Can Democrats Fix “America’s Most Broken Business”?


Bloomberg Businessweek columnist Claire Suddath has always known that childcare is a busy market in the United States, but with her daughter, she took a close look at how the pandemic has spread and distorted the childcare sector. For example, Suddath would read that a third of all daycares are considering quitting smoking, then pick up her child from daycare only to find out that her daughter’s “favorite caregiver” has quit. Why? “It’s not that she didn’t want to take care of children, but she got pregnant on her own and is going to have all these other costs,” Suddath told me. “The pandemic has dramatically worsened everything for parents and childcare companies. “She wrote a report for Bloomberg,”How Child Care Became America’s Most Broken Business”, To understand why child care centers might not let parents in these days – and if there might be a way to fix it, thanks to the Democrats’ Build Back Better plan. On Tuesday’s episode of What Next, I spoke with Suddath about his report, the current state of child care in the United States, and whether the legislative fixes proposed by President Joe Biden go pretty far. Our conversation has been edited and condensed for clarity.

Mary Harris: I hope you can explain a little bit how we got there, because the odd thing about child care is it’s no secret that the system doesn’t work. As Treasury Secretary Janet Yellen said, child care is a classic example of a broken market. Why is this the case?

Claire Suddath: While the US government has been reluctant to subsidize daycares and daycares, it has no problem regulating them properly. Over the years, we’ve put together a list of rules licensed daycares must follow, and these places are inspected to make sure children are safe. There are a lot of specifics – square feet per child, fire safety codes, earthquake preparedness, CPR classes – but the most expensive, the one that is part of why child care is so expensive, is that you need a sitter for three. to four infants, which typically includes children 2 years of age or younger, depending on the condition. This is because babies need constant supervision and the labor costs are so high for childcare compared to other industries. For example, 60% of the costs of a daycare go to salaries.

With childcare, there is this intractable tension: it takes a certain number of interveners to take care of the children for regulatory and safety reasons. But more guards means more wages to pay. As a result, the people who run the day care centers get the most money from each family.

I pay $ 22,000 for a daycare in Brooklyn. I don’t know the salaries of the people looking after my daughter as I speak to you, but I can assure you that they don’t do banking, do they? And if you want them to make more money, which, I want them to make more money. They provide a service that I can’t put a price on because I can’t pay what I think they should be paid for.

But every time child care costs have gone up, they have gone up exponentially. It is so beyond inflation. It’s a bit like health care: we know it’s so expensive, and working parents already overpriced it. And when you increase the prices that much, more people are priced off and it becomes less affordable.

One of the things you found in your report was how the costs are passed on to the consumer and follow women throughout their lives – the fact that they have to invest so much in child care to keep going. to move forward means that later on the road they are much worse.

And that was a problem before the pandemic. Then COVID burst in, everything shut down, and it was pretty devastating for the child care industry. I know you’ve spoken to a lot of day care providers. What did they tell you?

If you honestly talk to a day care provider about how they survived the pandemic, it’s like talking to someone who has returned from war. They need to feel comfortable enough around you to honestly tell you how difficult it has been for them.

Here’s something I don’t understand: Lawmakers in Washington approved $ 39 billion in child care assistance in March. It was supposed to stabilize health centers. But I read that about 2,000 child care centers may have closed during the pandemic. What happened?

It’s a huge, huge industry, if you think about the number of parents working with young children in this country, and the number of caregivers required to care for those children. When you lay it out, $ 39 billion is not a ton of money, for example 1 in 55 working women in the United States work in child care or preschool education. The CARES Act has given Delta Air Lines, a company, more money than all those millions of women put together.

Looking at how the child care industry continues to stiffen up, one can’t help but think that it has something to do with who does the job.

This industry is predominantly female, 40 percent of these workers are women of color, and many of them were not born in the United States – there are a lot of immigrants working in this industry. So I think you have a lot of aggravating factors that caused us not to address this issue for a number of reasons. People who are caregivers themselves are not the kind of people who will listen to a senator. They just don’t have the political clout, essentially. And on top of that, historically working women have been sidelined. As, if you want to work as a woman okay but we won’t pay for child care you have to find out for yourself. We see these same arguments over and over again. Last March, the state of Idaho received a $ 6 million preschool grant for low-income preschoolers. And the state ultimately rejected him. There was a state official who said he didn’t think the state should take this money because anything that made it easier for women to get out of the house, he didn’t think, was a direction in which Idaho should go.

Earlier this year, a silver lining appeared in Biden’s Build Back Better plan. One of the biggest components of the bill is devoted to repairing childcare infrastructure: it grants subsidies to a large number of families to reduce the cost of childcare, or even make it completely free. Corn …

Let’s say what is on offer now for Build Back Better is implemented. It is not about creating a whole federal program or even creating a whole federal subsidy program. All he does is tell the states, We have plenty of money at your disposal if you come up with your own childcare plans that meet a bunch of these criteria.. But that depends on whether all 50 states are making their own unique plans for how they’re going to fix child care.

It sounds like a lot of work.

Build Back Better includes a lot of things that are very necessary. It will cap costs for families and make care completely free for low-income families. It would be great for parents and those who are struggling to afford child care to begin with.

He also says that you need to raise the wages of the child care providers to a living wage.

I think the general idea is that it would kind of be the equivalent of a kindergarten teacher’s salary. It’s absolutely necessary – these people aren’t making money for a really hard job that I think we as a company should really value – but the only way these small businesses can afford it is two things. : The state will have to subsidize this higher cost and give this money to the companies themselves, or the companies will have to increase their prices for families so that they can pay these rates to the workers. Also, I think, given the lack of specs, the facilities may not pay a living wage.

Because “living wage” is not defined.

It’s not defined, and I don’t know what kinds of mechanisms are in place to force states to comply with each regulation. We have a low income family grant program that is chronically underfunded – only 14% of those who qualify even get money. The regulations say it’s a block grant that goes to the states, and the states are allowed to decide how they want to distribute it. States are supposed to subsidize at 75 percent of the current market rate, which means the amount of money daycares and daycares charge. In fact, only two states did so last year: Maine and South Dakota.

How the others get away with this?

Because there is no punishment. It takes a little imagination to think that the 50 states are somehow going to raise enough money to provide a living wage for educators.

You really opened my eyes to a system that is currently in crisis. Even if this bill passes, will the money from Washington arrive on time to day care centers to help the caregivers of your daughter, for example?

Even though Build Back Better passes tomorrow and New York State surprises us by having something ready to go, vendors still need to apply to join the state program. How does the state find providers? This is not an immediate fix – at best, it will take a few years, as states don’t have programs ready to go tomorrow anyway. When I spoke to providers who have survived the pandemic so far, many of them said they applied for the Small Business Loans and Paycheck Protection Program, and these programs had their own issues. but eventually gave them money. But they are still struggling. I mean, half of the child care providers still say they are losing money.

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