Economist cites challenges for employers with loss of federal subsidies for childcare
Pandemic-era federal subsidies for childcare came to an end last weekend, and, as a result, 220,000 providers that depended on the program lost crucial income.
It’s a huge setback for women workers, said economist Dr. Alicia Sasser Modestino, Research Director of the Dukakis Center for Urban and Regional Policy at Northeastern University. Sasser Modestino has done extensive research into the impact of childcare on the workforce, and said that the funding stoppage comes just as women are hitting an important milestone.
More women are in the workforce now since before the pandemic, she said, a direct result of the 2021 $24-billion American Rescue Plan, which expired this month. In January 2020, women had just exceeded being half of all workers in the workforce, Sasser Modestino said, a benchmark that had never been seen before.
“And then the pandemic hits in March 2020, and wipes out that progress entirely and set women back for several years,” she said. “We're at this moment where recently, over the last six months, we've seen that women have not only recovered in terms of their labor force participation, but it's actually at its highest level ever.”
Seventy-eight percent of women between the ages of 25 and 54 are now participating in the labor force, said Sasser Modestino, the highest rate ever, adding that 70% of women with children under five are in the labor force – a 5% increase over the decade before the pandemic.
“And it's not a coincidence that this is happening at the same time that we've made massive investments in subsidizing childcare,” she said.
The “childcare cliff,” as it’s been called, is not only bad news for families and providers who depend on the federal income, but employers will also feel the crunch.
“If you, as an employer, have just spent the last six months looking for the right worker, and you just hired them, and two months later that person loses their childcare and they have to quit their job, you're back at square one,” Sasser Modestino said. “You're back at square one with a smaller labor force to choose from. So it could potentially be a very big impact on the labor market.”
Sasser Modestino predicted that by “the end of the year,” there will be a dramatic drop in female labor in the workforce.
In a survey that she co-conducted during the pandemic, it was found that a third of parents said the deciding factor for who would care for children at home was “who was better at it”, rather than income or schedule.
“It's not the case that childcare wasn't in crisis before the pandemic,” said Sasser Modestino. “It's that all that was happening, and then the pandemic hit. So we went from something that was an emergency to an all-out five-alarm fire situation.”
Before the pandemic, employers paid $13 billion a year in lost productivity. A 2018 survey by the Center for American Progress said that mothers were 40% more likely than fathers to report that their careers had been negatively affected by matters of childcare.
Employer subsidies to help employees pay for rising costs of childcare will be an important way to keep women in the workforce, said Sasser Modestino; since many of the providers who depended on the federal funding used it to pay their staff, the ones that stay open will likely need to shift those costs onto parents.
HR can also help employees prepare by beginning to build resources around childcare options in their community or region. Also, research has found that women with children are more likely to stay on the job when they have managerial and co-worker support.
Flexible hours and other accommodations can go a long way to supporting workers with children in staying at work, said Sasser Modestino.
“You need to trust your managers and give them the authority to provide their workers – men or women – with the flexibility that they need to meet their childcare needs, especially during this moment where we're going to see a lot of disruption.”
