Child care solutions could increase state GDP by up to $7.5 billion, Commerce report finds
By Liz Bell
Solving the child care crisis would create large economic gains for North Carolina, another report has found.
Affordable, accessible child care could add up to 68,000 jobs in the state, increase its annual economic input by up to $13.3 billion, and boost its GDP by up to $7.5 billion, the study found.
“Child care access is an economic development issue,” said Samantha Cole, child care business liaison at the N.C. Department of Commerce. The department released the report last month along with the nonprofit NC Child, which advocates for policies that will improve children’s lives.
“It is not just an issue of child and family health,” Cole said. “It is not just an issue associated with improved outcomes for children and families. It is directly related to the health and wellness of our economy across North Carolina.”
The report is the latest on the economic impacts of unaffordable and inaccessible child care in North Carolina and beyond. NC Child also partnered with the state and national Chamber of Commerce Foundations in June to release a report that said the state was losing about $5.65 billion each year because of a broken child care market.
“When you put together those two reports, it really shows us what our economy has missed out on because of the child care crisis, but also what our economy could look like if we address the child care crisis,” said Tiffany Gladney, NC Child’s senior director of policy and government relations.
Businesses stepping in
The latest report found that one in five employers cite insufficient child care as a barrier to hiring. In 2023, the study found there were 100,000 fewer working-age parents with young children participating in the labor force than in 2019. And it found that between 14,498 and 31,067 parents could have returned to the workforce in 2023.
As employers experience these workforce challenges, there are more opportunities for them to engage in solutions, the report suggests.
The report recommends that businesses consider contributing to the cost of child care tuition for their employees, contributing to Dependent Care Flexible Spending Accounts, supporting employees’ emergency backup child care needs, providing near- or on-site child care, and investing in local child care expansion grants.
There is already momentum at the local and state level, Cole and Gladney said.
The NC Chamber has organized a Child Care Coalition group to engage business leaders in solving child care issues and advocating for policy change. Several local chambers have started or joined local efforts to expand access and affordability. And Cole’s position as a child care business liaison is a new role created this year for the state to link child care to economic development.
“There’s a lot to really admire in innovative public-private partnerships that are flourishing in communities across the state and across the country,” Cole said. She pointed to emergency on-site child care that a UPS site in California implemented and then saw large drops in employee turnover. She pointed to North Carolina’s Tri-Share pilot, a program in 14 counties that splits the cost of child care between employers, eligible employees, and the state government. And Cole pointed to an on-site child care program at KLINGSPOR Abrasives, a manufacturing facility in Hickory.
“I think we have a lot to learn from a lot of the creativity and innovation that communities, including employer organizations in those communities, are bringing to a very challenging problem, especially absent the significant amounts of public investment we need to see in child care access expansion at the state and federal levels,” she said.
Policy solutions
The report comes as stabilization funds, which are keeping child care programs afloat across the state, approach their end in December, and as communities in Western North Carolina begin to recover from Hurricane Helene, which devastated homes, businesses, and child care programs.
The legislature allocated $67.5 million in stabilization funds this summer, with a promise to do more before the funds run out. Legislators will be back in November to discuss budget items and in January for a long session to create a new budget.
“We realized that there was a key component missing when we went to advocate about early childhood education, and that was the economic impact that it was having on the state’s economy and local economies,” Gladney said.
The report recommends several policy strategies to address high costs for parents, low compensation for early childhood teachers, and the financial fragility of child care programs.
“The early childhood education crisis is not one that can be fixed with just one solution,” Gladney said. “It’s going to take multi-pronged solutions, and we need everybody at the table, including the business communities, to help us figure out how we can make this more sustainable and affordable.”
The strategies include more stabilization funding, funding to provide programs with a floor rate in the state’s child care subsidy program, funding for education-based wage supplements through the WAGE$ program, funding to expand NC Pre-K and strengthen Smart Start, expanding the Child and Dependent Tax Credit, expanding the state’s Tri-Share pilot program, providing free child care for early childhood teachers’ children, and improving educational pathways to early childhood careers.
The report acknowledges that not all working-age parents with young children would choose to send their children to child care if it was affordable and accessible. That’s why it provides ranges on the impacts of stable child care. For example, the report estimates that affordable child care could add an additional $5.7 billion to $13.3 billion in annual economic output, create between 29,000 and 68,000 new jobs, and add between $3.2 billion and $7.5 billion to North Carolina’s gross domestic product.
“Even after accounting for parents who prefer to stay out of the workforce to care for their children, this report indicates substantial possible economic impacts of adding working-age adults with young children to the labor force and illustrates how child care policy can support sustained economic growth in North Carolina,” the report’s executive summary reads.
When it comes to the recovery of the Western region from Helene, Cole said she speaks as both a resident of an affected community and as a working parent of a young child.
“I certainly believe that child care infrastructure is going to be critical to the disaster recovery in communities, almost as essential as we would see with other infrastructure like roads and bridges and clean water and power and internet access,” Cole said.
“Child care access is also critical to making sure that people are able to re-enter the workforce if their employment has unfortunately been impacted by this disaster,” she said. “It’s essential to making sure that children can resume routine and continue on pathways to kindergarten readiness … Without child care access, we’re not going to be able to see the rebuilding and the redevelopment of our economies in Western North Carolina that were very hard hit by this disaster the way that we would want to.”
This article first appeared on EducationNC and is republished here under a Creative Commons license.
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