General Business

Childcare Shortage Continues to Impact Businesses

One of the state’s hardest-hit industries during the pandemic, the childcare industry continues to struggle, but efforts are being made to support this critical sector.

As more parents head back to work after the pandemic, whether it’s on their previous full-time daily schedule or on a hybrid basis, they are seeking childcare services. Unfortunately, the Garden State’s childcare industry continues to face a shortage of workers. According to childcare staff, this actually isn’t a new problem. The pandemic simply shed light on the various challenges that the industry had already been facing.

Today, licensed childcare centers already operate on thin profit margins. However, they have to meet staffing ratios, per child age group, required by law. Technology can’t be used to bolster their bottom line; there’s no such thing as automation or remote options in this field. And, in a state like New Jersey, the solution of raising tuition fees just isn’t feasible. The state’s higher cost of living is already impacting the ability of many families to afford childcare in the first place.

“All of these problems existed before Covid … the pandemic just highlighted how dire the situation really is,” says Cynthia Rice, senior policy analyst for Advocates for Children of New Jersey. “It all comes down to staffing; that issue alone has had a ripple effect on so many of our businesses in the state because we still have parents who can’t find or afford childcare, and thus can’t go back to work.”

Not surprisingly, this is an issue that has primarily impacted women’s ability to return to the office. A recent report by the Rutgers Center for Women and Work found that nearly 10% of New Jersey women who didn’t work sometime between April 2020 and December 2021 cited childcare responsibilities (by comparison, just 2.3% of men reported not working for the same reason). “During the pandemic, we saw that women were much more likely to drop out of the workforce due to childcare challenges than their male counterparts, particularly mothers of younger children,” explains Alexis Bailey, vice president of government affairs at the New Jersey Business & Industry Association (NJBIA).

Bailey notes that the Rutgers report indicates that even after schools returned to in-person instruction, some 23% of families still experienced childcare disruptions in the last six months of 2021, and that number was even higher for low-income families. As such, about 20% of women in households earning less than $50,000 cut their work hours, while approximately 13% took unpaid leave … and 14% left their job because of childcare disruptions. “While many women are going back into the workforce, they are doing what they have to do in order to fill childcare gaps,” Bailey adds.

Another part of the problem is that positions stocking shelves at retail stores, packing boxes in warehouses, and ringing up groceries at grocery stores often pay more than jobs in childcare programs. So, while there are many passionate, dedicated childcare staff workers across the state, many of these employees have hit a wall with how much their passion for working with children can overshadow the need to pay the bills.

“Teaching and caring for children is hard work, and as minimum wages have increased, childcare centers are now having to compete with other businesses where people can make the same or more money doing a job that isn’t as demanding,” Rice says.

There’s also a shortage of workers who are willing to work earlier or later in the day; some parents need to drop off their children as early as 7 a.m. and pick up after 6 p.m., and childcare programs are struggling to find staff to accommodate those hours, Rice explains.

Fortunately, thanks to legislators like Senate Majority Leader M. Teresa Ruiz, the state is making strides towards establishing programs to support the childcare industry and address many of these issues. Earlier this year, Ruiz partnered with a few other legislators to announce a comprehensive childcare bill package to address the needs of providers, employees and parents. The bills include a grant program for the expansion of infant and toddler seats by 1,000, reimbursed at $22,000 per seat to prioritize providers in communities identified as childcare deserts and areas with a high percentage of low-income families. (This individual bill was signed into law by Gov. Murphy this past June).

“These bills deal with issues that have been facing the childcare industry for a long time,” Ruiz explains. “Private providers are standing up tall for families, but they are struggling with recruitment and retention of professionals for their classroom.”

Some of the other bills would provide tax credits and other incentives. If passed, these pieces of legislation would require new preschool programs or seat expansions to use private providers for at least 50% of their preschool slots; extend the enrollment-based payment model currently set to expire next June; allow for a gross income tax credit for childcare staff members who meet certain criteria; and extend childcare subsidies to families earning up to 300% of the federal poverty line.

Three other bills would establish departments or additional programs to support the industry, such as a Department of Early Childhood to provide focused and integrated development of under-five care and education; require the Department of Human Services to establish a quality-based reimbursement system for registered family day care providers participating in Grow NJ Kids; and designate the first full week of April as the “Week of the Young Child” in New Jersey.

“Many of us already understood that the childcare infrastructure is a key – if not the most important – variable in economic success both within any family unit as well as for the economic development in this state. However, I don’t think that was common knowledge to everyone until the pandemic,” Ruiz says. “Everyone suddenly realized that if childcare centers closed, people couldn’t come to work.”

The state continues to move toward universal preschool expansion as another option for families who require care for their preschool-age children. An organization like the New Jersey Economic Development Authority (NJEDA) is also doing its part to support the industry. In addition to millions of dollars being invested in improving funding and helping childcare centers make upgrades, the NJEDA recently developed a fund to create grant programs to allow for employers and local business groups to provide childcare benefits to workers.

“We’re hopeful that with all of the attention the childcare industry is getting from the Murphy administration and state legislators, there’s a lot of opportunity for improvement heading into next year,” NJBIA’s Bailey adds. “The intent is to help businesses have a seat at the table, and we hope employers can think a little bit differently about their benefit packages and possibly provide some support to employees in need of these services moving forward.”

Rice comments, “We need to move forward with looking at childcare as a public good. This industry is a critical support to families, it’s relationship building, it’s preparing children to be successful in school and in life. I think everyone’s eyes have been opened as to just how important this system is. We just have to make sure those eyes remain open at both the state and federal level.”

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