Research shows a large return on investments in high-quality early care for children from families with limited economic resources. High-quality care provided by a skilled early care workforce can better prepare children for entry into the K-12 system and can reduce demands on other public systems. Child care investments can also help parents enter the workforce and be productive at their jobs.
Early childhood development is a focus area for the Federal Reserve Bank of Minneapolis and a top-of-mind issue across the state of Montana. Over the past two years, the Minneapolis Fed has worked with Funders for Montana’s Children to disseminate information about early childhood issues in Montana and foster partnerships to increase access to affordable, high-quality early care. And during a community engagement trip that we and several other Minneapolis Fed staff members took to Billings, Montana, last February, child care was a frequently raised topic.1
The conversations in Billings furthered our understanding of the early care market in Montana, and underlined how local partnerships can create more opportunities for high-quality programs. Nonprofit, business, and public stakeholders in Billings noted challenges parents face when attempting to access affordable, high-quality child care. Business leaders described the lack of available child care as a barrier to filling open positions and growing their companies. Stakeholders frequently described child care providers’ own struggles to stay open and recruit and retain staff. And in discussing solutions, stakeholders in Billings noted the value of investing in local cross-sector collaborations to help increase the availability of child care.
The comments we heard in Billings echo those reported in other communities in Montana and the nation: a lack of affordable, quality child care can impact families, businesses, and local economies. Below, we provide more detail on what we learned from our conversations about early care challenges and solutions in Billings, and we supplement it with related data we examined after our trip.
A cost challenge, especially for lower-income families
The stakeholders we spoke with in Billings described the region’s child care market as challenging for many families and cited waiting lists at many providers. They indicated that the cost of child care is also often high relative to parental income and can be a barrier to economic mobility, especially for lower-income families.
Data show that the majority of Billings parents are likely to be working or looking for work. Roughly two-thirds of Billings children under age six live in a household where all of their parents are in the workforce. (See the table below.) But participation in the workforce doesn’t guarantee that parents have ample income. About 45 percent of Montana’s children under age six live in a household whose total earnings are lower than 200 percent of the federal poverty line.2 For a family of four, that means earnings of less than roughly $50,000. When we compare families’ annual earnings with data on the cost of child care, a wide gap emerges.
Data related to young children
||Number of children under age 6
||Number of children under age 6 who have all parents in the labor force
|Percent of children under age 6 who have all parents in the labor force
|Number of children under age 6 who live in poverty
|Percent of children under age 6 who live in poverty
|Rest of Montana
|Rest of U.S.
Public financial support for families exists, but it often falls short of what lower-income families need in order to access high-quality, market-rate child care.
According to a 2016 market survey, the median annual price of care for toddlers and infants in a licensed child care setting in Montana ranged from roughly $8,000 to nearly $9,000, depending on the age of the child and the type of provider.3 For a family of four with two young children and a household income at 200 percent of the federal poverty guideline, child care payments could exceed 30 percent of gross family income.
Public financial support for families exists, but it often falls short of what lower-income families need in order to access high-quality, market-rate child care. The State of Montana provides low-income parents with Best Beginnings Child Care Scholarships, which are child care subsidies made up of a blend of federal Child Care Development Block Grant dollars and state funds.4 However, eligibility for such subsidies phases out, ending once income reaches about $47,000 for a family of four. For families approaching that income level, a copayment of up to 21 percent of the family’s gross income is required.5
Child care impacts businesses…
As the availability of affordable care affects parents, it also affects the ability of businesses to employ them. Businesses and nonprofits in Billings spoke of trouble retaining employees who had lost their child care and of struggling to maintain productivity levels when employees’ unstable child care situations interrupted their ability to work. Some also noted that they had to devote staff resources to helping employees with their child care issues.
“People move here from other parts of the country and we have to work hard to help them find a place for their children,” said one representative from a large employer.
Local data show that child care availability is lacking relative to potential demand. Licensed child care facilities in Yellowstone County have the capacity to serve 38 percent of the county’s children under age five.6 In 2016, roughly a third of surveyed child care providers around the state of Montana had waiting lists for full-time care for children under age five, and a statewide child care provider survey found that more than 600 of the respondents’ 3,000 wait-listed children lived in Yellowstone County.7 That same year, two of Yellowstone County’s larger employers shut down subsidized child care facilities for their employees.8
Local reports about the impact of child care availability on the workforce in Billings match well with national survey data from employers and employees. In 2016, about 7 percent of Montana families with children under age six—about 5,400 families overall—reported that a parent quit, did not take, or greatly changed a job because of a problem with child care.9 One study estimates that, nationwide, child care problems were associated with $37 billion in lost earnings and job search costs for parents with children under age three and $13 billion in lost revenues and extra hiring costs for businesses.10
… and helps prepare children for school
By preparing young kids well, society can produce public benefits that accrue for years into the future, including reductions in remedial education and higher tax revenue.
It’s likely that the shortage of affordable care will affect the employers and communities of the future as well. Research shows that high-quality early care can help children arrive at kindergarten prepared to succeed in school, achieve academically, and eventually be productive in the workforce as adults. By preparing young kids well, society can produce public benefits that accrue for years into the future, including reductions in remedial education and higher tax revenue.
In Billings, several leaders across sectors described the negative effects child care market issues are having on many children’s preparedness for kindergarten. According to one K-12 leader, children are particularly unprepared in their language skills.
A host of challenges for child care businesses
On the provider side of the issue, child care operators in Billings reported struggles with staff retention and said their workers can find similar, better-paying jobs in the school system, or find easier labor with similar pay in another field altogether. In Billings, child care workers earn a median wage of $10.87 an hour—earnings that are similar to those from jobs in the retail and hospitality sector, and lower than those of janitors, office clerks and administrative assistants, customer service representatives, or school bus drivers.11 As one child care center operator put it, “Why would they work for us when they can earn more money and get better benefits for less demanding work at the school district—or maybe even at a fast food restaurant?”
Why would [child care workers] work for us when they can earn more money and get better benefits for less demanding work at the school district—or maybe even at a fast food restaurant?
—A Montana child care center operator
Community leaders across sectors also noted similar concerns in the elder care industry, where personal care aides in Billings earn a median wage of $11.13 an hour. The development of these professions may play an important role for Billings’ future economy; both personal care aides and child care workers are among the jobs projected by the Montana Department of Labor and Industry to have the most annual openings from 2017 to 2027.12
Child care center operators cited licensing requirements as another obstacle in finding workers. For example, several child care program managers mentioned that individuals who are involved only in the business aspects of a child care program may be required to have backgrounds in early childhood education, even though their jobs do not require them to work with children. Center owners and other child care stakeholders also discussed difficulties finding and paying for substitute care providers so that operators and staff could attend the training that aligns with Montana’s quality-rating system.
Finally, state child care subsidy rates fall short of covering the full cost of child care. The monthly payment for full-time infant care through the subsidy program was $796 in 2018. The maximum ratio of infants to providers in Montana was 4 to 1. If a child care center were at capacity and relying solely on subsidies, the center would receive about $38,000 to provide wages and benefits for a full-time caregiver for infants. If a center were expected to stay in the black with these subsidies alone, that $38,000 would also need to cover facility costs and other overhead, such as staff time needed to process subsidy payments and comply with licensing requirements.
Local initiatives show promise
Efforts to address the cost and availability of child care can benefit from working across different sectors. One example is the Yellowstone Best Beginnings Council, a coalition of child care organizations, medical providers, and other nonprofits that focus on improving school readiness for children in Yellowstone County. The council works to improve access to high-quality early childhood education programs and other forms of support for families with young children.
According to early care stakeholders, the coalition is developing creative interventions, building awareness of resources for young children by presenting insightful data, and strengthening social capital within the early childhood sector.
The same stakeholders often indicated that strengthening the connection with the broader philanthropic and business community is a priority for increasing the coalition’s impact. Stakeholders described a community of leaders who are often passionate about early childhood education but would benefit from more coordination. They noted that some businesses are exploring child care solutions within their companies and in partnership with local organizations.
In a number of other states and communities, leaders from private, for-profit institutions have played a key role in expanding the identification, supply, and affordability of high-quality child care. For example, in Minnesota, business leaders helped raise capital and build support for pilot programming that eventually increased the state’s capacity to boost access to high-quality early care and education.
Since our outreach trip, the Billings Chamber of Commerce has identified child care as a key issue facing its business membership and is considering how to engage in the issue. As an example of Chamber involvement in Montana, the Missoula Area Chamber of Commerce recently helped raise awareness of local child care issues by conducting a survey of parents’ child care needs and facilitating a process with local partners to help increase the supply of child care.13
Private sector leaders in Billings can play an important role in supporting the child care sector by engaging with local cross-sector collaborations, helping their own parent employees access child care, and finding ways to support child care providers. For example, some local organizations provide mentorship on business practices for licensed child care providers, but don’t offer financial support or financing through those programs. The opportunity to step in and fill that gap could be something for leaders in the business and economic development sector to pursue.
Private sector leaders in Billings can play an important role in supporting the child care sector by engaging with local cross-sector collaborations, helping their own parent employees access child care, and finding ways to support child care providers.
In some places, state and federal funding streams play a large role in helping children from low-income families attend early care programs, but a number of local governments and philanthropies also pitch in. For example, Starting Strong Rapid City uses philanthropic contributions to help families with three- and four-year-old children pay for early care and education based on financial need and other factors. And in Denver, a citywide sales tax supports a subsidized preschool program. There may be similar ways Billings can help improve access to early care and education opportunities.
In Billings, cross-sector collaborations can keep quality on stakeholders’ agendas as investments are made in early care. While the community has much to gain from increasing access to early care in the near term, long-term benefits come from providing the experiences children need so they can arrive at kindergarten prepared to succeed. This may require more resources on a per-child basis, but in the long run, research shows the return on investment is worth it.
Explore more features related to a community engagement trip that the Minneapolis Fed’s Community Development team took to Billings and the nearby Crow Reservation in early 2019:
What we learned on a community engagement trip to Billings and Billings community data profile
Understanding the CRA performance context