When families cannot secure reliable, affordable child care, the consequences often reach far beyond the home. Parents may be forced to miss shifts, lose jobs or step away from the workforce altogether, reducing household income while creating costs for employers and taxpayers. A new ReadyNation report estimates that the child care shortage now drains roughly $122 billion from the U.S. economy each year.
Families bear the largest share of that impact, losing more than $5,500 per parent annually — over $78 billion nationwide — when care is unavailable or insufficient. Businesses lose an estimated $1,640 per working parent, or about $23 billion a year, through missed revenue and the expense of recruiting replacements. Government revenue also suffers, with approximately $21 billion in lost income and sales tax collections, equivalent to about $1,470 per working parent, as reduced earnings lead to lower spending.
“We conducted this analysis four years ago, and the situation was already bad. Now it is worse,” said Sandra Bishop, chief research officer at the bipartisan nonprofit Council for a Stronger America, which includes ReadyNation and two other organizations. Without meaningful policy changes, she warned, the economic damage from the child care crisis will continue to grow.
The latest estimate is more than twice the $57 billion in annual economic losses identified in the group’s 2018 study, underscoring how sharply the child care crisis has intensified.
“The effects were broader and more severe,” Bishop said. More parents reported disruptions at work, including leaving jobs or being dismissed. In some cases, she noted, the number of affected workers had doubled since the earlier study.
Even the $122 billion figure may understate the true cost, Bishop said. The analysis focused only on families with children younger than three, although child care challenges frequently continue well beyond the toddler years.
The report found that 85% of primary caregivers said child care problems had reduced their working hours or productivity. Nearly two-thirds, or 64%, said they had arrived late to work during the previous three months. Fifty-eight percent had missed an entire workday, while 53% said they had been distracted on the job. The strain has also changed parents’ employment decisions: 33% moved from full-time to part-time work, 26% quit a job and 23% said they had been fired because of child care difficulties.
Those disruptions are unfolding as the nation continues to face a labor shortage. More than 11 million jobs were open at the end of last year, and the rate at which workers quit remained higher than before the pandemic. For companies in many industries, attracting and retaining qualified employees remains a major obstacle.
Contec Inc., a manufacturing company in Spartanburg, South Carolina, has experienced that challenge firsthand. The company has struggled to fill positions and has lost employees who could not find workable child care arrangements.
Founder and CEO Jack McBride said the company tries to adjust schedules when employees need a different shift to care for their children. Contec has also told former workers who left because of child care problems that their positions will remain available if they are able to secure care — a reflection of how urgently the company needs staff.
Demand for Contec’s cleaning and disinfectant products stayed strong throughout the pandemic. With more employees, the company could increase production and sales, but for now it is relying heavily on existing workers and paying “a ton” in overtime. McBride said he would consider partnering with other businesses on child care, though operating an on-site center would not be financially practical for Contec on its own.
The company is preparing to introduce three months of paid child care leave for both parents beginning this summer. The benefit is designed to give new parents time to bond with their children while helping cover some of the expenses during those early months. McBride has also been working with local leaders in Spartanburg to promote the importance of early childhood education.
As child care expenses continue to rise, more employers are offering pre-tax dependent care spending accounts. Data from the human resources association World at Work, which surveyed more than 800 organizations of varying sizes, showed a 6% increase in the availability of these accounts from 2021 to last year. However, most employers do not contribute directly, keeping their costs relatively low. The tax benefit can still help families, though the accounts were capped at $5,000 in 2022 — below the median price of child care.
World at Work found that 49% of employers provide child care information and referral services. Only 10% offer on-site or nearby centers, up from 7% in 2016 but below the 12% peak recorded in 2020 and 2021. Just 9% provide child care subsidies or discounts, a figure that has changed little since 2016.
The problem is particularly difficult for small businesses, which often lack the resources to offer extensive benefits. In one survey, more than half of small-business owners said their employees faced child care problems during the pandemic. Eight in 10 supported congressional action to expand access to affordable care.
Child care centers and home-based providers nationwide have yet to recover to pre-pandemic levels. At the same time, federal funding that helped stabilize the industry during the height of the pandemic is scheduled to begin expiring later this year. Child care experts and business owners fear the loss of that support could push even more providers and workers out of the field.
The United States spends about $2,400 per child from infancy through age five on early education and child care. By comparison, European Union countries spend an average of nearly $4,700 per child, while some invest three times as much.
“From a business perspective, I see this as a long-term competitiveness issue,” McBride said. He argued that the United States lacks the educational culture and investment found in some other countries, warning that the gap could eventually make it harder for the nation to compete globally.