Childcare shortage is bad for the economy

In 2018, Wilder research provided data showing how much the Northeastern Minnesota economy loses due to a shortage of childcare. Among other things, the report showed that:

(1) Families in that region lose approximately $8.1 million in potential earnings due to a lack of access to childcare.

(2) Employers face a 13% reduction in worker productivity which translates to a loss of thousands of dollars per worker without access to childcare.

(3) Local, state and federal governments lose an estimated $5 due to lost economic activity in that region.

(4) The region will experience an estimated loss of $13.3 million in lifetime earnings from children currently without child care who would probably not complete their high school education, reducing their future employability and earnings.

The economic losses mentioned above are potentially many times greater for the whole state. This is easy to infer when we see how much other states lose due to childcare issues.

The Iowa economy, for instance, loses $1 billion annually due to childcare issues. Iowa is one of the states with high labor force participation rates — like Minnesota. But lack of access to childcare costs the state $935 million in lost taxes and employee absences. Iowa, like Minnesota and many other states, faces increasing childcare costs as well as a shortage of childcare providers.

The U.S Chamber of Commerce recently found that Idaho loses $479 million annually due to childcare issues. Similar to Iowa, the majority of these losses are incurred by employers due to high turnover rates as well as employee absence. Other states like Louisiana, Maryland, Georgia, Washington, and Indiana have conducted their own reports over the years and found that they lose over $1 billion annually in economic activity.

Minnesota is one of the most expensive states for childcare in the country.  So, it is highly likely that total losses from childcare are higher compared to those from most states.

The childcare crisis is bad not just for parents, but also for the economy. Something must be done to address the crisis.