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2020 Utah Legislative Session

'A market failure': Utah's child care challenges prompt search for innovative solutions

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'A market failure': Utah's child care challenges prompt search for innovative solutions

At Kids Connection child care center in Orem, established teachers make less money than newly-hired fast food workers, said owner and co-director Tamara Thomas.

“Child care is so expensive … At Chick-fil-a, they’re starting at $13 an hour. None of my teachers make that,” Thomas said, adding that 90% of her staff makes less than $10 an hour. “And the job they do is, as I see, is infinitely more important than a fast food.”

Officials with Utah Child Care Cooperative, or UC3, describe the current state of child care in Utah as a market failure: profit margins too slim for business sustainability, costs too high for many families to afford and too few spots available at quality centers.

Affording child care

The average monthly cost in Utah County for professional child care for an infant (0-2) is $715.17; the average for a 3-year-old is $664.16; a 4- or 5-year-old costs $641.75 on average; and the average for a school-age child is $609.75. In comparison, the median household income for Utah County residents is $70,461, and $68,358 for the state.

According to a 2019 report by ChildCare Aware of America, the percentage of income spent on child care in Utah varies widely among different family structures. Families consisting of a married couple and an infant child spend 12% of their income on child care. Whereas families consisting of a married couple and two children spend 21.2%.

Single parent households spend a greater percentage of their monthly income on child care. Families consisting of an infant and a single parent spend 33.5%; families consisting of two children and a single parent spend 59.3%.

According to that same report, families below the poverty line consisting of a married couple with two children spend 70.6%.

The Utah Department of Workforce Services offers financial help specifically for child care to families who qualify. But according to Rep. Suzanne Harrison, D-Draper, only a small amount of “very, very low income families” qualify for that help, and those who do receive financial reimbursements see up to 39% of their child care costs covered.

“A very significant amount of low income families and middle class families struggle to afford child care” in Utah, Harrison said.

Marin Christensen, director of research and communication at UC3, said the top three issues contributing to child care problems in the state are unaffordability, inaccessibility and low quality.

“That’s why it’s a market failure, because the demand is there and they (child care centers) can’t meet it,” Christensen said. “They can’t meet it because of the thin margins.”

Grant will allow UVU's childcare facility to take on more students 02

Calvin Oswald, 3, practices fine motor skills at the Utah Valley University Wee Care Center on Wednesday, Dec. 5, 2018, in Orem.

Affording to run a child care center

“The biggest challenge by far is finding and keeping good staff. The problem is mainly, is that we can’t pay them a living wage,” Thomas said of running her child care center. But, she continued, “Child care is already so expensive, if we were to raise the rates to pay them more, families wouldn’t be able to afford it.”

Thomas said the reason she can only afford to pay her employees a small wage — less than many fast food establishments — is because the business model is substantially different.

“The expense of running a child care center is enormous,” she said. For Kids Connection, top expenses include payroll, high liability insurance fees, fees from overseeing entities, food served daily to children and more.

Once everything adds up, the profit margin for a child care center is very slim — about 4 to 5%, Thomas said.

“I will be transparent with you,” she said. “I, as an owner (and co-director), make less than my full-time director. So even the owner takes a very small piece of that pie.”

Page Checketts, executive director of UC3, said child care centers in Utah are stuck in an unfortunate cycle that begins with thin profit margins. Those thin margins require low employee wages to sustain. Those low wages, according to Checketts, regularly lead to an unstable workforce and ultimately result in a drop in child care quality and accessibility.

“Normal market adjustments in a normal business, they don’t really work in this industry,” said Angie Cook, UC3’s director of business development and policy.

Cook said one child care provider UC3 has worked with came to the point where she had to increase her prices, but she also knew that action would make her services unaffordable for one of her customers.

“She knew that that would send a woman back home, and she would lose her home and wouldn’t be able to work,” Cook said. “So she floated her for many months and just had her pay basic costs that didn’t even cover the care.”

Cook said because many child care centers are taking on the burden of keeping families at work, they fail to make much money, if any.

“The child care industry has reached market failure, so they can’t continue without some form of help either from business or state, and we’re advocating for both state and business help,” she said.

Two Rivers High School Child Care 08

Jay'Cinthyan Roach, 2, plays in the new child care program at Two Rivers High School on Thursday, Oct. 3, 2019.

Is business involvement a solution?

Rep. Harrison recently submitted two bills for the 2020 Utah Legislative Session beginning Monday that she hopes will significantly help the state’s current child care situation with innovative solutions.

The first bill, H.B. 187, is an employer tax credit for employers that either subsidize care at a licensed facility or provide licensed child care to employees during work hours. If the bill passes, employers would be able to get a tax credit for up to 50% of the finances they’re spending on employee child care benefits, with a statewide cap of $500,000 that would be allocated for the tax credit. There would be a five-year sunset on the bill, meaning after five years, if the business community is not significantly using the tax credit, the bill will go inactive.

The second bill, H.B. 89, is a workforce development incentive, which would allow the Office of Economic Development to consider whether a company provides working parent benefits — such as child care subsidies, flexible work schedules, paid family leave and more — and reward those companies with incentives.

UC3 is backing both bills, and Cook said they hope the bills will enable the local business community to see the role they could play in solving the issue.

“We can go out into the business community and show them that public-private partnership ... that the state will help and the businesses can help and hopefully this can bring down some of the cost and increase accessibility to the employees,” she said.

Cook says that because the area’s unemployment rate is currently so low, businesses are experiencing a workforce gap, with lots of positions remaining open because not as many skilled workers are applying.

According to an Early Childhood Services study, 44% of Utah parents said they would use child care to work more or continue their education.

When companies provide child care benefits, employee absences decrease by up to 30% and job turnover declines by as much as 60%, according to the U.S. Chamber of Commerce Foundation’s Center for Education and Workforce.

“We see this (the bills) as an answer to that problem, to fill the workforce gap with child care solutions,” Cook said. “It’s a matter of putting it in their budget and prioritizing and seeing this as a real need in their workforce. We do believe that if this is passed and businesses actually see what they can gain, the return on investment is quite high.”

Qualtrics, an experience management company with headquarters in Provo, is currently constructing an onsite child care center with the hope that the move will increase employee satisfaction. The center, which will host over 250 children, will focus on STEM learning.

Mike Maughan, the head of global insights, said understanding Qualtrics’ core beliefs can inform the reasoning behind their decision to build an onsite child care center.

“Our mission is to rid the world of bad experiences,” Maughan said. While looking through employee benefits, he and other executives decided that adding an on-site child care center to their Provo campus would substantially contribute to a great new parent experience for their employees, he said.

Maughan said employees’ reaction to the news of the upcoming center has been incredibly positive and excited.

Nic Dunn, director of public policy and business development for the Utah Valley Chamber of Commerce, said local businesses are exploring different ways to get the right workforce into the many jobs left open by the current low unemployment rate.

The chamber has not yet officially taken a position on Harrison’s bills, restricting Dunn from speaking specifically in favor of, or against, the bills’ proposal of providing incentives to businesses that offer child care benefits.

“How do we make sure our workforce is ready to fill open jobs in the county?” Dunn asked. “Honestly, that discussion is much broader than the idea of offering an additional benefit (such as a child care benefit), but that can be an appropriate tool to explore … because our economy is doing so well right now, we have a strong need for the right workforce, and benefits packages and subsidies can be a part of that.”

Two Rivers High School Child Care 01

Jay'Cinthyan Roach, 2, plays in the new child care program at Two Rivers High School on Thursday, Oct. 3, 2019.

An issue that impacts the home and the community

According a study by the Utah Women & Leadership Project, child care is the No. 1 challenge for working women. The study also found that 30% of Utah parents have cut back on work hours because of unmet child care needs, and that the cost per year of full time child care is 56% more expensive than the average price of a year of Utah public college tuition.

“We just have to keep it in our minds too that Utah is last in the nation for accessibility of child care,” Cook said. “We’re the No. 1 child care desert. And we can’t just say, ‘The market will figure it out,’ like some people are saying. And I understand their thinking, but it doesn’t work in this case. So if we want our workforce to thrive and we want to fill these workforce gaps that we have, then we need to be more proactive as a business and a state community.”

Checketts said that while many consider child care to be only a woman’s or mother’s field in life, UC3 approaches all that they do from an angle of working parents.

“Because we know that whatever happens in the home affects everyone in the home,” she said.

Checketts added that over half of parents of children under the age of six are a two-income household, and child care benefits would give parents more options and greater earning potential.

“We need to make sure we’re attracting companies that help community challenges,” Harrison said. “(The bills are) one way we can ask our business partners to step up.”

Harrison said the main motivation behind writing the two bills was that constituents who care about the issue brought it up and educated her on it.

“I think this is an issue that impacts so many people in my community,” she said.

One of the biggest potential challenges Harrison anticipates for her bills is the fact that not every legislator has dealt with the challenges of child care.

“I hope that my colleagues will be able to step inside the shoes of so many Utah families that are struggling with this,” Harrison said. “This is a huge issue for so many families. While it may not be every legislature’s lived experience, we need to think of all working families in this state … I really think we want our kids to thrive and be in safe, healthy environments, and we want employees to be supported at work. So we’re asking our business community to step up and help take care of tomorrow’s workforce to help subsidize child care now.”

Thomas said she sees the model of businesses trying to help with child care as a much better way to bridge the gap than government attempting to help.

“The government, just in my opinion, has done what they can do,” Thomas said, adding that government help involves “tax money, and it’s more oversight, and the amount of government oversight that childcare centers have already is borderline ridiculous.”

Overall, Thomas said she sees an urgent need to address the issues of early childhood education and care.

“(Accessible child care) is so important, not just for families in the micro sense, but for communities,” she said. “It has a huge impact, so it’s a good idea for everyone to be interested in this topic.”

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