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December 2023  Volume 21, Number 12        

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How Loss of Childcare Funding Will Impact the Workplace

A crisis is looming for working parents across the country as federal pandemic relief funding for childcare expired on September 30, threatening affordable care options. Employers stand to face major workforce disruptions if they don't take action to support employees with childcare needs.

The $24 billion in federal subsidies allocated under the American Rescue Plan Act helped prop up the childcare industry through the pandemic. Now, an estimated 70,000 childcare providers supported by this funding may be forced to close in the coming months, according to projections by The Century Foundation.

Many more providers can be expected to raise their rates to try to stay financially viable. But higher prices will put quality care out of reach for some working families.

Workforce Impacts

Employers have a significant stake in this crisis, as a lack of childcare options invariably impacts the workforce. According to Census Bureau data, nearly 5 million workers missed work in February 2023 alone due to childcare responsibilities.

With federal subsidies gone, these kinds of absences are likely to rise sharply. The Century Foundation estimates that millions of working parents across the U.S. will have to leave their jobs or reduce hours due to childcare issues.

Women tend to shoulder the bulk of childcare duties in most households. So, they may face difficult choices between their careers and caring for their kids if costs rise or providers close.

This dynamic played out during the pandemic when women's workforce participation hit a 33-year low in 2020. While some have returned, over 1 million still have not. More childcare instability could cause a repeat exodus.

In a survey by Bright Horizons, 77% of working parents said access to childcare contributes to their productivity on the job. Distracted, exhausted employees just aren’t as engaged and productive at work.

Steps Employers Can Take

To mitigate against workforce disruptions, experts recommend employers consider the following supportive measures for working parents:

  • Enhanced benefits
  • More scheduling flexibility
  • Childcare referrals

Enhanced Benefits

With childcare costs expected to rise, benefits like dependent care flexible spending accounts (FSAs) will become even more vital for workers.

Dependent care FSAs allow employees to set aside pre-tax dollars to pay for childcare expenses. In 2023, contributions are capped at $5,000 per household.

According to the International Foundation of Employee Benefit Plans, 75% of employers already offer this benefit to their workers.

Enhanced paid parental leave policies could provide another layer of financial support for new parents facing mounting childcare costs. Parental leave gives them time to bond with their child and adjust to their new family dynamic.

More generous leave policies beyond the 12 weeks of unpaid leave mandated by the Family and Medical Leave Act may also be attractive recruitment and retention inducements.

For example, some leading companies like Deloitte and EY offer 16 weeks of paid leave to primary caregivers. Others, like Reddit and Twilio, offer up to 6 months.

Flexible Scheduling

Giving working parents more flexibility over when and where they work can also minimize disruptions from childcare issues. For example, flexible start and end times, compressed work weeks, and shift swapping enable parents to tailor their schedules to meet childcare needs.

Childcare Referrals

For families struggling to find quality, affordable care options amid mass provider closures, employer assistance can be invaluable.

Some companies offer childcare resource and referral services through their human resources department or employee assistance programs.

These services help workers find and evaluate local care facilities that meet their location, budget, and program needs.

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In this issue:

This Just In ... Estate Planning: The New Must-Have Benefit

What’s Driving Benefit Costs Up 7% for 2024?

How Loss of Childcare Funding Will Impact the Workplace

How Claims Data Analyses Can Make Healthcare More Affordable

Support Your Staff As They Transition Back to Student Loan Payments



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