Companies offering child care get grown-up payback - Reuters

A woman pushes a stroller in front of the United States Supreme Court in Washington, May 17, 2021. REUTERS/Evelyn Hockstein

WASHINGTON, Aug 20 (Reuters Breakingviews) - It’s an opportune time for U.S. companies to think big about employees’ little ones. The pandemic hit women particularly hard, with about 2.4 million of them dropping out of the labor force, according to the Pew Research Center. At the same time, businesses are scrambling for talent and rethinking office space. Providing child care at workplaces is a response that fits the bill, and Washington can help. Organizations like clothing company Patagonia have found the return justifies the cost over time.

The sudden closure of schools and day care facilities last year took a toll on parents. It affected moms in particular, with 44% of women saying they were the only one watching their kids at home compared with 14% of men surveyed in a University of Arkansas study.

As America opens up again, that trend is not yet reversing. The infection threat from coronavirus variants could further slow a return to normal. The labor force participation rate for women has been stuck at around 56% for the last year or so, a reversion to levels last seen in 1987. About half of surveyed families said finding child care now is harder than before the pandemic, and it has also become more expensive, according to a Care.com report in June.

Yet companies need workers. In June, the number of U.S. job openings reached a record 10.1 million, the Labor Department said, slightly outpacing the number of unemployed. The U.S. Chamber of Commerce reported in June that more than 90% of state and local chambers found worker shortages were hurting their economies.

Offering on-site child care can help with recruitment and retention. The cost of operating three child care centers has been worth it for Patagonia. The company spends about $1 million a year, after charging for tuition, to take care of about 80 children.

Almost all working mothers return to the office after maternity leave. Over the past five years, parents with children at the centers have been 25% less likely than the average employee to leave the company, Patagonia reckons. That reduces expenses for hiring and training. Patagonia estimates these gains offset about 30% of the costs.

There are also tax benefits. Qualified child care programs get an annual U.S. tax credit of $150,000, while a company can also deduct 35% of any costs it doesn't recoup elsewhere from its taxable income. This helps Patagonia, which has about 2,300 employees, recover approximately half of its post-tuition costs.

Intangible perks like this also help employee morale. Parents can eat lunch with their kids at work while women can breastfeed their babies. Workers also don’t need to factor in dropping off and picking up kids during their commute. The company estimates these effects cover another 11% of its child care expenses.

One rare positive impact of Covid-19 is that it has led many workplaces to reconsider employees' work habits, potentially freeing up office space as more work is done at least some of the time at home. Child care is one way to use extra space productively.

Yet only about 4% of businesses offer child care at the office, according to the Society for Human Resource Management, partly because regulations and legal liability can seem daunting. But companies that have tried it out have mostly expanded their programs. Johnson & Johnson, (JNJ.N) which has about 135,000 employees, opened its first child care center in 1990 and now operates five of them, offering subsidized tuition. Goldman Sachs (GS.N) provides backup care at several locations and one full-time center, which has helped more than half of employees surveyed maintain their normal work schedules during the pandemic.

Even with that kind of help, child care may still be too costly for lower-income workers in retail, food services and other sectors. The Care.com survey found that 85% of parents are spending at least 10% of their household income on child care, compared with 72% in 2020.

That’s where the government can step in. President Joe Biden’s administration has temporarily increased the child tax credit with an additional $300 a month for certain families. It could also expand breaks for employers and lower-income employees to incentivize on-site care.

There are broad economic benefits. Every 10% increase in the female labor force participation rate in a metropolitan area correlates to a 5% increase in median real wages for everyone, a study in the Harvard Business Review found. And having the same proportion of women as men working would have added about $500 billion, or more than 2%, to U.S. GDP in 2019, reckons the Federal Reserve Bank of San Francisco.

In one example from Canada, the province of Quebec thinks its universal child care program has paid off. Every additional dollar spent on the service by the provincial government generated a combined increase in tax revenue and economic benefits totaling $1.75, the University of Sherbrooke found.

Faced with challenges to women who want to work, a shortage of employees and in some cases spare real estate, it's a no-brainer for companies and policymakers to consider supporting new options like providing on-site child care. It's not just a one-off opportunity, either. Patagonia and other employers can attest to a grown-up payback in the form of a win-win for businesses and their workers.

Follow @GinaChon on Twitter

CONTEXT NEWS

- Patagonia President Jenna Johnson and other business leaders met with U.S. Vice President Kamala Harris on Aug. 12 to discuss the White House’s child care initiatives. Part of the government’s efforts included an expansion of the child tax credit. The first monthly payment of about $300, depending on a family’s income level, was distributed on July 17. About 40 million households are eligible for the funds.

Editing by Richard Beales and Marjorie Backman

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

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