Introduction

Employer-sponsored child care benefits have emerged as a major trend over recent years. A 2023 article in the Wall Street Journal noted, “More Companies Start to Offer Daycare at Work,” while the Washington Post offered a few months later, “Newest Way to Woo Workers: Child Care at Airports, Schools, and Poultry Plants.”¹ The rise in employer child care benefits has been driven by a tight labor market, a supply-constrained child care sector, and in many cases by explicit government incentives. Yet the trend has received little scrutiny: Is it appropriate for employers to play a primary role in child care provision? What are the advantages and disadvantages of running child care through the employer-employee relationship, following the uneven results of providing health insurance that way? To what extent does doing so promote the idea that child care is a private, as opposed to a public, good? This report analyzes these questions—and finds the push for employer-sponsored child care needs serious reconsideration.

The turn towards employers has been coming from both sides of the political aisle. Republican-led states have been offering substantial incentives, as with Indiana establishing a $25 million Employer-Sponsored Child Care Fund.² President Biden’s administration, meanwhile, required semiconductor manufacturers to detail a child care assistance strategy for their employees as a condition of receiving Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act funding.³ The idea is very much in the air: Responding to the CHIPS child care measure, New York Times editorial board member Binyamin Applebaum suggested “this is a principle that ought to be expanded to other corporate recipients of federal handouts—and to the other components of a basic set of benefits that ought to be standard for workers in the United States.”⁴

At the moment, employer child care benefits are widespread but far from entrenched (see box below for a definition of these benefits). As of 2020, around 11 percent of U.S. workers nationwide had access to one of these benefits, although that rises to close to a third of high-salary private sector employees.⁵ Given recent movement, these numbers are likely now higher and headed further upwards: For instance, KinderCare, the nation’s largest private provider of child care, has reported a 50 percent increase since 2019 in the number of companies partnering with them for on-site centers and a 40 percent post-pandemic increase in child care tuition stipend partnerships.⁶ That means we have arrived at a pivotal moment for policymakers, advocates, and the public to discuss and decide on the proper role of employers with regards to child care.

“We have arrived at a pivotal moment for policymakers, advocates, and the public to discuss and decide on the proper role of employers with regards to child care.”

This report begins with a brief history of employer-sponsored child care benefits in the United States. Next, there is a discussion of philosophical implications surrounding employer-sponsored care. The focus then turns to the practical advantages and challenges posed by employer-sponsored care. Finally, the report looks at alternatives where employers can contribute to the child care system while avoiding the described pitfalls.

It is important to note that many, if not most employers offering child care benefits, as well as initiatives that encourage those benefits, are well intentioned. That intention should be applauded. Employers with a family-friendly orientation are important to a healthy society, and such an orientation can be reflected in other areas (like offering living wages, schedule control, and stable and sufficient working hours) as well as in unspoken corporate culture. Moreover, employers do have a key role to play in child care provision; they are undoubtedly a stakeholder, and at the moment, they are largely freeloaders in the sense that they receive gain from a child care system funded by parents and (limited) public money without paying into that system.

The argument in this report, then, is not that employees do not need or deserve benefits such as on-site child care programs, but that the benefits currently delivered by employers can be delivered—in a far more effective and fair fashion—by a fully publicly funded system into which employers contribute.

America faces a crossroads. With a broken child care system and high demand from parents, the nation can go down the path towards public funding or, alternatively, cement child care as an individual benefit to be derived from one’s employer. The employer path is appealing in its simplicity but brings with it all the negative elements seen with employer-linked health insurance. Given the large portion of the American workforce made up of low-wage workers and “gig” workers, doing so also raises the specter of increasing inequalities. Wherever one falls on this question, the next step is highly consequential, and must be taken with the thoughtfulness it deserves.