Social Security Act, and that would most likely be politically impossible to do without addressing the old age program’s 75-year shortfall. There has been no political willpower to maintain or invest in Social Security, which is why it hasn’t seen a major reform since the early 1980s.

In sum, you need to 1) fix Social security so that you can 2) add a federal paid leave program so that then you can 3) create a federal childcare program.

I am a big sad.

And we’re only halfway done!

2 Disparate School

This is a lot more straightfoward than leave to understand. Each school district in the US varies in when they start enrolling kids: age three (two years of preschool), age four (one year of preschool), age five (kindergarten). And even if they offer it, it’s not always guaranteed, full-day, or free. Some of them incorporate preschool into elementary schools, others offer it at separate care locations.

So now, you the federal government, want to ensure that there is childcare for every kid, and it’s a similar problem politically as it was for states with paid leave. If you just “close the gap” based on what’s already provided, you would be giving more money to states that have chosen to spend less themselves by not having any preschool or full kindergarten. Either you cut off funding at age 3 and tell states to start offering preschool, or cut it off for some places at 3 or 4 and others at 5, or you spend up to age 5 and subsume current state and local spending and programs.

And again, there’s incentive issues, the older kids are the cheapest kids, and in this case, care is cheaper than school.

That actually wasn’t as bad as I thought it would be based on the to-do list created on the leave side.

But you’re also starting to bump into another big problem: teacher shortages. This is a problem that’s getting worse and the expansion of care could exacerbate. Traditionally, childcare workers are very low paid because the profit margins are so small. Federally funded care would presumably reduce the downward pressure from profit concerns and allow providers to pay more. And to ensure quality of care, federal dollars could come with training requirements, benefits, or even federal salaries.

Those are all good things—it would just be occurring alongside a crisis in teacher pay, which is going in the wrong direction.

‘Care pay versus teacher pay’ and ‘care labor supply versus teacher labor supply’ aren’t issues on the younger side, but they are certainly issues for the age 3-5 kids when the line of whether they should be in school or whether they should be in care starts to get quite fuzzy.

So…..

So! The expansion of care that you want would require additional workers, additional pay and training for those workers, and if you pull too much from the (potential) teacher workforce , you’ll need to do something about generating additional teachers or additional teacher pay. You have much less room to manuever because states pay teachers, and you don’t have much control over that. And it’s a tough time to require tens of thousands of new workers, considering we are in labor force decline due to the aging population.

How long has teacher pay been a problem that we haven’t addressed?

At least twenty years.

I guess that’s not as bad as Social Security, because that’s been forty years, right?

That’s the spirit.

4 The Cookies

Childcare doesn’t exist in isolation. Even if the federal government decided to put its full resources and energy to making sure every kid in America had access to high quality childcare, the context for that window of investment is fraught with problems we’ve left unaddressed for decades:

• Lack of universal paid family leave

  • Bonus! The long-run shortfall in Social Security

• Uneven offerings of preschool

• Eroding teacher pay

  • Bonus! Worker shortages

There are a lot of bills coming due that childcare brings up. But the benefits of childcare, and what we lose by not having it, are getting too large to ignore. More on that to come.