Counties supplement child-care wages to address a broken market

Key Takeaways

Parents in Johnson County, Iowa needed to start saving for their children’s education much earlier than they anticipated. 

In 2022, a family with two children in childcare would pay $26,300 per year — more than twice the tuition at the nearby University of Iowa.

“And they’re not walking out of it with a big degree or a higher paying job,” said Laurie Nash, Youth and Family Service manager for the county.

That’s not to say there aren’t tremendous benefits to early childhood education, but the cost has been enough to force families into challenging decisions about parents’ participation in the workforce and frustration at trying to find care for young children. The wages paid in the childcare sector — averaging $11.16 per hour — were the lowest for any tracked profession in the county. Challenges staffing childcare programs drove a 12% decrease in their numbers in the prior five years. 

“The childcare business model is very different than almost any other business model,” Nash said. “If they raise their rates, they’re going to price families out, but if they take on more families, they have to add another staff person. It’s not as simple as ‘lower your costs or increase your profits’ — childcare doesn’t work that way —so that is why we have to come up with creative solutions because business solutions just don’t work.”

Different state-mandated ratios of children to adults only complicate staffing. Infants require more supervision than toddlers. 

Johnson County is trying out a wage-enhancement program that helps make the childcare sector less burdensome for workers, with hopes of improving the overall business model in the county. Workers at licensed childcare centers serving children up to age 5 that pay at least the county’s recommended $11.56 minimum wage are eligible for a $2 per-hour wage paid for through a public-private partnership.

The three-year pilot program combines funding from Johnson County and Iowa City, along with sponsorships from the local business community.

“We don’t see this as charitable giving,” Nash said of the outreach to the business community. “We don’t want to compete with their charitable giving. This is more like workforce development. Lots of businesses might pay for part of their employees’ healthcare or for a gym membership or help with transportation. Childcare is just another infrastructure piece that has to be there for employees to be able to come to work.”

The program is two years into its three-year pilot — the public funding came from the American Rescue Plan Act. Roughly 100 childcare staff are participating, compared to a 110-person control group. So far, surveys have shown that fewer people in the wage-enhancement program are identifying their financial situation as “not secure” and participating employers are seeing lower turnover.

“We’re also seeing that some of the providers are able to lower their tuition,” Nash said. “That was one of the things that we were hoping would happen, was that we would be able to increase childcare provider wages without increasing tuition for parents.”

Providers have also reported feeling like they’re in a more competitive recruiting position.

“When they have a position to fill, they’re getting more applications and they’re getting higher quality applicants, so they actually can choose well-qualified applicants instead of just having to take whatever applications kind of walk in the door,” Nash said. “And if they stay in the field and gain more experience, they’re better prepared to deal with some of those challenges that come up.”

A human resources director responded to a survey that the wage enhancement had given her childcare center a similar boost.

“Thanks to the program, we consistently receive a higher volume of applicants for these roles compared to our other job postings,” the director wrote. “This directly supports our ability to staff the children’s center with experienced professionals who are deeply committed to the care and development of the children we serve.”

The federal funding from the American Rescue Plan Act will end in 2026, but the county is working to continue the wage enhancement program. Voters will decide a local option sales tax in November, and if passed, a portion of that revenue will fund the program. Private sector promotion will continue. 

“We know that not one sector is going to be able to do this to sustain this all by itself, but if we’re working together with both of those groups then we’re hoping that that will be enough just to sustain the program,” Nash said.

Other counties are trying similar efforts to supplement childcare wages:

King County, Wash. is offering up to four $2,080 payments each through 2027 thanks to a pilot program funded by a 2021 levy, Best Starts for Kids, The Seattle Times reported.

A 2020 sales tax in Alameda County, Calif. is funding a total of $165.8 million in the form of $85 million in grants to cover childcare providers’ operating expenses and staff, $25 million in grants for family support and $20 million in facilities grants, with the rest covering administrative and evaluation costs, The Oaklandside reported.

North Shore Community Radio reported that Cook County, Minn. used a $385,000 Minnesota Department of Employment and Economic Development grant to supplement $6.11 per hour. 

Travis County, Texas voters approved a tax increase that will fund $75 million to add 1,900 spots for newborns and 3,900 after-school and summer programs. It would also match employer contributions to make childcare an employee benefit, according to the Texas Standard.