Ohio’s Economy Faces Potential Billions in Impact as Child Care Services Struggle

The challenge of accessing child care and ensuring a strong workforce at child care centers is currently viewed as a “crisis,” prompting numerous federal and state agencies to seek solutions.

Advocates and economic analysts are increasingly highlighting the pivotal role of businesses and employers in not only addressing the child care challenges in Ohio but also preventing significant economic repercussions for the state.

During a recent panel discussion held by the Federal Reserve Bank of Cleveland, policy advisors and local child care advocates underscored the importance of fostering public-private partnerships and establishing more incentives to retain a skilled workforce in the child care sector.

“The focus shouldn’t be on pinpointing responsibility but rather on identifying whose best interests are at stake, and there is a compelling business rationale for employers,” stated Sarah Savage, a senior policy analyst and policy advisor at the Federal Reserve Bank of Boston.

Savage pointed out that according to a private study conducted by Mercer in 2023, on-site care and child care subsidies are seldom provided even by organizations with over 5,000 employees.

The study revealed that only 10% of employers with 5,000+ employees offer on-site care, with 40% of such large businesses not providing any of the listed services, which include child care referrals, tutoring, subsidies, or reimbursement.

While businesses have obligations in this area, the improvement of the child care sector necessitates addressing its internal staffing challenges first, as outlined by Kyle Fee, a policy advisor at the Federal Reserve Bank of Cleveland.

Fee highlighted that workforce difficulties represent a significant barrier in the child care landscape, with workforce retention and pay trends mirroring those common in low-wage occupations.

According to Fee’s analysis of a 2019 national survey on early care and education, one-third of child care centers experienced staff turnover exceeding 20%, with turnover rates higher in centers offering lower pay. This turnover was associated with the intersection of pay levels and the scope of child care and education services offered at these centers.

The child care workforce predominantly comprises younger female employees who exhibit greater racial and ethnic diversity compared to the broader workforce, Fee noted.

As of 2022, child care workers nationally had the 10th lowest median annual wage, ranking just above fast food workers and cashiers, with Ohio’s estimates tending to be slightly lower, Fee indicated.

“The compensation for child care workers falls short of providing a living wage for a single adult with one child in any state,” Fee emphasized.

These figures reflect the declining population of child care workers who remain in the workforce, which has been consistently dwindling, according to Fee’s findings.

From 2010 to 2022, on average, around 15% of child care workers left the profession, a rate higher than the 8-9% turnover observed among preschool and kindergarten teachers during the same period, Fee highlighted.

In 2022, job turnover in the child care sector was 65% higher than turnover in “standard occupations,” as per Fee’s analysis.

On average, half of the individuals leaving the child care profession do not re-enter the workforce at all.

“The focus here once again is on the cycle of turnover among child care workers entering and leaving the workforce, which requires further examination,” Fee remarked.

Efforts are underway in Ohio to enhance wage conditions for workers while simultaneously upholding the quality of centers to encourage more families to enroll.

Nancy Mendez, the president and CEO of Starting Point, a child care advocacy organization in Northeast Ohio, highlighted collaborations with Cuyahoga County to offer pre-K scholarships to individuals with incomes up to 300% of the federal poverty line and utilizing federal ARPA funds for scholarships and staff bonuses.

“We are striving to stabilize this system by supporting child care centers in maintaining quality and linking parents to services in the region,” Mendez stated.

However, enhancing wages often corresponds to increased tuition, potentially lowering enrollment as families struggle to meet rising child care costs alongside other expenses, perpetuating a challenging cycle for centers, Mendez explained.

“There’s an ongoing conundrum here that they are struggling to resolve,” Mendez added.

The organization witnessed the lasting impact of the COVID-19 pandemic on various economic sectors across the state, particularly affecting child care significantly.

“We anticipated a significant decline in enrollment and workforce challenges due to the pandemic, but what we observed was a continued exacerbation of our workforce issues,” Mendez noted.

Starting Point received feedback from 60% of the child care facilities they collaborate with, reporting operational challenges stemming mostly from staffing shortages leading to low enrollment.

Mendez stated that child care facilities need to maintain over 70% enrollment to break even financially.

The combination of unaffordable child care and employee shortages has created a scenario that Mendez and panel policy advisors believe will negatively impact the economy. Mendez pointed out that neighboring states like Pennsylvania and Michigan incurred estimated economic losses exceeding $2 billion due to inadequate child care services.

“It wouldn’t be surprising if Ohio also faces around $2 billion in annual economic losses resulting from child care breakdowns or access issues,” Mendez added.

Proposed legislative measures aim to establish a partnership between employers and the state regarding child care costs, alongside initiatives for a tax credit focused on child care and family expenses, as well as a tax credit for Ohioans contributing to child care facilities. These measures, predominantly led by Republicans, stand a higher chance of approval given the GOP supermajority in the House and Senate.

However, the Ohio General Assembly is in recess until the Fall, likely extending past the November election. As a result, any potential actions on these measures will be deferred until later in the legislative term, with the possibility of requiring reintroduction in the following year if no action is taken by December.