Economic Growth Depends on Child Care – Progress Post Labor-Day Needed

As Labor Day approaches, there is much to celebrate. The nation’s unemployment rate, which rose in spring 2020 with the onset of the COVID-19 pandemic, has returned to 3.5% (the same level of unemployment that existed in February 2020).1 North Carolina is recovering faster than the national average with unemployment at 3.4%, below the national average and below the state’s 3.7% unemployment rate from February 2020.2

Still, the journey toward economic growth remains challenging. Another measure of working Americans—the employment-population ratio, which measures the number of workers against the population—remains lower than February 2020 throughout the country for both men (-1.6%) and women (-.9%).3 For North Carolina, the employment-population ratio in June 2022 was 58.4%, similarly down from 59% and mirroring the decline in national employment.4

The most recent Census Bureau Household Pulse Survey reflecting workforce data from June 29-July 11 found that 6.1 million parents are not working because they do not have child care (176,984 in North Carolina).5 In the past four weeks, an additional 6 million parents (237,251 in North Carolina) had challenges with child care that kept them home temporarily.6 Throughout the U.S., about 63% of these parents are women, but in North Carolina, 70% are women.7

What we know is that parents need child care in order to work or return to the workforce. We also know the supply of child care falls short of the demand in many communities. And many families struggle with the cost – not just families earning low-incomes, but families with average incomes. For example, in North Carolina in 2020, the average income of families with children under age 5 who paid for child care was $118,000, while the average income of families with children under age 5 who did not pay for child care was approximately $80,000.8 That’s an income gap of approximately $38,000.9

With the additional federal child care funds sent to states as part of the 2021 Coronavirus Response & Relief Supplemental Appropriations (CRRSA) Act10 and the American Rescue Plan Act (ARPA),11 many states increased income eligibility for child care subsidy to support working parents, 12 waived co-pays to help make child care more affordable13 and revised program payment practices to pay on enrollment rather than attendance. These measures were intended to promote program stability and support working families.14

States also invested in strategies to boost the quality of the child care workforce and increase compensation for child care educators. In a tight labor market, recruiting and retaining child care staff has been challenging. But, what we saw with the supplemental federal child care dollars that were allocated to states was that child care administrators met marketplace challenges with bonus and retention grants, wage supplements such as WAGE$ and AWARD$ and workforce development strategies such as T.E.A.C.H. scholarships (now in 24 states)15 and new ECE apprenticeship programs. 16,17

Child care needs additional investment because child care as a business is a system that struggles to meet the needs of families and those that work in child care programs. It is a fragile business model because parents cannot afford what it really costs to operate a high-quality child care program. Pay for child care professionals depends on program revenue generated by parent fees, but parents already struggle with the cost. It is nearly impossible to raise the wages of people working in the industry without supplemental investments because parents simply cannot pay more. 

I am, by nature, an optimistic person. Although the budget reconciliation bill passed by Congress last week did not include child care funding, there are opportunities this fall that can make a difference. 

We can see the impact of the additional federal child care funds on the child care market from the past federal COVID-19 relief measures. Those investments are working. The industry did not collapse. But the stabilization strategies are temporary. We need to figure out long-term ways to invest in child care as a public good so parents can work, children can learn and those who work in child care can earn sufficient wages to support their own families.

The new federal fiscal year begins October 1. The Senate FY2023 Labor, Health and Human Services and Education Appropriations bill (released July 28) includes an increase of $1 billion for child care. It also includes increases in other important early care and education programs such as a $1 billion increase for Head Start, a $60 million increase for Preschool Development Grants Birth to Five (PDG B-5) and an increase of $95 million for early intervention grants to states (I.D.E.A. Part C) to support infants and toddlers.18 While less than envisioned as part of the House-passed Build Back Better Act earlier this year, the annual appropriations bills to be passed this fall are an important opportunity to continue increased investments in child care and early childhood programs.

Another opportunity to potentially be considered this fall could be bi-partisan discussions related to reauthorization of the Child Care and Development Block Grant. Earlier this year, Senator Richard Burr (R-NC) and Tim Scott (R-SC) introduced legislation, S. 3899, which includes many important investment concepts, including workforce investments and cost-modeling. In addition, Representative Katherine Clark (D-MA) introduced the Child Care is Infrastructure Act, H.R.1911, which allocates funds for facilities (supply expansion and renovation/repairs) that could help support child care in communities where parents struggle to find care due to supply shortages.  

There are four months remaining in calendar 2022. Using these months to push aside partisan politics and pursue much-needed policy innovations is well worth the time of our elected officials. Parents need access to child care. Economic growth depends on working parents.


1U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, July 2022.  
2 U.S. Bureau of Labor Statistics, North Carolina Economy at a Glance, June 2022.U.S. Bureau of Labor Statistics, Employment-Population Ratio, July 2022.
4 U.S. Bureau of Labor Statistics, North Carolina Employment-Population Ratio, June 2022.U.S. Census Bureau, Table 3. Educational Attainment for Adults Not Working at Time of Survey, by Main Reason for Not Working and Source Used to Meet Spending Needs, July 2022.U.S. Census Bureau, Table 1. Childcare Arrangements in the Last 4 Weeks for Children Under 5 Years Old, by Select Characteristics, July 2022.
7Ibid.Committee for Economic Development (CED) of The Conference Board, The Economic Role of Paid Child Care in the U.S. – A Report Series, 2022.
102021 Coronavirus Response & Relief Supplemental Appropriations (CRRSA) Act, P.L. 116-260.
11The American Rescue Plan (ARP), P.L. 117-2.
12Early Learning Policy Group, Income Eligibility for Subsidy/SMI by State, July 2022. 
13National Women's Law Center, At The Crossroads: State Child Care Assistance Policies, 2021.
14Early Learning Policy Group, Enrollment vs Attendance Payments by State, June 2022.
15 Child Care Services Association, T.E.A.C.H. National Center.
16 Child Care Services Association, American Rescue Plan Funding: Child Care Workforce Investments, 2022.
17 U.S. Department of Health and Human Services, Administration for Children and Families, Scaling the Early Childhood Education Pipeline through Registered Apprenticeships, 2022.
18 Senate FY2023 Departments of Labor, Health and Human Services and Education Appropriations bill, July 28, 2022.