A $15 minimum wage would also raise childcare prices
A new report by EPI is calling for a $15 minimum wage in order to help childcare workers, but that would also raise childcare costs for parents.
New research by the University of Minnesota is showing in more detail the crisis of lack of access to childcare. The project, which showcases national childcare access, has demonstrated in detail the divide that exists between rural and urban Minnesota when it comes to childcare availability. Of course, this is an issue that has been going on for a while. But the project’s map helps shed more light on the regional differences that exist.
A crisis has been brewing in Minnesota: parents lack access to childcare services, and if they do have access, they can rarely afford to pay tuition. This crisis, however, affects different regions differently. Rural areas suffer the most when it comes to accessing childcare services, as showcased by the map.
The main reason for this occurrence is the fact that it is hard for centers to open in rural areas. Centers cost a lot of money and therefore charge higher tuition compared to family childcare centers. But parents in rural areas can rarely afford these high prices. This, in turn, makes rural areas less attractive markets for licensed centers. Additionally, centers also require that the demand for childcare services be high enough that they can recoup their operating costs. But rural areas usually do not have a high demand for childcare services due to the lower population density.
As a result, this leaves family childcare centers as the providers of choice in rural areas. Unfortunately, these centers have been exiting the market at an alarming rate, leaving rural Minnesota wanting. It is not uncommon to hear of parents commuting more than 30 minutes to access childcare services in rural areas.
One of the most significant causes of the rural-urban divide has been the heavy exit of family childcare providers. These are the providers that are prevalent in rural areas. Daycare centers, due to their high costs and the requirement for high enrollment numbers, rarely open in rural areas. Most of the growth in centers has been experienced only in the metro region.
There are a couple of reasons for the exit of family childcare providers. According to Tony Sertich,
People close their centers for a wide range of reasons, like retirement or inability to turn a profit with a business model that is fundamentally broken.
This certainly explains part of the reason why providers may close. Regulation, among other factors, has also led to the exit of providers. Many providers cited over-regulation as one of the reasons they chose to close. In some cases, regulation was enforced punitively and inconsistently by county licensors which made it hard for providers to stay in business.
Generally speaking, the state of Minnesota has some of the highest standards in childcare. Minnesota, compared to other states, requires lower student-teacher ratios. For instance, providers are required to have 1 teacher for every infant (6 weeks to 16 months). Some states may allow for a higher number of kids per teacher. Minnesota additionally has strict hiring requirements for teachers. These factors taken together increase costs for providers and may drive them out of the market.
Additionally, for the past couple of years, Minnesota has seen changing and increasing regulatory requirements. The state of Minnesota, partly due to some federal assistance programs, has tightened regulation in the last several years and increased training as well as paperwork requirements. Most family childcare providers have closed after failing to navigate the expanding as well as changing regulatory environment. Changes such as enhanced background checks and increased training have raised costs for providers.
For metro providers, this may not present a big issue since they can just raise tuition. Rural providers, however, have a limit on how much tuition they can charge since the majority of their customers have low income. This, in addition to the fact that training courses are hard to find in rural Minnesota, has made it hard for providers to thrive.
Like most sectors of the economy, the childcare industry has been heavily affected by the coronavirus and stands to face long-term issues. The decreased demand for childcare services due to the coronavirus has caused some providers to close permanently. Additionally, most providers that have just reopened or have stayed open are struggling due to increased costs of operation.
To clarify, due to the coronavirus providers have had to hire more teachers to allow for social distancing. They have also had to hire extra staff to do additional cleaning and they have also had to spend more on cleaning supplies. This is something that will potentially hit family childcare providers harder than licensed centers in the long run.
Due to the tremendous amount of restrictions placed on providers due to the coronavirus, family childcare providers are less likely to be able to comply with social distancing as well as sanitization rules. And since they already take care of fewer kids and therefore make less money, they are much more likely to permanently close due to financial turmoil.