Lady Business: Back-to-school and the business of Big Daycare

Hello, and welcome to Lady Business, a newsletter about women, the business world, and all the ways they overlap. You can sign up for Lady Business and read previous issues here. This is the 133rd issue, published September 12, 2021.
 

La Rentrée

I spent my August in a flurry of almost pre-pandemic activities: work travel, wedding travel, and for the first time in two years, a two-week international vacation. Yes, it involved several PCR tests and a whole lot of paperwork (one of the French national pastimes); but it was all worth it to spend the last two weeks of the summer visiting a dear friend, mostly ignoring my email, and returning to a city that will always be a home.
 
Between the pandemic and the usual emptiness of Paris in August, I was expecting the city to be deserted ahead of “la rentrée.” (France takes summer vacation so seriously that there’s an official term for the September period when everyone returns to work and to school.) But Paris was much busier and more celebratory than I had expected—yet it felt safely so, especially thanks to the mandatory “vaccine passports” required to enter any museum or restaurant (even to sit outdoors).
 
Yes, converting my CDC card to a French QR code required more even more paperwork; and I apparently won the bureaucratic lottery in receiving my “pass sanitaire” within two days of arriving within the country. But having to show proof of vaccination—and knowing that everyone else around me had been required to show similar proof—made flying six hours to a foreign country feel a whole lot safer and less risky than most of my domestic pandemic socializing. Maybe we’ll get there eventually.
 
In the meantime, the U.S. rentrée seems pretty fraught, with many employers continuing to push back return-to-office dates and schools struggling to figure out the classroom during Delta. And then there’s the ongoing crisis in the childcare industry, which lost another 5,900 jobs in August alone—and which I spent most of my summer reporting on, in a feature that Fortune published while I was on vacation. My article includes some history and policy analysis along with business reporting on the state of the childcare industry—and it was also shaped by the personal experiences of dozens of friends and other parents who made the time to share some of their childcare stories with me:
 

The United States once had a government-founded universal childcare program; it was established during World War II, to help women contribute to wartime production, but federal funding lapsed after 1946. Then, in 1971, Congress overwhelmingly passed a bipartisan bill that would have established a national, federally funded childcare program, with tuition subsidized based upon a family’s income. But President Richard Nixon unexpectedly vetoed the bill, citing the “family-weakening implications” of legislation that would enable more women to work outside the home.

More women went to work anyway. During the 1970s and 1980s, female paid labor force participation grew at a rapid clip—as did the scattered childcare industry that these women relied on. … And many of those women can’t afford to pay for consistently high-quality care. America’s childcare system is funded by a mixture of tax credits and government subsidies for lower-income families (who still spend a third of their income on childcare, on average); employer subsidies, for those fortunate enough to work at companies that do provide childcare benefits; and, especially, out-of-pocket spending. The total cost has mounted astronomically since 2000, growing twice as fast as inflation. U.S. parents today pay an average of almost $10,000 per child per year—accounting for more than 10% of household income for a married couple, and 34% for a single parent, according to Child Care Aware of America. Yet those prices don’t guarantee high-quality care, for which few national regulatory requirements exist.

“Childcare is a failed market,” says Elliot Haspel, an early education policy expert at the Robins Foundation and the author of Crawling Behind: America’s Child Care Crisis and How to Fix It. “The pain point is so deep, and it cuts across so many income levels and classes. At some point this decade, the dam is going to break.”

 
This article grew out of my coverage of the ongoing employment crisis for women, which is inextricably tied to the nation’s childcare crisis and its lose-lose-lose economics. Childcare is wildly expensive for parents, yet low-margin for its providers and low-paid for most of its workers. Taking care of young children—inarguably one of the most important jobs in society—pays $12 per hour as a national median, worse than other occupations that don’t require formal education (or immediate responsibility for human life), such as janitorial services or construction. No wonder the industry is in crisis—as shown in these bleak charts created by Fortune graphics editor Nicolas Rapp:
 

But while small childcare providers have closed up shop in droves during the pandemic, there are a handful of for-profit big companies that are thriving, led by KinderCare, Learning Care Group, and Bright Horizons. My article focuses on what we call Big Daycare or Big Childcare, and ask what role these providers can and should play in the post-pandemic childcare landscape:
 

Now for-profit Big Childcare players are emerging from the pandemic as the strongest remaining pieces of the nation’s decrepit childcare infrastructure. These companies have both critics and fans among the parents, childcare workers, smaller childcare providers, industry executives, senior government officials, Fortune 500 human resources executives, and policy experts interviewed for this article. They sit at the nexus of Big Business, national policy, the acute and long-simmering labor crisis among caretakers, the needs of parents across all socioeconomic statuses, and the debate over the future of childcare. And they are carefully watching to see whether Washington will step in to fundamentally reshape their industry.

But if that potential government overhaul fails to materialize—or if, as seems possible, the federal plan includes a meaty role for Big Childcare providers—these companies will likely play an outsize role in determining what care will look like in the coming years. Will they be able to prop up the post-pandemic U.S. childcare system, overcoming the many long-standing problems that have plagued parents, employers, care workers, and even the providers themselves?

It's obviously not a question that can be fully answered yet. But it's one that's worth asking, and understanding, at this inflection point for the U.S. childcare system, as Congress makes decisions that could address these multiple crises—or decides not to act, and waits for the dam to break.   

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