Investing in Child Care Pays Dividends to Employers — and All of Us

Child care is one of the biggest expenses facing working parents, often costing more than housing or health care.

In Michigan, the average annual cost of center-based care for one infant and one toddler was $24,756 in 2023, according to an analysis by Child Care Aware of America.

But parents aren’t the only ones paying. When families struggle to find reliable, affordable child care, we all pay.

And the cost to employers is steep. Childcare shortages contribute to increased absenteeism, tardiness, reduced productivity, turnover — and the fact that many parents simply opt out of the workforce because they can’t afford child care. The U.S. Chamber of Commerce Foundation calculates these shortages result in a loss of $2.88 billion in economic activity in Michigan per year.

That’s why childcare solutions increasingly are seen as investments that pay dividends for employers, families and communities. In fact, Boston Consulting Group estimates the ROI to employers alone as high as 425%, with gains in employee performance, organizational growth, recruitment and retention, community standing and brand impact.

Fortunately, employers and parents have options to make the investment in quality child care more affordable.

We explored these options in detail during a recent TalentFirst member-exclusive Spotlight Series webinar, Employer Solutions & Resources for Child Care.

Michigan’s childcare shortage

As a participant in the webinar observed, the childcare crisis is a community problem that must be addressed on a systemic level.

This was reinforced in our comprehensive 2023 report, Balancing the Scales. The report documented that Michigan’s childcare workforce fell by 26.8% from 2001-2022, contributing to a loss of childcare openings estimated to range from 116,000 to 348,000, depending on the age of the child.

One of the biggest factors driving this loss: Most early childhood educators (ECE) earn poverty-level wages. The current median hourly wage of Child Care Aides ranks in the 2nd percentile of all occupations in Michigan. The highest-paid ECE teaching occupation, Lead Teachers, ranks in the 12th percentile. In comparison, kindergarten teachers rank in the 67th percentile.

ROI on a generational scale

Employers have an opportunity and a role to help fix this disconnect — low wages for educators, high costs for families — and help ensure children have access to quality child care and preschool that prepares them to enter kindergarten at grade level. They can use their influence to:

A more focused example is that TalentFirst has joined with a wide range of community organizations to endorse renewal of Kent County’s Ready by Five Early Childhood Millage.

ROI in the current landscape

Within their workplaces, employers have multiple options to leverage resources to make child care more accessible. But understanding those options and navigating the childcare landscape can be complex and overwhelming.

A recent TalentFirst survey of West Michigan employers confirmed this, revealing the need for employer resources to navigate the childcare landscape. That’s why TalentFirst developed a toolkit to help guide senior leaders and business owners through their options. An overview of the resources we explored with members at the Spotlight Series:

  • Low-cost solutions: These include flexible work schedules, employee assistance or resource programs, providing employees with information about financial assistance options.
  • Childcare resources: Helping employees explore the Great Start to Quality childcare network. Sponsoring backup child care, such as through Care for Business.
  • Flexible spending accounts: Allowing employees to set aside pre-tax dollars for childcare expenses.
  • Tri-Share program: Through MI Tri-Share, the cost of an employee’s child care is shared equally among the employer, the employee and the State of Michigan — a three-way split — with coordination being provided regionally by a facilitator hub.
  • Subsidies and vouchers: Subsidies are direct financial assistance for child care, while vouchers are redeemable only at pre-approved providers in the employer’s network.
  • On-site child care: Typically, the employer partners with a childcare company to design and manage a quality child care center within the workplace.

These options are explored in greater detail in our toolkit. (The toolkit is among our member-exclusive resources. Learn more about the benefits of joining TalentFirst’s CEO Council or HR Council.)

Addressing equity

It’s important to remember the employee experience is increasingly varied. Targeted investments for segments of the workforce are critical — but will inevitably exclude other segments. For example, childcare benefits are unavailable to employees without children.

In response, more employers are embracing a flexible approach to benefits. This may include a menu of benefits options, such as tuition assistance or pet care. (See our Talent Solutions Playbook for other examples.)

Seeing dividends

Unfortunately, money is being left on the table when resources are underutilized.

For example, many families are not aware of the financial assistance available to them and that employers can provide. Only about 10% of eligible families receive the state’s Child Development and Care subsidy.

On the employer side, our survey found nearly 60% of West Michigan employers were considering the Tri-Share model — but only about 5% have adopted it.

One TalentFirst member, Cascade Engineering, has found Tri-Share to be an impressive investment:

“The benefits of Tri-Share far exceeded the cost of the program as it is an incredibly effective retention tool. We have employees who say they will never leave the organization because of the program. They were paying up to $900 a month and were able to cut that bill by two-thirds.” — Christina Keller, CEO

Clearly, child care is an essential component of a well-functioning talent system, with ROI for everyone.

The availability of high-quality, affordable child care allows workers with caregiving responsibilities to participate more fully in the workforce. When families earn more income, and the state budget becomes more efficient — increasing tax revenues and reducing the cost of social safety net programs.

For children, access to high-quality early education is associated with better quality of life, including academic success, lower rates of criminal justice involvement, better overall health and, later in life, increased labor force participation.

Just as we all pay in some way for shortcomings in child care, we all can benefit from investing in solutions.

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