In episode 3 of the Bright Side of Benefits, host Becky Seefeldt sits down with Kinside’s Brittney Barrett to discuss the growing child care crisis in the United States and how employers should react to it if they want to retain and attract talent.
Listen to Episode 3 below:
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TRANSCRIPT – EPISODE 03: Child Care Crisis
Hi, I’m Becky Seefeldt here with another episode of the Bright Side of Benefits. This is a series for benefits professionals and consultants where we talk about the latest news and happenings in employee benefits – all in easy-to-digest, bite-sized snippets. I’m the VP of Strategy for Benefit Resource, a third-party benefits administrator headquartered in Rochester, NY. For over 20 years, I’ve been dedicated to the education and advancement of consumer-driven benefits.
Today I’m joined by Brittney Barrett. Brittney is a tech entrepreneur and the current co-founder and Chief Marketing Officer of Kinside. Kinside is an employee benefit and child care marketplace that is creating new transparency into inventory and pricing at daycares, preschools, camps, and after-school programs. Currently available to over 4,000 employers, Kinside does partner with BRI to help reduce the financial and tactical burden of child care on working parents leveraging Dependent Care FSAs.
Thanks so much for having me.
So in this episode, we really want to talk about the Child Care Crisis. And it really is a crisis. Some of the stats we see:
- 57% of working families have spent more than $10,000 on childcare in 2020.
- 58% of working parents rely on child care centers.
- 1 in 4 families accessing child care struggle to find an open seat.
- It is estimated that US businesses lose on average $12.7 billion each year due to child care challenges.
These all seem like very powerful statistics on their own. But, Brittney, would you mind walking us through the business case for child care benefits?[Brittney]
Absolutely, Becky. And, I think that $12.7 billion is practically a business case in and of itself. But, I can talk you through a little bit why we founded Kinside to begin with to solve for this problem.
How Kinside Started
I don’t think she had the full picture on how difficult it was to find an open and affordable child care spot. So she ended up calling, like, 50 different centers. She was getting callbacks intermittently hearing that they had a year and a half long waiting lists…the whole thing was costing her a ton of money.
So on a very micro level, my co-founder Shadiah and I had been working together at her last start-up. Today, it’s a Unicorn called HoneyBook. And you know, we had 100 or so employees. She went out on maternity leave. So, she was the first employee at our business to go out on maternity leave. And you know, she was kind of in meshed in new motherhood. Then all of a sudden, her return to work date was coming up. And she realized that she had not yet secured daycare.
So, as kind of, the first mother, our employer – the one that she was a founder of – you know, I don’t think she had the full picture on how difficult it was to find an open and affordable child care spot. So she ended up calling, like, 50 different centers. She was getting callbacks intermittently hearing that they had a year and a half long waiting lists. And in the end, she had cobbled together this crazy situation of a nanny mixed with a childcare facility that closed at 1PM. The whole thing was costing her a ton of money.
So when she finally came back to work (she already had to delay her return to work, and was feeling very anxious about her situation), she was like, “we need to have a childcare benefit because if I wasn’t the founder of this company, there would be a very strong case for me to take some time off.”
And, she is not alone in that.
The Business Case for Child Care Benefits
In the U.S., about 35% of women do not return to work full-time after having a child. There’s a variety of reasons for this. So, from the total lack of paid leave to the cost of full-time childcare is about 23% of a family’s annual income…it’s really, really easy for employers to think that this type of turnover is just…inevitable. But, it’s proven time and time again that just isn’t the case.
One go-to example for this in the market is Patagonia. So for a period of five years, 100% of mothers at Patagonia returned to their jobs full-time. Now, Patagonia offers an on-site center. So of course that’s, like, the richest example of a child care benefit out there. Their particular program I believe is a million-dollar program. But it actually mostly pays for itself.
So, parents pay tuition at the center. It’s not that parents think that they should have to pay something for child care or that you have to be covering 100% of tuition. Every dollar there actually matters tremendously. Because where things get really sticky with parents is when their child care costs – especially when two children – start to actually neutralize their earnings. At that point, it feels like a lose-lose situation to be staying in your role. So they’re either looking for jobs that pay more or just trying to take a break from the workforce.
At Patagonia, parents are actually paying tuition at that center. And that accounts for about 40% of the cost of the program already. But then you have government tax abatements for qualified child care facilities. And those pay for another 30% of the costs. That’s a huge percentage of the cost. And that’s not just a Patagonia thing. There are tax credits available for literally any childcare benefit you offer. And the remaining percent for that program is paid by their increased retention and productivity as a result of that program.
So, it’s really easy to forget that it costs employers 150% of their employees’ salaries to replace that employee with another one. Especially when you’re getting to the point of like, a VP at your company. So depending on what they make, an employer could’ve just paid for that child care outright and it would be less expensive than replacing them. So that’a a really important thing to keep in mind. And you don’t need to offer something that robust in order for those to apply.
And the results aren’t just at Patagonia. There’s Harvard Business Review articles on this, and J.P. Morgan has information here. And basically, companies that offer this, they aren’t just benefitting in retention. They also see a 50% gender split at a C-level Executive level, which is just good for humanity but it’s also great for business. When you have that more diverse viewpoint in the boardroom, you’re looking at average revenue increases of about 25% overall. So there’s a really positive correlation with keeping these women engaged in your workforce for long periods of time and having those alternate viewpoints available in all of the decision-making processes.
It’s really easy to forget that it costs employers 150% of their employees’ salaries to replace that employee with another one…Depending on what they make, an employer could’ve just paid for that child care outright and it would be less expensive than replacing them…and you don’t need to offer something that robust in order for those to apply.
Well, I think you touched on a couple of things that are really important in this. It’s that stress element. I remember when my kids were first going into child care. The 6-month wait was common. And, you had to plan really far in advance and make it part of your childcare preparations. About as soon as you were pregnant, you had to have that on your list to find a slot for them. And in some cases, even begin paying for it just to keep that spot available. But also just understanding the diversity and the retention efforts that I think are very top of mind with everyone in the current work environment.
But, could you expand a little bit more on…why now? What about things that have happened in the past year makes this such a critical timing for people to look at?
How the Pandemic and Great Resignation Exacerbated the Child Care Crisis
…but these are women who are working essentially two full-time jobs, and by the time they pay for childcare, are making the money of having no job or a part-time job. So I don’t think it’s a surprise that they aren’t feeling excited to participate in a system like that. And it’s a reason why childcare benefits are increasingly the most requested benefit among employees. It’s just gotten to a point that is untenable.
Yeah. So I don’t know but…I know you might have seen this somewhere in the news, but there has been a global pandemic. And that has really exposed the inexplicable link between child care and working. And by the way, this is not the first time in history that we’ve seen this. I think it goes back to all the way…something Elanor Roosevelt said around when women started going back to work in World War II. You know, a ton of childcare centers started closing and there was just not enough inventory. And it had a terrible impact on the economy.
Despite that, for all of our talk as a nation about making paid leave and universal childcare a thing, we’ve basically done nothing. And in that same period of time, the Child Care Tax Credit has expired. And the price of childcare has gone up by over 41% over just two years. During that same time, data from our platform shows us that current seats are down by almost 30%. So there’s less inventory – there’s not enough child care seats – and it’s now far too expensive.
So people act like, well, “maybe that’s just a problem for parents; those are their decisions to have a child”. But as a business owner myself, I know that it makes it more difficult for me to both retain and attract an employee. So I have to pay that employee more if they need to pay that much for child care. You’re paying for it one way or another. And if you don’t, you see what’s happening now which is that workforce participation rates for women are what they were in the 1980s right now.
So there’s this kind of idea out there that the Great Resignation is just millennials who want to freelance in Bali. But these are women who are working essentially two full-time jobs, and by the time they pay for child care, are making the money of having no job or a part-time job. So I don’t think it’s a surprise that they aren’t feeling excited to participate in a system like that. And it’s a reason why childcare benefits are increasingly the most requested benefit among employees. It’s just gotten to a point that is untenable.
I think you make a very good point and compelling argument. But we all know that employers might be a little hesitant to get involved. And I know I’ve heard organizations that are like, “we don’t want to get involved in child care or offerings. That’s kind of their responsibility” or they feel like there’s some sort of legal considerations with that. What advice could you give them, or how can they prevent childcare benefits from becoming a major cost center or a major concern for them?
Advice for Employers
Well, the fact of the matter is that, regardless of whether or not you offer a childcare benefit, there is a cost of not offering one, right?
Right now, employers are having a real hard time attracting talent. And that’s because the talent pool has shrunk because a lot of women are not excited to be going back to work. So, you have these employers who are hiring recruiters at unprecedented rates for 30% of an employee’s salary. And I’m not saying anything negative about recruiters. But, I doubt that you would need one if you as an employer just gave that 30% of that employee’s salary to the experienced woman you are hiring to help her pay for child care. You could break that up over a few years and you’d still have a line of candidates out the door.
And I understand where employers are feeling like child care benefits have to be a major cost center. You invest it all upfront, and the dividends don’t pay themselves until way later. And I think that kind of has a historical precedent, which is that child care benefits that were available, were very expensive, and they mostly had to do with back-up care.
So those back-up care days historically have been pre-paid. Meaning whether an employee uses them or not, the employer is paying for it. And I don’t think the employer is always seeing the return on that. So when it comes to back-up care, it’s actually pretty hard to use those days in a center. If a child is sick, a lot of facilities are not going to accept that child.
What you want in that instance is somebody to come into a home so the employee can either successfully work from home or go into the office or go into their job maybe in a manufacturing facility. But today there’s all these new benefits that are a lot lighter and a lot more affordable where you’re actually paying for usage.
Companies like UrbanSitter, who we at Kinside partner with, they offer a massive number of vetted in-home providers. So you’re looking at babysitters that can come in. And back-up care requests are being answered in two minutes, literally. And employers who sponsor them, those days, they are only paying for the number of hours you use. So that right there is just all upsides. You get an employee being productive, and you’re not taking on the risk associated with 500 back-up care days for your employees.
That’s one option.
Same thing with a benefit like ours. Our baseline offering (first of all, is included with BRI’s Dependent Care FSA, which…go BRI!), you’re not paying anything there. And if you want to upgrade to the new service level, what you’re going to see is that we can match your employees with open child care spots and savings with 96% satisfaction rate when it comes out. And it comes out to less than a couple of dollars per employee per month who’s actually using it.
So you don’t have to pay hundreds of thousands of dollars to get these retention benefits at this point. You can offer a child care benefit like a Kinside or an UrbanSitter. If you really want to take those retention benefits through the roof, experiment with the idea of funding the Dependent Care FSA, for instance. That’s $1,500 you’re giving to your employees for child care that they’re only going to use on that.
So there’s a lot of things that employers can do today to offer a light child care benefit without much of an upfront investment. And then you can kind of, when you prove out that benefit, you can move and expand that offering.
I think that’s really good to know that there are some options to step your way into offering more rich child care benefits.
That’s right. And the cost of not doing it is going to, at this point…if you retain one parent because you use a Kinside or an UrbanSitter or because you sponsor a child care benefit, it’s already paying for itself. That’s how these new tech-driven benefits work. They don’t have to have that upfront cost. And you can immediately see the upside.
Well, thank you Brittney for joining us today. Very helpful information, helping provide some perspective on the child care crisis and some options that employers have.
I also want to thank those listening. Also a reminder, if you’d like to stay up-to-date with the latest benefits, trends, and industry news, be sure to visit BenefitResource.com and sign up for our blogs and newsletters. You can also follow us on LinkedIn @BenefitResource.
And to end with a bright note, we have a quote today from Taylor Swift:
“No matter what happens in life, be good to people. Being good to people is a wonderful legacy to leave behind.”
Thank you and have a great day.