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Costs Hinder Small Business Growth and Workforce Stability

The latest small business survey from Goldman Sachs underscores a growing problem: The negative impact of rising child care costs in the U.S.

The firm’s 10,000 Small Businesses Voices survey spotlights how a lack of affordable and accessible child care is hurting small businesses and workers. “Over one-third of owners noted that their employees have been forced to cut their work hours or forgo work entirely because of child care challenges,” the report’s authors said.

Analysts at Goldman Sachs noted small business owners are also eager “for policy solutions to address these issues, including federally funded programs and tax credits to offer child care benefits.”

Of those polled, 84 percent said it has been difficult “for working parents to afford high-quality child care programs for their children (66 percent very difficult, 18 percent somewhat difficult), while only 2 percent say it has not been difficult at all.”

In addition, 57 percent of respondents said that where they reside, there are not enough child care programs that are affordable and high-quality. “More than a third (35 percent) say their employees have been forced to cut their work hours or forgo work entirely because of the cost and/or availability of child care,” the report’s authors said, adding that 38 percent of those polled said a lack of child care “has had a negative impact on their ability to operate or grow their business.”

Of those polled, 62 percent said being able to offer a child care benefit to their employees “would have a positive impact on talent recruitment and retention.”

“Seventy-seven percent of small business owners would support policymakers increasing federal funding programs that help families better access affordable child care,” the report said. “And 70 percent would support legislation to increase the tax credit available to businesses who want to locate or provide child care for their workforce from $150,000 to $500,000.”

In a January report on child care costs, the U.S. Census Bureau said government subsidies like the Credit for Child and Dependent Care “are designed to assist parents with increased costs but in recent years prices continued to rise, while the number of day care providers dropped amid the pandemic.” The bureau said between 2014 and 2021, the “estimated revenue of employer firms classified as Child Day Care Services increased all but one year: 2020.”

The report noted that child care expenses are “untenable for families” nationwide. “A brief drawing of available data across 47 states show child care prices for a single child ranged from $4,810 a year for school-age home-based care in small counties to $15,417 for infant center-based care in very large counties,” the report’s authors said. “When adjusted for inflation, this equals between $5,357 and $17,171 in 2022 dollars. These price ranges were equivalent to between 8 percent and 19.3 percent of median family income per child in paid care.”

Between 2017 and 2023, the national average annual price of child care increased 23 percent. Although costs have been slowly increasing over the past 20 years, the rapid gain in child care expenses since 2017 was due to the pandemic, when more than 9,000 child care centers closed.

During the pandemic, the federal government did provide child care providers with funding and so did states. But the federal money ended in April. And since the pandemic, businesses and consumers have been facing staggering inflationary costs. This pressure came to a head last month. Frustrated, overworked and financially strained child care providers staged a temporary closure. More than 1,000 providers closed their doors for a “Day Without Child Care.”

While the stunt caught the media’s attention, the issue is not getting enough attention. In this election year cycle, 55 percent of business owners polled in the Goldman Sachs survey said access to affordable child care “has not been sufficiently addressed on the campaign trail.”

Some are calling the issue a child care crisis. Dawn Kelly, owner of The Nourish Spot in Queens, N.Y., and who was featured in the Goldman Sachs report, said small business owners such as herself “are grappling with workforce challenges directly tied to the lack of affordable, quality child care.”

“We are resilient and will continue to endure despite these hurdles, but this child care crisis is weighing down our businesses and our employees,” Kelly said. “The ability to offer child care benefits would be a significant first step in helping our businesses compete and grow.”

Jill McCarthy, national director of the Goldman Sachs 10,000 Small Businesses Voices survey, said small business owners “have made clear that the child care crisis is exacerbating the biggest challenge they’re facing right now — hiring and retaining qualified employees.”

“Ensuring small business owners’ voices are heard on this issue by our local, state and federal elected officials is a priority for Goldman Sachs 10,000 Small Businesses Voices,” McCarthy added.

Top 10 States — and the U.S. Capitol — With Highest Child Care Expenses:

  1. Washington, D.C. ($24,243)
  2. Massachusetts ($20,913)
  3. California ($16,945)
  4. Minnesota ($16,087)
  5. Connecticut ($15,501)
  6. New York ($15,394)
  7. Maryland ($15,335)
  8. Colorado ($15,325)
  9. Washington ($14,554)
  10. Virginia ($14,063)

Source: Economic Policy Institute

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