Alternatives

What, then, is the proper role for employers with regards to child care? I suggest a three-pronged answer.

The only real solution to America’s child care needs is a system of choice that is funded by a permanent stream of public dollars. Estimates of how much is ultimately needed at a national level range from around $100 billion to $250 billion per year.¹ (As a reminder, in 2023 the U.S. spent close to $800 billion per year in public funds on K–12 public schools—about $14,000 per child—versus $34 billion on the more expensive service of child care.) As one benchmark, the Organisation for Economic Co-operation and Development (OECD) recommends nations spend 1 percent of their GDP on child care (inclusive of all early care and education settings such as pre-K).² America is currently near the bottom of the table at roughly 0.3 percent of GDP; the OECD and European Union average is 0.7 percent, with peer economies like France exceeding the target.³ For the United States to meet the 1 percent GDP goal, it would need to spend about $230 billion a year.

While it is hopefully clear by now there is danger in giving corporations too much clout around child care, active participation from the business community—as well as identifying pay-fors that include employer sources—is required to gather the political will to pass those levels of investments.

There is precedent here. In 2023, Vermont passed a major expansion of child care funds, Act 76, which created a nearly $125 million annual funding stream.⁴ The funds allow the state to subsidize the care of more than 7,000 additional Vermont families every year (a significant increase for a small state) and increase the per-child subsidy reimbursement rate to providers by more than a third. On a per-capita basis, Vermont now puts into child care more state money than any other state in the nation.

Act 76 is primarily funded by a payroll tax levied on all Vermont businesses in the amount of 0.33 percent paid by employers and 0.11 percent paid by employees. Importantly, businesses themselves were instrumental in advocating for this tax, including testifying in favor before the Vermont legislature. As one article about Act 76 noted:

The advocates [from the group leading the effort, Let’s Grow Kids] organized a group of seven business leaders and educated them on the systemic issues of child care, as well as the potential returns on investments for their businesses…

They then asked those leaders to look at the state’s revenue sources. The business owners chose the payroll tax as the best option. Then they told legislators.

“Each of them said, ‘Tax me,’” [Let’s Grow Kids CEO Aly] Richards said. “Vermont makes more money, I make more money, my employees make more money, and we pay off this payroll tax surcharge basically, before half the year’s over. That was the sort of final thing that pushed us over the finish line.”⁵

Similarly, when the small, conservative rural town of Warren, Minnesota, was facing a child care shortage in 2022, business leaders rallied to ensure voters passed a half-cent sales tax to generate $1.6 million to build and operate a city-owned, nonprofit-run child care center. Minnesota Public Radio reported:

Business leaders pushed hard for the tax. They understood how a shortage of child care was limiting economic growth.

“It’s the number one factor,” said Phil Thompson who chairs the Warren Economic Development Authority and owns an accounting and crop insurance firm that employs about 30 people.⁶

This type of vocal advocacy—one that goes beyond platitudes and leans into measures that raise dedicated tax dollars—is where businesses should be pouring their child care energy. This can involve both donations to advocacy organizations, as well as direct political activity.

It is worth noting that, generally speaking, corporate interests have vastly more political influence than child care advocacy groups. No child care advocacy group spends more than $500,000 a year on federal lobbying, and there are only a handful at the federal or state level with a legal entity set up to make campaign contributions.⁷ On the other hand, corporate executives are frequently top political donors, and at times even personal friends with legislators. One study looked at political giving from 400,000 corporate leaders at 15,000 of the largest U.S. companies. It concluded that “the corporate leaders…gave 19 percent of the total dollar amount recorded by the [Federal Election Commission] between 1999 and 2018. While less than 1 percent of all Americans donated during that period, 40.5 percent of corporate execs did.”⁸

Businesses, then, have a critical role to play in the fight for an effective child care system: It’s hard to see how we achieve a publicly funded system without their influence, or with their influence being used to oppose new revenue streams in favor of employer benefits.

That said, there is a reasonable argument that advocacy is a long game, Congress is gridlocked, and employers are suffering the ill effects of inadequate child care here and now. The best short-term action is to expand the capacity and sustainability of community-based programs through grants and offers of in-kind services.

An example of this type of investment is what Corning Inc. does for its hometown of the same name. Fast Company reported in 2021 that “the company invests $2.5 million a year to fund five local community day care centers that care for 400 children. Corning employees as well as community members have access to the centers.”¹² Corning has been making these investments since the 1980s, making it one of the most durable examples of an employer supporting inclusive community-based child care. Knowing that not every company is as stable as Corning, ideally such support would come with a lengthy contractual commitment, perhaps of 10 years, to guard against the fickleness described in the previous section.

Importantly, direct support of community-based programs does not have to be limited to child care centers. The Fast Company article goes on to explain that:

Companies can also work with the local non-profit child care resource and referral agency to create a grant program for local in-home day care providers. For instance, [Chris Sharkey, president of Corning Enterprises at Corning Inc.] is working with the Chemung County Child Care Project to create a grant program for in-home day care providers in Steuben County, where Corning Inc., is located, and nearby Chemung County. The program allows new providers to apply for funds to pay for items that would allow them to meet licensing requirements such as smoke and carbon monoxide detectors, fire extinguishers, and sprinkler systems. “Even a modest investment of $500 can make a difference to an in-home provider,” she said.¹³

In some cases, employer investments are made with more specific intentions, such as offering enough funds that providers can extend their hours to help employees of companies who do not work a traditional nine-to-five schedule.

It is worth noting how qualitatively different these investments are from solely pursuing on-site child care centers or stipends: First and foremost, community investments add new money into the system without enhancing inequalities. In situations where employer offices are not located near any community-based providers, employers could either supplement on-site centers with community investments or work with community partners to start new programs in the vicinity.

For large companies with a national footprint and geographically dispersed facilities, intensive community investments may not be feasible. These companies are more apt to turn to stipends as opposed to (or in addition to) on-site centers. As those stipends do nothing to help with child care supply, staffing, or quality, employers may consider matching a percentage of the stipend that goes to employees with funds that go directly to the employee’s child care provider.

While still inferior to a publicly funded and universal system, businesses’ direct support of community-based programs can be a positive intermediate step.

As I have tried to emphasize throughout this report, implementation of a publicly funded child care system does not necessitate employers abandoning on-site child care centers or other child care benefits. For certain employers, such as hospitals, having on-site programs makes enormous sense. Instead, these programs can become part of the broader system, and companies should start thinking now about what that looks like.

France offers a good example. The French child care system is solid if imperfect: France exceeds the OECD target of spending at least 1 percent of GDP on child care services, and the country maintains an admirable network of high-quality crèches for younger children before they enter école maternelle, the nation’s universal pre-K system, at age three.¹⁶ A 1989 New York Times article entitled “How France Is Providing Child Care To a Nation,” quoted a member of a visiting U.S. delegation as saying, “We have seen the future, and we’re behind.”¹⁷

France has on- and near-site workplace child care centers, currently making up slightly less than 10 percent of formal child care facilities.¹⁸ These are known as crèche d’entreprise. A subset, crèche inter-entreprise, are shared among several employers. Employers do contribute to operating costs since these have reserved slots for their employees (although some have community slots as well), but between public subsidies and tax breaks, employers only end up on average covering 17 percent of the slot cost.¹⁹

Importantly, these programs are fully incorporated into the broader French system. While there is also an ongoing controversy in France about the involvement of investor-backed for-profit child care chains, crèche d’entreprise generally operate under the same government regulations as community-based programs. As one article explains:

Parents’ financial contribution is calculated based on a scale and varies depending on the household’s resources. The place in a company crèche costs parents the same as the municipal crèche, on average 220 euros [$240 USD] per month.²⁰

The presence of public funding, then, may actually help employers expand the reach of their on-site programs. Similarly, child care stipend dollars will go farther—or can be repurposed—in a system where child care fees are affordable or even free for many employees. Businesses should have a sense of how they want to fit into a publicly funded system. As they are doing so, business leaders should engage with policymakers to explain what they need to make a smooth transition.

By preparing to integrate into such a system rather than stand isolated, employers can ensure their self-interest remains aligned with the interests of their employees, communities, states, and the nation as a whole.