Policy Spotlight: Child care is foundational for economic recovery

Paid, out-of-home care plays a foundational role in U.S. labor markets. This Policy Spotlight describes the early impact of the COVID-19 pandemic on childcare businesses, charts federal and state efforts to keep child care providers afloat during the COVI-19 pandemic, and discusses the need for longer-term supports to preserve robust childcare capacity for parents’ return to work. The situation in the state of Illinois is emphasized. Prior to the pandemic, Center Care providers had a capacity of almost one-quarter million children (infants through pre-Kindergarten), while around 55,000 of children were cared in “family care”, where providers offer paid childcare from their own homes. The COVID-19 pandemic onset was characterized by an immediate and severe drop in the demand for care and mandated facility closures. As providers reopened under stringent COVID mitigation policies, the capacity of childcare operations was greatly reduced. This simultaneous increase in costs and decrease in revenues placed many providers in financial peril. The Spotlight details the federal and state supports for the childcare industry that were available soon after the onset of the pandemic. Implications of the consequent changes in the demand for and supply of child care enrollments on system capacity, prices, and the prevalence of larger versus smaller providers, are traced under various scenarios projected for the economic recovery from COVID. An important implication is that in the absence of ongoing government support there may be fewer children in childcare at higher prices. Far less childcare may be provided than was true before the pandemic, as social distancing policies are predicted to reduce enrollments by as much as 46% at centers and 21% at family care. Parents with children in care may ultimately pay the substantial costs of social distancing and other mitigation measures through higher childcare prices. The Spotlight concludes by discussing a number of policy options going forward, including making the state-run childcare subsidy program available to more families, increasing capacity in the federal Head Start program, and even directly offering care at public facilities. Policies to encourage more supply also include loans for starting new family childcare businesses and small grants.