Jandos Rothstein
Ask nearly anyone who runs a child care service why they decided to open their business, and the word you’ll almost certainly hear is “passion.” The word you won’t hear is “money.” Despite the fact that parents spend on average nearly $12,000 a year to put an infant in a day care center, the average child care provider makes less than $24,000 a year. Even the top earners in the industry make less than $33,000.
How can it be that child care is expensive for parents, but not lucrative for providers? One reason is that business owners cannot create efficiencies of scale to rack up profits. The costs are more or less fixed: rent and utilities to maintain a physical space, compensation for enough staff to give individualized care to children and meet state-mandated adult-to-child ratios in facilities, plus all the toys and food that children require. There are no corners to cut. But parents can only be squeezed for so much, and the United States devotes a smaller share of our GDP to early childhood than all developed countries except Ireland and Turkey.
As a result, America has entrusted a critical cog of our economic engine, which allows parents to work and young children to thrive, to a throng of dedicated small-businesspeople, disproportionately Black, Latino, Asian, and female, engaged in an arduous labor of love.
THE DRIVE TO BE a caregiver was ingrained in Donna Mason early. She’s the second-oldest child of six children born to teenage parents, and her oldest and youngest siblings both have special needs. “I probably was nurtured to be a caregiver,” she said. She started early, running a thriving babysitting business in her neighborhood as a teenager, but she never intended to go into early-childhood education as a career. In college, Mason enrolled in premed.
But then as a young single mother, she started pricing out child care and realized that she couldn’t afford it. So she got a job at a center, allowing her to enroll her son for free. This experience is common: Half of the child care providers in the country are mothers themselves. Mason eventually became the director of a center, and then an administrator of the St. Albans Early Childhood Center, a large organization in Washington, D.C., that runs three different day care sites for 225 kids. “I made lemonade. I made it work,” she said.
BriTanya Bays of Stamford, Texas, also felt innately drawn to care work after working at a child care center straight out of high school. Armed with a degree in child communication disorders, she started crafting a business plan to open a child care center of her own, “in response to a lack of high-quality, affordable child care in Texas,” she said. Across the country, there are far more infants and toddlers in each state than the available number of licensed child care spots, and half of American families live in a place where they can’t get care at all. Those who can find a spot, meanwhile, often aren’t guaranteed high quality; in 2006, fewer than 10 percent of day care centers provided high-quality care, according to the National Institutes of Health.
Bays was working as the director of an existing center while pregnant with twins and realized she couldn’t even afford to enroll her own children part time, so she started her own in-home program. “The work is hard,” she said, with long hours to go along with the low pay. But “to provide daily care for children who are not your own is virtuous.”
Sylvia Hernandez fell into the industry by accident. Her mother ran a day care in California, and when she got injured, she asked Hernandez to take over while she recovered. Hernandez agreed, “not knowing I was going to be doing this for the rest of my life.” She stayed, like many in this line of work, because she wanted to improve children’s lives. Hernandez told me about caring for children who grew up, graduated college, and came back to thank her. “It’s very rewarding, because you are making a better person.”
Her in-home center in the San Fernando Valley offers care around the clock, accommodating parents who work odd or long hours. This comes at a personal sacrifice. She only sleeps about two or three hours a night. “I don’t get to rest until the last child leaves,” she said. And then she gets up again, to greet the one who arrives at 4 a.m. “By 7 [a.m.], I already have 10 to 12 kids,” she said. She takes a one-hour nap at the same time the kids do.
But she feels called to serve her parents. “We are practically the only person they can count on. I don’t want them to not go to work because of me,” she said. “So I have extended my hours.”
Child care facilities are schools in miniature, with directors serving as teachers, principals, school administrators, and business owners all at once.
Makisha Binns decided to open up a licensed in-home day care in Belleville, Illinois, when her daughter, who is now eight, was one year old. Binns has always had a passion for teaching, and for years she worked in a number of school positions: teaching assistant, teacher’s aide, after-school program instructor, preschool teacher. But she sustained an injury while in a violent domestic relationship so severe that she was told she would never walk again, let alone work in a school. Child care was a way for her to keep her love of teaching going while still being able to rest and be comfortable in her own home.
Binns takes pride in what she does, interacting with her kids on an individual level. Nap time started while we were speaking, and each child came to give her a hug before they lay down. “It makes me so excited to know I can make a difference in a child,” she said. “The first three to five years in a child’s life [are] the most important. So if I can set the foundation for those children, it’s the beginning of their life, the rest of their life.” Starting to tear up, she told me, “That’s what motivates me.”
Practically all of the providers I talked to called out the stereotypes people have about working in day care, that they do nothing but sit kids in front of a TV and wipe their bottoms. They described instead how they each create detailed curricula and schedules full of activities, designed to keep children intellectually and socially stimulated during some of the most formative years of their lives. These are schools in miniature, with directors serving as teachers, principals, school administrators, and business owners all at once.
About half of these child care businesses are minority-owned, and an incredible 93 percent of the workforce is female, according to Labor Department data. And child care providers share something else in common: The finances are tenuous, because parents can only be asked to pay so much.
“THE WORK PUT INTO a quality child care program is definitely not supported by the market—how much we’re getting paid, how much it costs to operate it,” Bays said. “The child care providers are taking a loss, the parents are taking a loss, and it’s not benefitting the child in any way.”
With a laugh, Bays noted that her “big dreams” of running a small business quickly met the cold, hard facts of the industry. The salary she pays herself boils down to $5 an hour, and if she operates below capacity, even that meager salary puts the business at a loss. She makes even less from the families she serves who get government subsidies to pay for care, which pay her less than $2 an hour per child. And yet she knows how much it costs parents. Many families who don’t qualify for subsidies can’t afford to send their children to her day care. “What am I supposed to do? Do I take the loss?” she asked.
It’s a tough equation. Families spend, on average, nearly 10 percent of their incomes on child care, 40 percent higher than what the government considers affordable. They’re spending more to send an infant to a child care center than what they spend on food, transportation, or health care, and in many parts of the country it’s even more than housing. To afford care, most families have to cut back on other necessities.
Binns charges families $38 a day, but her monthly expenses come to $3,000 and she’s only making a small profit. First the rent gets paid, and then she tries to cover other bills by the 15th. She gets $500 a month through an Illinois state food program, but that doesn’t always cover her needs. She only just started paying herself $10 an hour in May. “I can’t even remember the last time I bought myself something,” she said. As a single mother, she’s struggled to get her three kids what they want and need. Her oldest wants a car, but she just doesn’t have the money.
Hernandez doesn’t get paid extra for staying open for 24 hours; the state doesn’t offer extra overtime or overnight subsidies. When all is said and done, Hernandez makes less than $7 an hour. California hasn’t raised its subsidy reimbursement rates in years, she said. But she still has to cover bills for the business like rent, power, and water, which keep climbing. “I would be doing a different type of business if I wanted to be seeing my income really high,” she said.
About half of these child care businesses are minority-owned, and an incredible 93 percent of the workforce is female, according to Labor Department data.
The Angels Learning Center in Minnesota charges parents who don’t get subsidies $322 a week for an infant and $272 a week for a toddler. Most families there receive government subsidies. The money is just about enough for Gigi Vaye, the assistant director, to cover rent and salaries. “You don’t get in this business for profit,” she said. “You’re in this business to help people, to change lives.”
Mason’s school is financially stable, and she typically has three to six months in reserves. The staff of 70 enjoys good compensation, health insurance, and a 401(k) plan. But the tuition isn’t cheap: She charges $2,075 a month for babies and $1,925 a month for kids ages two to three and a half.
But even for St. Albans, the profit margins are slim. “I can’t charge you what it really costs,” Mason noted. Yet child care providers receive next to no direct investment from the government, earning only modest subsidies for lower-income children. Mason lays out the reality: “If you want us to charge a fair price, to have quality staff, to maintain our facilities, to implement an enriched curriculum, then we need funding. That’s the bottom line.”
THE BUSINESS OF child care barely worked, then, before COVID-19 ever existed. The pandemic all but shattered an already fragile model. Unemployed parents could no longer afford child care; those working from home or fearful of sending their children into a potential outbreak pulled back. The changing schedules and work patterns played havoc with an industry that must adapt to its customer base. Eighty-six percent of child care providers say they are now serving fewer children than before the pandemic; enrollment is down 67 percent on average. That’s a staggering loss of revenue for businesses that typically operate with no cash reserves and barely in the black.
Bays shut down when the pandemic hit, and her husband also lost his job as a school custodian. No children other than her own have since returned. “We’ve run through all our savings paying for the last six months of not having kids in here,” she said.
Vaye’s center has licensed capacity for 92 children, but they’re at 25—an increase from where they were at the start of the pandemic. The loss in families equals a loss in income so steep that she hasn’t been able to bring most of her staff back yet. She’s been trying to enroll more children, but it’s tough. One family did a tour after their current center had a COVID outbreak, but they just decided to keep their child home. “We’re trying to stay above water,” she said. “It’s a day-by-day process.”
Even worse than the financial stress has been the logistical stress, as child care providers became essential workplaces. Most providers have had to buy extra supplies to ensure safety on their own, and about 14 percent haven’t been able to get what they need. In addition to cleaning supplies and personal protective equipment like masks and shields, many facilities need more toys and furniture to ensure that each child can be socially distanced with whatever materials they use. Some rooms have needed to be reconfigured to account for distancing. Overall, the cost of providing child care with lower enrollment has increased 47 percent for centers to meet all of the new health and safety requirements. For home-based providers, it’s increased 70 percent. Few providers have extra money to cover those kinds of costs.
Binns is spending an additional $200 a month, and the costs of basic goods are rising. “Everything’s so high now, it’s cutting from your profit,” she said. She’s been searching high and low for Clorox wipes or Lysol disinfecting spray—she even woke up early on a Saturday to try at Walmart, to no avail. She finally found two cans, but they were $45. “I can’t even afford that,” she said. She’s asked parents to bring supplies if they can.
Binns and I spoke on the third of the month, and she hadn’t yet paid her rent or any of her bills. In May, a quarter of providers said they were behind on their rent or mortgage payments. Half had delayed paying other bills.
Without more help, an estimated 4.5 million child care slots could disappear, cutting the country’s capacity in half.
Even at a school with the size and revenue of St. Albans, where Mason works, things have been tough. The school experienced two major moves and a renovation in the last four years that ate into her reserves. During COVID, the school closed from March 12 until June 29. What got Mason through was a $427,000 Paycheck Protection Program loan, made possible by the CARES Act passed by Congress in March. Coupled with a month’s rent deferral from her landlord, that allowed her to make payroll for two months and keep things relatively stable. She was lucky: Overall, the industry received just $2.3 billion in PPP funding out of a total $659 billion pot.
But Mason has applied for a handful of other loans and gotten no other assistance. She’s now spending $5,000 to $6,000 a month on PPE. She estimates she lost $150,000 in revenue in April and $300,000 a month in May and June. Even though she’s open now, she still lost $100,000 in July and another $75,000 in August. “I’m bringing in just enough to pay the bills, nothing more,” she said. “But I’m OK with that, because I’m still providing a service and I’m still able to stay in business.” She just has to cross her fingers that no major catastrophe hits when she has nothing in savings. “We’re in survival mode,” she said.
Hernandez is one of the unlucky ones who couldn’t get a PPP loan, nor an Economic Injury Disaster Loan available through the Small Business Administration. “I really was very hopeful I was going to get the PPP loan, because … I didn’t want to lose my staff,” she said. Instead, she’s had to dip into her savings to make payroll. She’s cut back on her own expenses, only preserving her Starbucks coffee run to stay awake.
“I’m very scared,” Hernandez said. “If I run out of the funding for me and my staff, or funding for getting the supplies … we would have to close our doors.” She began to cry. “It’s hard. It’s frustrating. I get emotional.”
CONGRESS INCLUDED $3.5 billion in extra funding for the Child Care and Development Block Grant in the CARES Act. But it’s a small drop in a vast sea of need. In April, the National Women’s Law Center and CLASP estimated that it was costing $9.6 billion above what the federal government already offers for child care providers to stay solvent each month. Sens. Elizabeth Warren and Tina Smith proposed a $50 billion child care bailout. Republicans incorporated substantially less than that in child care grants in their proposals. But a deal for any relief legislation has been stalled since April. No other federal money has materialized.
A few weeks before we spoke, Binns had been excited about a new grant to help child care providers, attending a webinar to make sure she got everything right. It was only the day the grant was released that she found out that she was ineligible because she only has capacity for eight children, and the grant is for those with ten or more.
“There’s so much on our plates now, and we’re not getting assistance,” she said. “It’s been a struggle. Sometimes I want to give up, but I know I can’t, because this is the only source of income I have.”
Without more help, an estimated 4.5 million child care slots could disappear, cutting the country’s capacity in half. A July survey found that about 40 percent of providers are certain they’ll shut their doors permanently without financial assistance. Only 18 percent of programs expect they will survive longer than a year.
The paradox is that child care is desperately needed as a bizarre school year begins. The Brookings Institution estimates that there are 41 million working parents with children under the age of 18. Those without in-person school need child care to return to work. Child care providers are more critical to the functioning of the economy than ever. Yet they feel invisible, ignored by a political system that has taken them for granted for decades.
“Everybody talks about nurses or doctors, our local fireman and policeman,” Hernandez said. “All this work we’ve done, sometimes I feel like nobody recognizes it.”
