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Pandemic-Era Child Care Funding Has Run Out. It's Likely to Have a Big Impact on the Workplace

A group of children sitting on bean bags in a classroom.

​Many working parents already are faced with challenges around child care, trying to find affordable options while navigating work and family life.

Now, those challenges may get even more difficult.

On Sept. 30, $24 billion in federal pandemic relief funding for child care—as part of the $1.9 trillion American Rescue Plan Act Democrats passed in March 2021—expired. That expiration may cause more than 70,000 child care providers who benefited from federal funding—roughly one-third of those supported by the funding—to close in the coming months, according to estimates from The Century Foundation, a liberal think tank. Other providers may raise prices to stay in business.

"Parents of young children have competing priorities, and losing reliable child care means an attention-splitting juggling act," said Mandy McAllister, CEO of GoBundance Women, a member network for women in business.

The expiration has big implications for employees trying to balance work and child care simultaneously and for companies that count on workers to be present and productive on the job.

The news, industry insiders said, indicates that employers and HR leaders will have to step up if they don't want to risk losing employees, particularly women, who bear the brunt of child care responsibilities.

What's at Stake

There are a number of issues of concern for the workplace as a result of the pandemic-era child care funding running out, experts said. McAllister said employees will be looking for additional help from their employers—from higher compensation to child care benefits to more flexibility. Otherwise, they will likely look for other jobs that offer better pay and benefits.

Higher rates of burnout are also likely as a result of child care centers closing as working parents deal with the complications of managing child care. Employees who have access to child care support say they are less anxious and more productive on the job, with a Bright Horizons survey finding that 77 percent of working parents think child care programs contribute to productivity. 

Then there's another complication: Women may drop out of the workforce entirely if they can't afford or find child care. The Century Foundation estimates that millions of working parents will be impacted by the funding expiration, with many leaving the workforce or reducing their hours, costing families $9 billion each year in lost earnings.

"From an employer perspective, this could mean employees—particularly women—will face a challenging decision: Child care or career?" said Jessica Harrah, chief people officer of KinderCare Learning Companies, a Portland, Ore.-based early education and child care provider.

According to a U.S. Census Bureau survey earlier this year, nearly 5 million people missed work in the month of February alone because they were caring for their children. Having child care centers close completely will undoubtedly cause that figure to rise.

"The balance of sustaining quality early learning programs led by high-quality teachers while maintaining a family's ability to afford care is nearly impossible to achieve," Harrah said. "Stabilization funding helped for a time."

What Employers Can Do

Industry insiders said that smart employers will look to offer help and solutions to support their working parent workforce.

Beefing up benefits to support working parents is one obvious solution, said Julie Stich, vice president of content at the International Foundation of Employee Benefit Plans (IFEBP).

"In light of the end of federal funding and the rise in child care centers closing, employers will need to consider what they can do to accommodate working parents of young children," she said.

Benefits offerings will come into play, including more onsite or backup child care options and dependent care flexible spending accounts (FSAs), which are tax-advantaged accounts that allow workers to fund and pay for child care. IFEBP data finds that the majority of employers (75 percent) offer dependent care FSAs.

Employers that offer those resources will want to tout them to their workers as ways to help. Those that don't might consider adding them.

Onsite child care is not a common perk, though larger companies, including Tyson Foods and Aflac, offer the benefit for employees. That may give those employers a competitive advantage.

"Some employers provide child care resource and referral services," Stich explained. "If they don't, they can refer employees to their employee assistance program to help find quality care. Long term, if things don't improve, employers may start to consider providing onsite care centers, backup child care or child care subsidies."

More comprehensive parental leave may also be a helpful resource. While it doesn't provide long-term child care support, allowing new parents to spend several weeks of paid time at home with their child will be a highly coveted benefit, experts said—and one that will likely keep workers in place.

"Many human resources leaders realize that a modern benefits package for a diverse workforce must include some type of child care benefit," Harrah said.

Another benefit that's sure to gain more attention in the wake of expired child care funding: Flexible schedules and remote work options. Allowing workers to work from home has become a popular and common option due to the COVID-19 pandemic, although many firms have recently told workers to return to offices. Calls to continue to allow employees to work from home, especially in light of child care complications, might be renewed.

"Some employers may want to re-examine their flexible work policies to accommodate workers' need for flexible working schedules," Stich said.

McAllister said most organizations learned during the COVID-19 pandemic that work from home can be very effective, and work-from-home options, as well as other flexibility, should be allowed.

"Companies that can offer flexible work schedules have an opportunity here," she said. "In a tight job market, more work-from-home hours might mean a chance to attain better talent."

In general, insiders said, employers have a responsibility to help their workers manage such a fundamental part of their lives. Doing so will mean more productive workers—and likely more loyal ones, as well.

"Parents need support, and the companies that offer it first are the ones who will have an easier time attracting and retaining employees," Harrah said.


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