Our country is in a child care crisis, exacerbated by the pandemic, which has shown how difficult it is for families to access quality, affordable care and for providers to make ends meet. Absent a robust federal investment and universal child care program, the Better Life Lab team at New America set out to better understand what innovations existed in the child care and early education space. Although no single innovation is enough to solve the national crisis, these innovations aim to improve existing parts of the child care delivery system. This five-part series is designed to share our findings as to what innovations could work in improving child care access, quality and affordability to create an equitable system that works for us all.
Tiffany Gale has a fervent wish – to offer paid leave to her employees. But Gale (no relation to the author) runs a home-based child care center out of her home in Weirton, West Virginia, and doesn’t have the profit margins to pay for an employee to take a paid leave and hire a temporary replacement. Nearly all the money she makes, she explains, goes back into the business: for supplies, playground equipment, toys and staff. After expenses, she estimates she took home $30,000 last year. “Not much for a small business owner,” she said. One of her two employees is her sister-in-law, who has spina bifida and limited feeling in her lower limbs, which makes her prone to infections and occasional hospitalization. When she is out, Gale can’t afford to pay her, nor does she have the staff and paperwork capabilities to apply for disability or job assistance. “I care about her, and she genuinely cares about the children,” Gale said. [link to story here]
What Gale faces, like so many other child care providers, are the demands of running a small business with high labor costs, strapped tuition-paying parents, slim profit margins and many moving pieces. Roughly 30 percent of infants and toddlers go to a home-based program, and estimates from Home Grown show that 1.2 million paid carers work inside their home, like Gale. And research shows that the day care industry is highly fragmented, with nearly 90 percent of the establishments being single proprietorship day care providers and educational professionals – like Gale herself. Unlike other peer competitive countries, most of this country’s child care is unsubsidized, so it’s up to parents to pay the full cost while transferring some of the high-cost burden to the employees, many of whom make poverty wages. On top of that, the owner of the child care center is expected to manage the staffing, payroll, marketing, communication and benefits on top of everything else.
One of the most promising innovation areas we found in our on-going child care research is the growing number of technological and financial tools available to help the business side of the child care industry run more smoothly and efficiently – which can ease the time burden on owner/providers and potentially lower costs for parents and providers. While such innovative efficiency fixes can be very useful to individual child care centers, they are not a substitute for substantial public investment. Full enrollment, better marketing or payroll assistance can boost market efficiencies, but it will take real federal investment, year over year, to help families cover costs and boost child care educator wages, or robust family-supportive and safety net policies that would allow home-based providers like Gale to have her employees take paid sick leave without hurting her bottom line.
These innovations help, and they should be applauded in their efforts for making improvements, but by no means should they be considered a substitute for robust public investment and child care infrastructure, the same way our country’s policies and tax dollars support K-12 education.
» Key finding: Some of the most promising, scalable innovations are those that seek to centralize administrative roles and allow child care centers to focus on providing quality care, not back office functions. This can help lower costs for parents and overhead, keep family homes and small child care centers sustainable, and raise the low wages of child care workers.
Solutions that increase the pay for child care without adding costs to parents
Mirza is a fintech company that works with employers to subsidize the cost of child care so their employees aren’t forced to drop out of the workforce. The employers give a zero-interest loan, between $5,000-$7,000 per year, that an employee puts toward child care and can repay over three years, or get chunks of it forgiven with retention and attendance incentives. This program allows parents to afford quality child care without taking income away from the providers. Mirza integrates with an employee’s payroll provider so that monthly loan payouts and repayments happen automatically.
“It’s actually a care subsidy disguised as a loan,” said Siran Cao, the company co-founder. Since many parents are having children during some of the peak career-building years, stepping away from work comes at a much higher cost. “That is a period where the opportunity cost of leaving the workforce is missing some of that career acceleration.”
Mirza is in the process of launching with U.S. companies and Cao expects to do so in the summer and fall of 2022.
Solutions that match families with providers and provide back-end office supports
Probably one of the most talked about solutions for making child care more accessible and affordable without the addition of a significant federal or state investment are those that work with existing child care centers to centralize administrative costs, and take on some of the administrative burdens, including personnel, placement, covid-19 mitigation, and external communications and marketing.
Winnie, Wee Care and Wonderschool offer such administrative support. All three conduct an online marketplace for day cares—connecting families with open spots—with the goal of allowing providers to operate at peak capacity and spend less time on administrative tasks. The low-margin industry of child care operates most effectively when all spots are filled, so these companies are doing a service to improve access and lower operating costs for the providers.
Innovations at a glance:
»Wonderschool. Wonderschool is a two-sided marketplace meant to help parents find child care options and offers a child care management system (CCMS) for day-to-day operations. This CCMS provides online enrollment and enrollment management, tuition processing, financial recordkeeping tools, a CACFP (food program) solution, daily attendance tracking, a parent communication and engagement tool, and an online community for providers.
The child care providers—80 percent of which run home-based day cares—can self-select which level of Wonderschool access they want and need, with prices ranging from $2 a month per child to access the Wonderschool child care management system, to up to a 10 percent revenue share for opting into a higher tier of service with marketing and enrollment support. In some cases, a sponsoring agency like a government agency or child care network will purchase Wonderschool access and make it available to the child care providers within their communities. Two examples include the Elevate New Mexico Child Care program and the Maryland Child Care Boost program. Wonderschool also offers a New Supply solution, in which new child care programs are supported in setting up, getting licensed and onward into operations.
“Technology solutions provided by the Wonderschool platform help keep administrative costs low, efficiency high, and programs fully enrolled and profitable; these are all key components of running a sustainable child care business,” said Mia Pritts, Wonderschool’s VP of Strategic Partnerships.
» Winnie. Winnie matches families looking for day care spots with licensed providers using publicly-available state data. While Winnie is free for any provider to use (the founder Sara Mauskopf gives the analogy of Yelp, where anyone can claim a page), subscribers of Winnie Pro pay $199 per month and receive prominent placement, lead generation and a better web presence with more customizable features.
By keeping the centers at capacity, or close to capacity, they are helping to increase the profit margins. Mauskopf’s own research estimates that if the average cost of day care is $844 per month (with some locations being much higher) Winnie Pro subscribers net a return on their investment by keeping spaces filled just two weeks faster.
“With this audience, we are able to help child care businesses fill their open spaces on average 2 weeks faster than if they did not use Winnie to list their open spaces,” said Mauskopf. “Given the average cost of day care in the US is $10,174 per year, or $844 per month, when Winnie helps a center fill a space 2 weeks faster that’s $424 they’ve made, or $225 after the cost of the subscription.”
» WeeCare. WeeCare also serves as a marketplace for parents and child care centers – both home-based and day care centers. Participating providers are considered “Wee Care Directors” and by participating, are better able to fill their child care centers to capacity.
Similar to Wonderschool, Wee Care offers back-end support, including accounting, marketing and a web presence. WeeCare estimates that such administrative tasks being outsourced saves 20 hours per week for the child care provider. The company collects a percentage of the enrollment feeds from any leads generated, though a spokesperson for the company said they’ve been reducing that fee as the majority of their growth revenue comes from creating an employee child care benefits program.
Solutions centralize administrative costs and services for multiple centers
» Neighborhood Villages. Neighborhood Villages serves as a de-facto school district for five child care centers in the Boston area. This nonprofit operates as the back-end support for the centers, providing a family coordinator on the ground to help with wrap-around services, such as housing or food support for a family in crisis, and a central office function to assist with personnel, administrative functions and issues as they arise, such as creating a comprehensive Covid testing system. (Read more about Neighborhood Villages in Early Learning Nation).
Solutions to make licensing easier
Questions of licensing currently vary widely across states. The process can be onerous, though it can matter a great deal when it comes to the quality metrics and subsidy reimbursement rates. Licensing too, gives a record of the child care space, which can in turn make it easier for families to find available care options. But for many families who rely on non-traditional child care—particularly home-based child care or Family, Friend and Neighbor care—the licensing process can be too much of an administrative hassle without enough upside.
» Neighborschools. Groups like Neighborschools, based in Massachusetts—a state with strict licensing requirements for child care—will help a child care provider navigate the licensing process free of charge for two years, then collect a referral fee for any placements made after those two years are up.
Innovations in this area focus on using the same forces that make private companies and services profitable and efficient—technology, data management, systems design—to improve affordability of child care. Each of these innovations is designed to improve upon the existing system, in which each child care provider is going it alone, and represent an infrastructure improvement rather than a total overhaul. There is a logic to this: substantial change is far more difficult and requires a great deal of political will and public investment.
It’s important to be cautious about developing or perpetuating false optimism that if only a child care center had a better website, or backend payroll system or full enrollment, the child care crisis would be over, that child care would be a more equitable and affordable good.
These innovations help, and they should be applauded in their efforts for making improvements, but by no means should they be considered a substitute for robust public investment and child care infrastructure, the same way our country’s policies and tax dollars support K-12 education. Until the day comes when early care and education receives the investment and support as a public good like K-12 education, these new technologies are making providers’ jobs easier, one improvement at a time.