The US childcare crisis is a $122 billion economic threat

First, his 5-year-old son had a fever. Then her 2-year-old daughter developed a cough. That left Massachusetts-based Jamie LaDuca spending two weeks caring for sick children while also trying to run his business.

“It was chaos,” LaDuca said fortune, adding that she feels she is getting calls from daycares to pick up her children when they are sick more often than before the pandemic. And, of course, it led to his work as co-founder and partner of the boutique public relations firm 143 Communications.

LaDuca is just one of millions of Americans struggling with child care issues—and these challenges have serious economic consequences. The lack of adequate child care for infants and young children across the country now costs an estimated $122 billion annually in lost earnings, productivity, and revenue, according to new research shared exclusively with fortune by ReadyNation, part of the Council for a Strong America, a bipartisan nonprofit focused on education and childcare policy.

That’s more than double the $57 billion researchers estimated the nation’s unmet child care costs in 2018, before the pandemic, compounding the problems parents and providers face.

The ongoing child care crisis and the fallout from the COVID-19 pandemic are not only causing economic problems for Americans, the forces are reshaping the landscape for working parents.

In fact, childcare issues were one of the main reasons LaDuca left her corporate PR job in 2021 to start the company with the mother of her young child. “My career path if I was still working at my job I couldn’t do before – I had to be in meetings all day, really being a slave to other people’s schedules,” LaDuca said. “I’ve changed everything that I thought my life would be like in a communications company role—because I’m like, This is not sustainable.”

But even as an entrepreneur, it is not easy to solve the problem of child care. Last year, when both children came down with COVID-19 and were home for 21 days, LaDuca calculated that the family paid about $6,300 in unused child care — not including the proceeds of their business.

For the past two weeks, LaDuca said he has lost productivity. “I try to pack all this work into three hours of sleep in the evening and then come back when everyone is asleep and settled. It must make it difficult, of course, to have a business and to grow a business.

About 51,000 Americans officially missed work last month due to childcare issues. While that’s down from a record high of 104,000 childcare absences reported in October 2022, it’s still above pre-pandemic levels. And it may be underestimated because that number doesn’t include many parents who care for sick children while at work. Then there are men and women who drop out of the workforce altogether because they can’t afford to have children, because it’s too expensive or not easily accessible.

“As we’ve seen over the past four years—and as recent reports show—the infant care crisis is a growing problem,” said Barry Ford, CEO of the Council for a Stronger America. “Businesses are not productive, parents’ careers can be interrupted or thrown away, and most importantly, without quality early support, the next generation will grow up to be successful.”

Who bears the economic costs?

The pandemic has fundamentally changed the landscape for working parents, DuLuca said, making child care less stable and eliminating many safety nets that were previously available. Pre-pandemic, if his son had been sent home with a fever or something like that, LaDuca said he could have called backup — his mom, his dad, even his sister-in-law — and asked them to help him. Today, that is unacceptable.

“There is more awareness about keeping people isolated [when they’re sick],” said LaDuca. “Pre-pandemic, you could have a kid with a cough and send him in [to daycare]. You can’t do that anymore.”

Having flexibility with work is not a bad thing, it is important. “I’m very lucky, and I know that—I’ve been able to make a leap and change my career path and make it fit. But not everyone has that ability,” LaDuca said.

These challenges have economic costs. Families, not surprisingly, are hardest hit by the lack of affordable, quality childcare. Every year, parents lose an estimated $78 billion in lost wages and lost productivity, according to the report.

But it’s not just working parents who are affected – or even childcare providers. Employers lose $23 billion a year in reduced profits and increased recruitment costs to replace older adults leaving the workforce. These costs have also risen steadily from the $12.7 billion reported in 2018. The lack of childcare not only reduces labor productivity, but also puts many parents out of the workforce and causes competition for new hires.

Even those without children or adults are affected by the childcare crisis, the report found. Taxpayers of all stripes lose an estimated $21 billion annually in lower federal, state, and local tax revenues.

Why are costs rising so quickly and where are they coming from?

The dramatic rise in the economic burden of the child care crisis can be attributed to the fact that the problems facing the sector are more widespread and severe than four years ago, said Sandra Bishop, report author and chief researcher at the Council for a Stronger America. “The combination of COVID-19 and inadequate policy action today has exacerbated the child care crisis,” Bishop said. fortune.

Parents, for example, reported child care issues causing them to be fired nearly three times more often in 2022 than in 2018, according to Bishop. In addition, the percentage of parents experiencing some type of negative impact on their careers due to insufficient childcare – such as being late to work, reducing work hours, and being denied promotions – is now higher than it was reported pre-pandemic.

In addition to the stress the pandemic has placed on existing child care systems, other factors such as high inflation and the Great Recession have also played a role. During the pandemic, for example, women’s labor force participation dropped more than men’s, and lack of childcare was an important driver of women dropping out of the workforce, Bishop said.

About 16% of the US workforce, about 26.8 million people, rely on child care in order to work. But a major part of the problem is that supply has not kept up with demand — and the pandemic closure of childcare centers and home providers has made the situation worse.

In total, about 12.3 million children in the US have working parents, but there are only 8.7 million licensed childcare slots, according to the latest report from Child Care Aware of America: The Year in Child Care: 2021 Data, Analysis and Recommendations. That leaves a potential gap of about 3.6 million slots.

For her two children, LaDuca said she called daycares to ask for a place for them before she told her parents she was pregnant. And with his son, even that is not enough news. He was put on a waiting list and couldn’t start daycare until he was five months old. “It’s worse now,” LaDuca admitted.

This scarcity means that cost – which has always been a major obstacle – is now a bigger burden on families. On average, the annual cost of child care nationwide is about $10,600 per child, according to Child Care Aware. In order to secure childcare in Massachusetts—one of the most expensive states for such services—LaDuca said she now allocates about 40% of her salary directly to daycare costs. When she and her husband discussed having a second child, cost was a major consideration. We ask ourselves: “How are we going to make an extra $20,000 a year to put this kid in daycare?” he said.

“They want to work. I want to work. We both work hard for our careers,” LaDuca said, adding that exiting the workforce was not an option she wanted. The solution? She turned a small apartment on the property into a vacation rental on Airbnb and helps pay for one child in daycare each year.

But even as parents come up with creative solutions, the challenges Americans face with babies and toddlers won’t go away — and they’re hard to plan for. “We can talk about it and say, yeah, it’s hard. But until you go in, you don’t know,” LaDuca said. “The reality is that for the foreseeable future, this is definitely one of those things that will be difficult.”

But while families need to be practical and find solutions amid the chaos, Bishop says policymakers and experts need to understand and prepare for the long-term consequences of the never-ending childcare crisis.

“This economic cost occurs every year of a child under 3 years of age—for every successive cohort of children,” Bishop said. for each new birth cohort.”