It’s common sense that parents with young children need access to child care in order to obtain and retain a job, which makes child care providers a vital part of local and state economies. That’s why a report released by the Committee for Economic Development, Child Care in State Economies: 2019 Update is so important. The report reviews the market-based child care industry (which includes centers and home-based child care providers) and estimates that child care has an overall economic impact of $99.3 billion – supporting over 2 million jobs throughout the country.
What the report shows is that there is a strong link between child care and state and local economic growth and development. And, that the child care industry causes spillover effects (additional economic activity like the purchase of goods and services and job creation or support within the community) beyond those employed within child care or the business income of those operating centers or home-based programs.
Here in North Carolina, child care programs have an overall economic impact of $3.15 billion ($1.47 billion in direct revenue and $1.67 billion in spillover in other industries throughout our counties and cities). Child care programs have an overall jobs impact throughout the state of 64,852, which includes 47,282 individuals who are employed within child care centers or who operate a home-based business plus another 17,570 in spillover jobs – created through the activity of those operating child care programs.
The economic impact of child care matters because it helps drive local economies. When parents can access child care, they are more likely to enter the workforce and stay employed.
Access to affordable child care also supports parents who seek additional education or job training, which can result in higher earnings over an individual’s lifetime. For example, according to U.S. Census Bureau data, the difference between the income of a parent in North Carolina with a high school degree and a parent who dropped out of high school is $6,231 annually[i], but over a lifetime, that’s $249,240 the parent would earn just by going back to school to earn a high school diploma. If that parent were to enroll in community college, and obtain an Associate’s degree, he or she could earn $10,652 more annually[ii] or $426,080 more over a lifetime compared to a parent who has not graduated from high school.
Earnings for those with a college degree are that much higher — $17,748 annually[iii] for a parent who has a Bachelor’s degree compared to a parent with an AA ($709,920 more over a lifetime). When parents have access to child care, both labor force participation grows (and with that, the ability for parents to support their families) and also the potential for parents to return to school to increase their earnings over the long-term becomes possible.
Child Care Costs & Labor Force Participation
In North Carolina, the average annual cost of child care is expensive. For center-based infant care, the cost is about $9,254 per year, and for home-based care, it’s $7,412.[iv] The cost of center-based infant care exceeds the cost of tuition at our 4-year universities and is 19.2% of state median income. With an understanding of the economic impact of child care, it’s concerning that parents may opt out of the workforce or reduce their hours at work when they can’t afford to pay the cost of child care. It not only means that parents could be less likely to be self-supporting, but that local economies are impacted as well – twice in fact. First, they are impacted by families who without employment may depend on welfare and second, communities are impacted by revenue foregone (no earnings or reduced earnings by those who reduce their hours means less revenue to support basic community needs such as police and fire protection, or local schools).
The CED report finds an economic return related to the use of child care subsidies that support parents in entering or staying in the workforce. CED estimates that for every additional federal dollar spent for child care subsidies to help parents work, there’s a $3.80 increase in state economic activity.
Child Care has a Two-Generational Impact
While I’ve mentioned the economic impact of child care on state and local economies, there is also the two-generational role that child care plays with regard to families and young children. Child care is a work support for parents, but it also enables children to be in a setting that promotes their healthy development and school readiness (while their parents work). In this way, child care not only has a direct impact on the economy today, but also impacts the economy of tomorrow.
The impact of child care is broad-based:
- There’s the direct impact of economic activity or revenue generated by those in the child care industry (centers and home-based providers),
- There’s the indirect impact or spillover impact that results within communities from the operation of these businesses,
- There’s the employment impact of jobs within the industry and spillover jobs as a result of the industry,
- There’s the employer impact as parents who have access to child care reliably show up for work and are productive while at work, and
- There’s the impact on children who have access to quality child care that supports their healthy development.
Check out CED’s Child Care in State Economies: 2019 Update report today.
[i] U.S. Census Bureau, Table S2001, Earnings in the Past 12 Months, 2017 American Community Survey. https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_17_1YR_S2001&prodType=table
[iv] The US and the High Cost of Child Care:2018, Child Care Aware of America, http://usa.childcareaware.org/advocacy-public-policy/resources/research/costofcare/