Childcare in the US is “a textbook example of a broken market”, according to Treasury secretary Janet Yellen. “It does not work for the caregivers. It does not work for the parents. It does not work for the kids . . . [therefore] it does not work for the country,” she said in 2021.
Sachin Shivaram could not agree more. He is the chief executive of Wisconsin Aluminum Foundry, one of the biggest businesses in a smalltown in the rural US Midwest. He tried to fix that broken market for his own employees — but failed. His is a sobering tale for other US employers facing increasing pressure to help solve America’s childcare crisis — pace JD Vance, the Republican vice-president contender, who recently suggested it could be solved by getting grandma to do more babysitting.
For Shivaram, it all started with a pink car seat: he got chatting to a worker arriving for the 2pm to 10pm shift one day, saw the car seat and asked how the single father handled childcare: he dropped his four-year-old at a friend’s house one night, at grandma’s the next. “I just couldn’t imagine her with her little backpack, packing her toothbrush for a different place every night . . . then I asked other [employees],everybody had a patchwork [solution for] their kids,” he told me. Shivaram decided to set up his own childcare centre.
He needed 125 children to make it economically viable, but had only 25 from his company, so he tried to recruit from nearby businesses. “Literally no one said yes”: childcare wasn’t “that big of a deal” for their workers, he was told. Faced with annual costs above $40,000 per child— in an area with a median household income of $60,040 — Shivaram gave up, settling on a $400-a-month employee childcare subsidy instead.
Worker Greg Place tells me he is thrilled: Shivaram’s involvement got his daughter into local day care, and the subsidy pays half the cost.
Childcare has been a problem since my single working grandmother raised three children in the 1930s. But the cost since then has skyrocketed, while availability has plummeted. Half of Americans live in “childcare deserts” with only one day care spot per three kids, according to the Treasury. And families are spending nearly a quarter of household income on it, with more than a third dipping into savings to do so.
Nearly half pay more than $1,500 a month on childcare, much more than the $11,260 annual average in-state tuition and fees at a public university. “Parents worry a lot about the affordability of college but childcare comes much sooner and parents are much less prepared for it, they are earlier in their careers, they’ve had less time to save, and you can’t borrow to pay for it,” Elizabeth Davis, of the department of applied economics at the University of Minnesota, told me.
The answer isn’t to pay childcare workers less, however. In this highly labour-intensive industry they are already among the lowest paid in America.
Despite Shivaram’s setbacks, policy experts say employers are undergrowing pressure to be part of the solution. A “paradigm shift” is taking place among business leaders, Aaron Merchen, senior director of early childhood education policy and programmes at the US Chamber of Commerce Foundation, told me. There is a new understanding “that this is not a niche issue” for people to work out themselves. Some employers are getting involved due to childcare-related absenteeism and staff turnover, some offer childcare to remain competitive, while others want to do the “right thing”, he says.
Employers in Vermont recently backed a new 0.44 per cent payroll tax to fund childcare; employers pay the tax but can withhold up to 25 percent of it from staff wages. After some employers tried to solve childcare themselves — like Shivaram — “they realised they’d pay less if there was a long-term sustainable public funding stream”, says Aly Richards, CEO of the Let’s Grow Kids campaign, who lobbied for the tax.
Shivaram is disappointed he couldn’t do more. He wants childcare to be treated more like a public good — like the roads that bring people to work. The market may “figure out a fix” in 10 or 20 years’ time, he says, but the cost of waiting that long is that so many kids will have poor childcare. And like Janet Yellen, he thinks that will have costs for us all.
This article was originally published in the Financial Times on September 16, 2024, and was written by contributing columnist Patti Waldmeir.