Child care doesn’t pay

Four out of every five child care centers said that they had a staffing shortage in a recent national survey; 78% of respondents said low wages were the main obstacle to recruitment of staff, and 81% said it’s the reason they leave the profession.

For Idaho, those numbers are even worse: nine out of 10 child care centers surveyed have a staffing shortage, and 84% identified low wages as the main obstacle to recruiting staff “because they are so low that potential applicants are either relying on pandemic unemployment or are recognizing they can make more money working just about anywhere else.”

Child care survey

The survey was conducted by the National Association for the Education of Young Children between June 17 and July 5, gathering input from over 10,000 individuals, where 108 were from Idaho. The survey focused on two issues: the effect of pandemic relief funds on the child care industry and staffing.

The wages issue is major. “It’s just not enough to compete with some other industries that are able to offer a lot more,” said Beth Oppenheimer, executive director of the Idaho Association for the Education of Young Children.

On the issue of retention, 66% of Idaho respondents said that low wages are the most common reason that educators left the field, followed by 14% of respondents who pointed to exhaustion and burnout; 10% said a lack of benefits, while only 3% said regulations were the key challenge.

The survey also looked at the health of the child care sector and found it wasn’t good. Nationally, one out of every three child care businesses said they were considering closing their child care program this year. Again, for Idaho, those numbers were even worse: 49% of respondents said they were considering leaving their program or closing their family child care business within the next year, with another 8% saying that maybe they would close.

Low wages

Wage data for child care providers varies depending on the source. Oppenheimer cited $10.38 per hour as the current median wage in Idaho. The U.S. Bureau of Labor Statistics (BLS) reported $11.51 for the median child care wage in Idaho and $11.73 for the mean for 2020. Either way, it’s still less than starting wages at Amazon or Walmart.

The Idaho Business Review (IBR) analyzed whether a single person making $11.73 could afford to live in Boise using the least expensive form of transportation through ValleyRide. This is an optimistic estimate since it assumes that mass transit has stops close to both home and workplace, which is often not the case for much of Boise. Given the recent escalation in rent, IBR determined that after taxes, rent, subsidized medical insurance, food, phone, utilities and transportation, this is not a living wage.

Oppenheimer remarked that: “These are skilled workers who are licensed, and many obtain ongoing training and certifications, but there is little incentive for them to remain in the industry that cannot pay them a living wage.”

Pandemic relief

Oppenheimer credited the survival of Idaho’s child care businesses to the state’s use of pandemic relief funds. In the first phase of child care relief, the state used $21 million of Coronavirus Aid, Relief and Economic Security Act (CARES) money as direct grants. The Idaho Department of Health and Welfare (IDHW) managed the grant program.

“What the state did is they offered grants to child care providers up to about $5,000 a month; and that was just to keep the doors open for these child care providers,” Oppenheimer explained. “Without that funding, the child care providers, many of them would have shut their doors.”

During the state lockdown, many of those working from home withdrew their children from child care. Since child care providers bill on a per child basis, this resulted in a large and sudden drop in income for child care businesses. Many had to shut their doors temporarily, and over 200 closed permanently. For the ones that didn’t: “The (CARES Act) relief funds really helped them keep the lights on and pay their power bills, because without the income of the families for child care, they don’t have any other income,” Oppenheimer told the IBR. “It wasn’t a silver bullet, but it helped them get by.”

Idaho extended its initial relief for child care with Phase 2 funding that started in September 2020, using the same monthly grant format. IDHW used $18 million of the Coronavirus Response and Relief Supplemental Appropriations Act money in a Phase 3 extension of the child care grants starting in February 2021.

In addition, IDHW put together a wage enhancement program for child care providers, funded by that same $18 million. This program pays a supplement of $300/mo. to individual child care providers and started in May 2021. Oppenheimer estimated that the program has approximately one year before the funds are depleted.

“It is great that these funds are going to support the salaries of individual child care providers,” Oppenheimer pointed out. “First, while it’s helping, it’s not sustainable. It’s only going to last a year. And second, it’s still not getting child care providers to a wage that is enticing them to work in child care programs.”

The supplemental monthly $300 is a temporary pay increase of $1.73/hour. That would bring the BLS mean hourly wage to $13.46. Walmart and Amazon still pay better and offer benefits, with no licensing requirements.

Unaffordable

It is often said that the cure for labor shortages is to pay better wages. In the child care business, which runs on laser-thin margins, the cost of higher wages would be added to the monthly bill that parents pay. That bill is already unaffordable for those on the lower part of the earnings spectrum.

The U.S. Department of Health and Human Services considers child care affordable at or below 7% of household income. In 2019, a family with two children spent an average of 22.4% of its income on child care in Idaho. For single parents, the average was 69.5% of income. And married couples living at the poverty line spent nearly 65% of their income on child care for two children.

An early 2020 study by the U.S. Chamber of Commerce calculated that Idaho’s economy loses $479 million every year, largely in lost wages and lost productivity because of unaffordable child care. The catch is that the working poor who need child care the most cannot sustain the higher fees that better wages would entail.

Can four afford child care in Boise on $38,000?

We wanted to determine if a family of four in Boise could afford child care on annual earnings of $38,000. We chose this amount because it’s right at the upper limit for qualifying for a federal child care subsidy administered by the Idaho Department of Health and Welfare.

The monthly family income we used is $3,166, which is the published upper limit for a family of four to receive the child care subsidy. This is the same as an annual income of $37,994. If this was earned by just one person, it would be equivalent to making $18.27/hr. We assumed that neither working parent receives benefits and that the two children go to day care.

Our first calculation is affordable rent using the 30% of income rule, which yields a result of $950. Maybe someone could find a two-bedroom apartment in Boise for that in 2017, if they were lucky. According to Keller Williams Realty, the current average monthly rent for a two-bedroom apartment in multifamily housing in Boise is $1,250.

Next, we’ll use the take-home pay calculator for Idaho at smartasset.com, an online financial advisory firm. For a family of four, the estimated monthly net pay after federal and state taxes is $2,542. After subtracting an optimistic rent of $1,250/mo., there is $1,292 left.

This family makes more than the $3,013 cutoff for Medicaid, but can go to Idaho’s health insurance exchange at yourhealthidaho.org, where the parents are eligible for tax credits to cover their entire insurance cost; the kids are eligible for the Children’s Health Insurance Program (CHIP). We will not deduct any health insurance cost.

This family makes more than the $2,839/mo. cutoff for the Supplemental Nutrition Assistance Program (SNAP); therefore, they are not eligible for food stamps.

Average child care in Boise for one child is approximately $150/wk. This is based on a survey of weekly care costs for routine care posted online. Other estimates vary. Assuming the kids are at child care full time, the cost of care is $650/mo. for one child, or about $1,300 for two.

If the annual gross pay for this family is $3,166/mo. or less, the federal child care copay for the two kids will be $150/mo.  That would leave a remainder of about $1,100 to meet all other monthly expenses, like food, phone, utilities and transportation.

If pay is a dollar or two more per month, then the family isn’t eligible for the subsidy and the monthly child care bill will be market rate around $1,300/mo., which would leave this family with $42 to meet all other monthly expenses.

Can a child care worker afford Boise?

We examined if a single person working in child care could afford to live and work in Boise. According to the U.S. Bureau of Labor Statistics, the mean wage for a child care provider in Idaho was $11.73/hr. in May 2020. This is equivalent to $2,033/mo. or $24,398/yr. In comparison, the median Idaho child care wage was $11.51, which was just a bit lower than the mean.

We determined affordable rent using the 30% of income rule, with a result of $610. This might have paid for a nice studio 20 years ago. According to Keller Williams Realty, the current average monthly rent for a one-bedroom apartment in multifamily housing is $888. This is about 44% of income.

According to the take-home pay calculator for Idaho at smartasset.com, the estimated monthly net pay after federal and state taxes is $1,384. After subtracting rent of $888/mo., there is $496 left. This worker makes more than the gross $1,468/mo. cutoff for the SNAP program, so food stamps are off the table.

Our child care provider makes more than the $1,468/mo. cutoff for Medicaid; however, this worker is eligible for subsidized medical coverage around $32/mo. through Idaho’s health insurance exchange at yourhealthidaho.org. This leaves a balance of $464 to meet all other monthly expenses. A minimalist monthly food budget of $150 leaves $314. An inexpensive cell phone plan for $30 and utilities at $150 leaves $34, which isn’t enough for a car and gas, but it enough to cover the monthly $24 cost of an annual ValleyRide bus pass. This leaves $10 for all other monthly expenses.