Daycare Closures Have Impacted Millions of Working Parents in the U.S.—Here’s How Employers Can Provide Relief

Nearly half of working parents say the child care benefits at their job are poor.

It’s estimated that more than 70,000 child care programs in the U.S. will close as a result of federal, pandemic-era child care funding ending on September 30.^[1] 

This has obvious implications for families, but it also has consequences for businesses. According to Capterra’s 2023 Child Care Survey of 813 working parents in the U.S., 56% of those impacted by daycare closures this year already have or are considering reducing their work hours to care for their children, while 26% already have or are considering leaving the workforce altogether.*

Good child care benefits can attract, retain, and keep working parents at full employment during this crisis. Large employers such as Marriott and Tyson Foods have started offering onsite daycare to their employees, for example. But HR leaders at smaller businesses don’t need to blow their budgets on onsite daycare—more affordable benefits are not only more desired by working parents, but can also be extremely effective.

With daycares shuttering, some working parents have to work less (or not at all)

In the U.S., two-thirds of children under the age of six have all of their available parents in the workforce.^[2] And according to our survey, a majority of working parents (53%) relied on a daycare program or other form of paid child care outside of their home to care for their children this year.

Parents rely on daycares to be able to work. The federal government recognized as much when it passed the American Rescue Plan Act (ARPA) in 2021—giving states almost $40 billion in relief funds to keep child care providers open during the COVID-19 pandemic.

But ARPA funds ended on September 30 and daycare providers are now struggling to stay open. Of the working parents in our survey that used a daycare this year, 8% say their daycare has already shut down, and another 4% say their daycare has announced it will shut down in the near future. Extrapolating this finding to the 67.1 million families with a working parent in the U.S., according to BLS data, we estimate 4.3 million working parents in the U.S. have been affected so far.^[3]

Analyzing this data further, we find that some working parents have been more impacted by these closures than others:

• Small-business employees: 14% of working parents at small businesses (1-100 employees) have been affected by daycare closures, compared to 12% at midsize businesses (101-1000 employees) and 11% at enterprise businesses (1,001+ employees).

• Employees in big cities: 13% of working parents in big cities have been affected by daycare closures, compared to only 11% in small towns or rural areas.

• Employees in the Western U.S.: Compared to 7% in the Northeast, 9% in the South, and 15% in the Midwest, 20% of working parents in Western states say they have been impacted by daycare closures. 

In some cases, working parents that have been impacted by these closures have been able to find a new child care solution without it affecting their employment. According to our data, 31% have already transitioned their children to a different daycare, while 27% have switched their children to a different form of child care entirely (such as hiring a nanny or having a relative watch them).

Others, however, haven’t been so fortunate. Lacking affordable alternatives, this wave of daycare closures has forced some working parents to reduce their work hours, find a new job, or stop working altogether. Even more are currently considering taking such actions.

Businesses didn’t cause this crisis, but they must now deal with the consequences. If companies can’t figure out solutions to give enough child care relief to the working parents they employ, they could see a large number of them leave their organization.

Enterprises, retail stores grade out the worst on child care benefits

Exacerbating this child care crisis is the fact that employers have left a lot to be desired when it comes to child care benefits—giving working parents little to no help in making child care more affordable, available, or flexible.

That’s according to the working parents in our survey, of which nearly half (45%) rate the child care benefits at their job as “poor.”

Breaking these responses down further, we see which businesses are behind the ball the most on child care benefits:

• Enterprise businesses: More working parents at enterprise businesses say their child care benefits are poor (47%) than those at small (45%) or midsize (40%) businesses. This is somewhat surprising given that enterprises should have the funds and infrastructure to offer better benefits. But because they also spend the most on employee benefits per hour worked, their poor performance on child care benefits could be a result of trying to save money.^[4]

• Retail and food service businesses: Of the industries represented by at least 30 respondents in our survey, businesses in retail and food service have the highest percentage of working parents who say they have poor child care benefits (54%). We chalk this up to these businesses relying heavily on widely-available, low-skill labor that skews young. By contrast, IT software and services businesses have the lowest percentage of working parents who say they have poor child care benefits (33%).

• Businesses with remote employees: 55% of working parents that work remotely say their child care benefits are poor, compared to 46% that work completely onsite, and 36% that work in a hybrid format. Business leaders may assume that allowing parents to work from home is enough of a child care benefit in and of itself, but the reality is these workers have more problems balancing child care and being productive at work.

We also find that women are more likely to say their child care benefits are poor than men (55% vs. 35%)—likely an indication of the gender divide in who predominantly handles child care responsibilities.

Want to offer better child care benefits? Parents say to start with stipends and backup care

Gartner’s 2022 Global Labor Market Survey found that offering the most relevant benefits can increase an employee’s intent to stay with an organization by 11% and their performance by 12%.^[5] In the case of working parents, that means offering benefits that can help them navigate this ongoing daycare crisis without having to make sacrifices to their child’s well-being or their job.

If you want to improve the child care benefits at your organization, the working parents in our survey highlight two benefits they’d like to see at their job more than any other: a child care stipend and backup care benefits. Only 15% say they get a child care stipend now, but 68% wish they did. Similarly, only 15% say they get backup care benefits now, but 64% wish they did.

Let’s explain why these two benefits are so valued and how you can offer them in more detail:

Child care stipend

A study earlier this year found that the average family in the U.S. spends $284 a week on daycare—which is 53% more than they spent a decade ago.^[6] As more affordable daycare centers shutter, transitioning to a more expensive one is not a viable solution for a lot of working parents.

A child care stipend can help. Unlike a dependent care flexible spending account (FSA)—which has either pre-tax money withheld from an employee's paycheck or contributions from the employer, with a combined $5,000 annual limit—a child care stipend is a subsidy completely covered by the employer, similar to a commuter or wellness stipend.

The amount of stipend you offer is up to you, but even a small amount could be the difference between giving working parents a few daycare options and no options at all. Administration is made easy through a stipend administration platform, where you can automate the stipend payout schedule and even set up a system where workers request reimbursement as child care costs accrue.

A stipend summary dashboard on PeopleKeep

Backup care benefits

The COVID-19 pandemic highlighted how precarious paid child care can be. When daycares had to close unexpectedly due to an outbreak, working parents were often left scrambling to find a backup care solution.

Out of options, 76% of the working parents in our survey say they or their co-parent have had to burn through their paid time (PTO) when their primary form of child care fell through—creating an inequitable benefits situation compared to non-parent employees.

Instead of forcing working parents to use their PTO, companies can offer backup care benefits. 

The most common way this benefit is offered is through a licensed child care provider—contracted by the employer—that workers can send their kids to at a discounted rate subsidized by the employer when their primary form of child care falls through. Another way companies can offer backup care benefits is through backup care days: a form of PTO offered only to working parents that they can use to care for their children in an emergency. 

Whatever form your backup care benefits take, adding it to your benefits package can elevate the employee experience for working parents and allow them to continue working when their child care plans falter.

With more parents entering the workforce, now is the time to offer better child care benefits

In June of this year, the labor force participation rate for mothers with children under the age of five reached an all-time high of 70.4%.^[7] If you don’t yet have a lot of new parents in your workforce, you likely will in the future. And with no end to the child care crisis in sight, now is the perfect time to improve your underwhelming child care benefits to attract and retain these critical employees.

Onsite daycare sounds like the ideal solution, but according to our data, more working parents that have access to onsite daycare don’t use it than those who do. Additionally, nearly a third (30%) don’t have access to onsite daycare, and don’t wish they did. For many businesses, onsite daycare simply isn’t viable.

Instead, focus on smaller additions. Child care stipends, backup care days, and even offering flex schedules where working parents can have more say over when they work can ultimately be the biggest difference makers.