The Child Care Sector Will Continue To Struggle Hiring Staff Unless It Creates Good Jobs

As the U.S. labor market continues its historic and remarkable recovery from the depths of the pandemic-induced recession, the child care workforce stands out in stark contrast, struggling to regain its significant pandemic-related job losses.¹ More than two years after the start of the pandemic, the child care workforce—mostly employing women and, disproportionately, women of color—continues to operate below pre-pandemic levels. This not only harms the sector but also precludes workers with caregiving responsibilities, primarily mothers, from fully participating in the labor force.²

While pandemic-related lockdowns and associated challenges account for the initial decline in employment, the child care sector was already on an unsustainable path prior to the pandemic. The pandemic and economic recovery merely exposed a critical workforce issue plaguing the sector: a lack of good jobs. Child care workers—which include both teachers and aides/assistant teachers—are some of the lowest-paid workers in the United States and are less likely than other workers to have access to benefits through their employer. Additionally, workers of color in the sector experience very large pay gaps.³

Amid a tight labor market that has given low-wage workers more power, many low-wage workers are reassessing their career choices and seeking better jobs from their employers and the labor market. The child care workforce, in particular, has demonstrated that without major improvements to the quality of jobs, including better wages, workers do not plan to return to their pre-pandemic work.

A child care workforce operating below capacity significantly affects the overall economy. As parents struggle to find care for their children, some—most likely mothers—may have to reduce their working hours or drop out of the labor force altogether.⁴ And for early childhood educators who remain in the sector, increased responsibilities can lead to higher levels of stress, which may cause more workers to leave the workforce or reduce their productivity. Notably, it has been well established that better-quality jobs are associated with less worker turnover and higher productivity, which also benefits employers.⁵

Without new government investments aimed directly at improving job quality—including through increasing wages for staff—the child care sector will not make up its significant shortfall in workers. Policymakers must meet the moment and invest in child care immediately, particularly since child care workers are essential to keeping the U.S. economy strong.

Since February 2020, the childcare workforce has lost 88,000 jobs, or 8.4 percent of its pre-pandemic workforce. (see Figure 1) In stark contrast, all private sector jobs and nonfarm employment have been recovered. Over the course of the past 2 1/2 years, the child care workforce has struggled to keep up with the job growth taking place in other sectors. While child care job growth has occurred for much of 2022, it has been too slow to make up for the large deficit and remains slower than job growth in other sectors. In fact, in June 2022 the sector had only just reached more than 10 percent below pre-pandemic employment.

It is clear that without a major rethink of the child care sector, workers will not come back.

Figure 1

Without relief funding included in the Biden administration’s American Rescue Plan (ARP), the sector would have suffered even larger workforce losses. ARP dollars were integral to keeping many sites open, preventing the permanent closures of nearly 75,000 sites and saving more than 3 million child care spots.⁶ Significantly, three-quarters of stabilization grant recipients used these funds to support worker compensation—mostly through bonuses, though 38 percent increased baseline pay. However, bonuses are not sufficient, and wages are still too low to attract and retain staff.⁷

The ARP funding was a temporary fix applied to a long-term structural issue. More must be done.

More than two years after the start of the pandemic, child care sites continue to operate at reduced capacity because of struggles hiring staff—particularly as many workers have left the sector altogether⁸ and moved toward jobs that pay them more.⁹ Survey data from across the country point in the same direction: Hiring staff for child care is more difficult than ever. As a result, more than half of all providers are serving fewer children than their full capacity because they cannot hire or retain enough staff members.¹⁰

There is consistent state-level evidence of issues hiring staff across states: 89 percent of providers in both Louisiana and Virginia say that finding staff is a problem, 87 percent of child care providers in Michigan are experiencing hiring challenges, and 89 percent of child care providers in Travis County, Texas, report difficulty hiring in the past six months.¹¹

Likewise, in Virginia, child care sites that accept public subsidies had an average of four teacher vacancies at the time they responded to the survey, and two-thirds of those sites were serving fewer children or turning away families.¹² Meanwhile, three-fourths of all sites in Louisiana have at least one vacancy, and 64 percent are serving fewer children or turning away families.¹³ And Stephanie Berglund, CEO of Alaska’s child care resource and referral network, shared with the Anchorage Daily News that many providers in the state have been unable to enroll new children due to “extreme” challenges hiring staff.¹⁴ Collectively, job seekers are showing that they are not interested in working in child care despite ample job openings.

Despite operating in states with vastly different environments, child care providers across the country—including in Alaska, Louisiana, Michigan, Texas, and Virginia—face the same structural obstacles to staying afloat, let alone meeting the demand for their services. Nationally, full-time child care teachers are paid, on average, $14.01—less than half the wage of kindergarten teachers. And Black and Hispanic women are paid even less, at $11.27 and $12.59 per hour, respectively.¹⁵ Wages are a central factor for workforce struggles and require large-scale structural change in order to expect any improvement in attraction and retention of staff.

Proprietors of child care businesses tend to recognize that current pay does not match the vital and challenging work that early childhood educators perform. However, the reality of the child care industry is that there is little room to increase teacher or assistant/aide salaries without the program operating at a net financial loss. Prior to the pandemic, child care providers operated with less than 1 percent profit margins, and the U.S. Department of the Treasury reported that one or two months below full enrollment could erase those margins entirely.¹⁶ Sites could increase tuition to fund raises for teachers, but most families are already spending a far higher percentage of their income on child care than federal guidelines recommend.¹⁷ Yet at the same time, it is not fair—or economically beneficial—to continue to pay child care workers extremely low, often poverty-level, wages.

Care for infants and toddlers is an even tougher situation due to lower child to staff ratios. Because the youngest children require more hands-on care and supervision, more staff are required to meet safety and licensing requirements. However, this stretches tuition dollars even more thinly: Teachers for children ages 3 and under earn $6 less per hour, on average, than teachers for preschool-aged children.¹⁸ Prior to the onset of the COVID-19 pandemic, child care slots were more than three times as difficult to find as care for children 3 to 5 years old.¹⁹ This scarcity has only been exacerbated by the pandemic, with parents reporting getting on waitlists when they find out they are pregnant and still not having a slot when their child is born—or for several months after.²⁰

It is simple: Child care teachers are not coming back without better-quality jobs that pay better wages. In Michigan, 8 out of 10 sites identified low wages as the primary reason they cannot find staff.²¹ In Virginia, 84 percent of sites indicated they were receiving too few applicants or none at all, and 60 percent of sites had applicants turn down offered positions due to insufficient pay or benefits.²² A member of the National Head Start Association who leads a site in West Virginia shared that the starting wage for Head Start teachers is $8.75 per hour—the state’s minimum wage and even lower than the national average child care workers tend to be paid.²³ They said, “It is not surprising that workers are choosing other options that better support their own families. Locally, Sheetz pays $15 per hour with a $3,000 signing bonus, and school districts pay teachers double what we can afford to pay.”²⁴

Higher compensation attracts more workers to an industry. A randomized controlled trial in Virginia child care sites found that providing additional compensation is highly effective for retaining early childhood educators in their positions.²⁵ The experiment provided $1,500 to teachers who remained at their sites throughout an eight-month period.²⁶ Teacher turnover in child care centers that received the $1,500 bonus was about half what it was in centers that did not receive the bonus—15.3 percent vs. 30 percent.²⁷ Likewise, permanent wage increases—a longer-term solution than one-time payments—have a significant impact on hiring and retention. In the home care industry, there is evidence that a $2.50 increase in hourly wages leads to both higher entry into home care jobs as well as better retention of those already working in the sector.²⁸

Soon, the temporary support of COVID-19 emergency funds will run out. The Bipartisan Policy Center estimates that states will be facing a $48 billion funding cliff in 2024.⁴¹ The ARP funds that have allowed providers and educators to survive to this point will expire in September of 2024, with no replacement or continuation planned. The challenges in hiring staff are likely to only get worse. To address this, state governments and Congress must act now.

The Child Care and Development Block Grant (CCDBG), the main federal support for child care programs, provides funds to states to reimburse child care centers for services provided to eligible families, primarily those with low incomes.⁴² However, as of 2018, the CCDBG served only 15 percent of federally eligible children.⁴³ States also provide reimbursements that are insufficient to cover the true cost of care. Congress should increase the total amount of funding for the block grant, with states supplementing through additional funding allocations, so that the state lead agencies can increase both the number of children served and the magnitude of the subsidies—addressing both access and educator pay.

States have options for policy innovation in the ways they implement CCDBG funds, particularly with respect to the way state agencies compensate providers. Currently, many states calculate provider reimbursement based on attendance, while most providers hire and schedule staff based on enrollment.⁴⁴ Since providers cannot anticipate whether each child will be present on a given day, this misalignment can lead to staffing costs that exceed the state reimbursement.

Another crucial policy choice is the decision for how much money will be given to providers as reimbursement for services provided to eligible families. State agencies are required to assess the market rate for child care and set payment rates that ensure families eligible for CCDBG and those not receiving subsidies have equal access to child care, with a recommendation of the 75th percentile of market rates.⁴⁵ The reimbursement rates are required to be reevaluated every three years and can reflect market surveys that were completed up to two years prior.⁴⁶ Indeed, the National Women’s Law Center reported that the majority of states were basing their subsidies on market rates that were three to four years old, and six states based their 2021 reimbursements on data from 2016 or earlier.⁴⁷

Additionally, there is no statutory threshold for what constitutes “equal access.” The result is subsidy reimbursement rates that are too low to support what providers must earn to support their center and staff. This is reflected by even greater difficulties in hiring and retention for sites that accept subsidies.⁴⁸

States can make changes to their reimbursement process that would allow subsidies to support better wages:

1. By moving to a fixed contract or grant model, agencies could reduce the instability and unpredictability of subsidy revenue for providers. Georgia, for instance, has implemented a Quality Rated Subsidy Grant program that guarantees higher, fixed reimbursements for providers that meet specific quality criteria.⁴⁹ Notably, these contracts can build in requirements regarding training and development opportunities, wages, and other job quality requirements that will benefit workers and improve the quality of care and education provided.
2. States have the option to increase their reimbursement rates. Greater reimbursement rates would increase provider revenue, potentially creating space in the site’s budget to increase compensation. This creates a trade-off between the number of children who receive subsidized care and the magnitude of per-child subsidies if the total amount of grant money remains the same. To continue serving the same number of children with a higher reimbursement rate, states would need additional dollars allocated to the program.
3. Revisiting the way market rate assessments are conducted could also help subsidies keep up with rising wages and other costs. Rather than retrospective assessments of the market, which result in states basing payment rates on years-old data, state lead agencies could consider using alternate methodologies that estimate future costs that will better inform their reimbursement rates.

In addition to these state-level administrative policy decisions, increased federal funding for CCDBG is imperative to enact meaningful wage reforms and, importantly, has bipartisan support, with Republican lawmakers calling for a doubling of congressional spending on the program.⁵⁰ As funding for the next fiscal year is determined, appropriators should include a material and significant funding increase for CCDBG.

The struggle to hire and retain staff for child care has become a persistent and intractable challenge. The qualitative and quantitative data point to a lack of good jobs—particularly low wages—as a systemic barrier to recruiting enough staff needed to provide critical care for all of the families who need it.

Ultimately, a new investment of public funding is needed to tackle the shortage of good jobs plaguing the early childhood sector. This funding should focus on increasing wages, ensuring workers have access to critical employer-provided benefits, and providing opportunities for worker career advancement that are not funded by workers themselves. Moreover, early childhood education, like K-12 education, is a public good with public benefits that reach far beyond the children who are enrolled. That means that the long-term benefits of early childhood education greatly exceed upfront costs, including investments in the wages of workers.

Months and months of stagnant employment numbers and reports from states across the country are sending a clear message: Early childhood educators are not coming back to their jobs if the jobs themselves are not changing. It is now up to state and federal policymakers to listen.

The authors would like to thank Marina Zhavoronkova, Lily Roberts, Madeline Shepherd, Rasheed Malik, Maggie Jo Buchanan, Lauren Hoffman, and Jesse O’Connell for their helpful feedback, as well as Anona Neal for her fact-checking.