States turn to employers to boost child care benefits

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States turn to employers to boost child care benefits

This story was originally published by The 19th.

As efforts to expand the child tax credit and provide paid family leave stall at the federal level, states are increasingly pushing private employers to step in and fill one of the other most painful gaps for working parents: child care.

According to the National Conference of State Legislatures, 17 States offer child care tax credits to “employers who operate or contract child care services for their employees.” These states are Arkansas, Colorado, Connecticut, Georgia, Illinois, Iowa, Kansas, Maryland, Mississippi, Montana, New Mexico, New York, Oregon, Rhode Island, South Carolina, Virginia, and West Virginia.

Eric Syverson, senior policy specialist in the fiscal affairs program at the National Conference of State Legislatures, said the discussion of a federal child tax credit is generating bipartisan consensus around finding ways in the tax code to help parents and families who need child care.

“I think the states have now understood that the federal government is temporarily considering another increase in these tax credits: the child tax credit, the child and dependent care tax credit, the EITC. We could also benefit from that increase if we pass our own measure.” And that’s what a lot of states are considering right now, Syverson said.

He added that the biggest beneficiaries of the state tax credits are large businesses that can afford to pay for child care. While the credit is growing in popularity, a relatively small percentage of businesses take advantage of it. Syverson attributes this to the high costs of setting up a daycare and a general lack of awareness among large businesses about the tax credit. According to the Bureau of Labor Statistics, only large businesses that receive tax credits are able to afford child care. 12 percent of all workers had access to child care benefits through their employer in 2023.

Jessica Chang is the co-founder and CEO of Upwards, a child care marketplace that connects families with child care providers, helps child care providers meet their business needs, and helps companies and government entities create child care benefits programs for their employees. Chang said her company operates across the major stakeholders in child care: employers, government, families and child care providers.

As a first step, Upwards can partner with employers by connecting employees with nearby child care providers, a more convenient and cost-effective option than building an on-site facility. The company can also use employee data to personalize child care benefits. For example, if Upwards notices that employees are missing work to care for their children, it can recommend offering backup child care credits to help families find providers at non-traditional times.

“By partnering with Upwards, we’ve been able to help our employees find trusted providers who can accommodate the varying work schedules at our properties,” Susan Loveday, vice president of human resources at Dollywood Parks and Resorts, told The 19th. “Additionally, to help cover childcare costs, we provide a monthly stipend to employees whose children are cared for by an Upwards provider.”

For Chang, child care as a benefit could become more like health insurance, or even more important.

“That’s why it’s necessary for employers and government to be involved in order to normalize this and say, ‘This is not a social problem. This is actually an economic problem. This is not a mother’s problem. This is a family problem,’” Chang said. “Employers, for example, don’t say to us, ‘Hey, we’re going to try this and if it doesn’t work, we’re going to walk away.’ They’re actually saying, ‘How can we make this successful so that there’s no problem? How can we do this for two or three years because we want to make sure that everything is done correctly?’ And that’s a big change from just checking a box.”

Federal action on child care and other family policies has been slow to progress. Last month, Senate Votes Against Bigger Child Tax CreditAdditionally, federal law does not guarantee workers paid days off to meet parental, medical, and family responsibilities.

But there have been efforts at the federal level to encourage businesses to help their employees with child care, a measure that has support from both Democrats and Republicans.

In 2022Congress passed the CHIPS and Science Act, a bill that allocated $50 billion to companies developing semiconductor manufacturing and research and providing child care to their employees.

When President Joe Biden was the presumptive Democratic presidential nominee, in a debate with former President Donald Trump, he said“We should dramatically increase the child care tax credit. We should dramatically increase the availability of women and men, or single parents, to be able to return to work. And we should encourage businesses to maintain child care,” as a way to address the child care crisis.

The Heritage Foundation, the conservative group that developed Project 2025A draft plan for former President Donald Trump’s potential second term calls on Congress to encourage on-site child care for employees, saying it “puts the least strain on the parent-child bond.”

Some experts, however, argue that employer-funded child care is only a temporary solution to the child care crisis – and that it raises equity concerns.

For Elliot Haspel, a senior researcher at the family policy think tank Capita and author of “Crawling Behind: America’s Child Care Crisis and How to Fix It,” employer-sponsored health insurance and its “uneven results“The fact that child care is reflected in this phenomenon is something people should look at more closely. Haspel writes, “The only real solution to America’s child care needs is a system of choice funded by a permanent stream of public funds,” and employer taxes are one way to start collecting those funds.

“We have a lot of precedent today at the state and local level for equitable ways to fund more affordable, accessible, quality child care,” Haspel said. “In Vermont, they’re funding a major child care reform bill through a small payroll tax, 0.44 percent, of which 75 percent is borne by the employer and the business owner, after business owners went to the legislature and basically said, ‘Tax us. This is important, this is worth it.’ That’s the kind of employer activity we need.”

Similarly, he added, Massachusetts, Washington DC and Portland have all levied taxes on high-income households to help them pay for child care.

“When we care about something and we decide it has sufficient societal value – whether it’s public schools or roads or parks – we find the money,” Haspel said.

Casey Peeks, senior director of early childhood policy at the left-leaning Center for American Progress (CAP), says employers should be more active as advocates for child care funding, citing the Council for Strong America’s report that the child care crisis is costing the United States dearly. $122 billion Every year, the loss of income, productivity and turnover is considerable. She considers childcare as both an economic and social problem.

“I describe it as a public good because I’m not a parent, but I still benefit from child care. Every day I take the subway to work and I benefit from the fact that my subway driver or my bus driver puts their child in a safe, quality child care program, so they can go to work and I can go to work,” Peeks said. “I really think that businesses have a role to play and it’s in their interest that we don’t have a child care crisis. (…) I think that whatever employers provide should hopefully be in addition to what’s provided by public investment.”

Another aspect of the child care crisis is supply. A June 2024 report from the Federal Reserve Bank of Chicago found that despite the rising cost of child care, child care workers earn on average $14.60 per hourThe Chicago Fed attributes the decline in supply to low wages and high responsibility; employment in the child care sector in the fourth quarter of 2023 was 9% below pre-pandemic levels.

Anna Lovejoy, CAP’s director of early childhood policy, acknowledges states’ efforts to address the child care crisis, but is not convinced that incentivizing businesses to provide child care helps solve the supply problem and could potentially create equity issues.

“When you tie child care to employment, if someone loses their job or decides to leave their job, they don’t have child care while they look for work,” Lovejoy said. “So that’s a disadvantage for families. I also think it creates a kind of equity issue between those who are employed and those who are not, between those who have child care and those who don’t.”

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