By Sarah F. Small, Jocelyn Fischer, Yana van der Meulen Rodgers, and Debra Lancaster

With New Jersey facing childcare shortages, policymakers are wondering how we can improve the supply of childcare services. A recent report by the Center for Women and Work (CWW) finds that improving wages and benefits is pivotal to retaining and recruiting childcare professionals. Without substantial wage improvements, many employed in childcare will continue to leave the field or turn to better paying jobs in elementary education. Indeed, previous research by the Center for Women and Work suggests that New Jersey’s childcare professionals are typically paid far below their peers within all levels of education. Providing opportunities for advancement, family-friendly policies, financial incentives for educational attainment, and unionization may also help retain and recruit childcare professionals.

Maintaining and improving the number of workers employed in childcare is pivotal to improving care supply, as is increasing the number of care facilities. Although childcare centers have generally reopened and recovered since the onset of COVID in New Jersey, the state is facing a severe decline in the number of home-based care providers. These workers fill an important gap in the care infrastructure, often serving parents with atypical work schedules. In order to improve the number of care facilities in the state, policies are needed to streamline and reduce regulatory burdens, offer better labor protections for home-based care workers, offer incentives for employers who sponsor childcare facilities, and provide more state-sponsored care.

The CWW literature review provides a policy menu for state and local government, drawn from recent policies in areas across the United States. For example, in order to improve the wages of the childcare workforce, state and local government could consider offering wage bumps or retention and education bonuses to childcare professionals, similar to those instituted by states like Maine, Minnesota, Kentucky, North Carolina, Washington, and Wisconsin. Many of these states have funded their initiatives through temporary federal COVID relief funds, but others have relied on state funds or are reworking state legislation to prioritize care workers. Other states have revamped their childcare subsidy pay structures so that childcare providers receive subsidy funds for qualified children who are enrolled in their services, rather than receiving subsidies only when a child attends on a given day.  Some states like Georgia and Oregon give providers substantially higher reimbursement rates if they prioritize care of infants and toddlers, a commonly underserved group. Others have changed their subsidy structure all together: Hawaii and Colorado have engaged in contracts with care providers to reserve a specific number of slots for underserved groups. This approach works to ensure there is space set aside for such groups rather than forcing parents and providers to match subsidy arrangements on the open market.

Many regions and states have prioritized minimizing regulatory burdens for childcare providers so that they can focus on providing care and expanding their capacity rather than dealing with cumbersome bureaucratic hurdles. For example, the workforce board of Tarrant County, Texas purchased an online shared services platform to support business operations of childcare centers and in-home providers. Moreover, state officials and stakeholders in Oregon collaborated to create an organization which helps centralize and automate as many business functions as possible for childcare providers. Other states have relied on their economic development offices to examine zoning and regulatory hurdles faced by in-home providers in particular.

State-level employer tax credits may also help spur the development of employer-sponsored childcare facilities. Currently, eighteen states have an employer tax credit designed to incentivize employers to provide childcare directly for their employees or to otherwise help expand the supply of childcare. For example, West Virginia offers a tax credit for employers providing childcare for their workers, which can be used to help cover both start-up and operating costs. Arkansas offers a tax incentive which allows for a tax credit proportional to the annual salary of childcare personnel hired for providing childcare services for a company’s employees as well as a tax refund based on any initial physical start-up costs.

Ultimately, accessible and affordable high-quality childcare provides a powerful two-generation approach to building the workforce. Childcare is important not only for today’s workforce, but also for the workforce of the future. Childcare supports women’s labor force participation and regional economies. Childcare also fosters children’s development.  For New Jersey, investments in high-quality childcare and early childhood education promises both short-term and long-term benefits for children, families, and the economy.

Follow the link below for full details regarding our literature review and policy menu.