How does a healthy childcare industry affect New Hampshire’s economy?

A healthy childcare industry benefits all of us. Parents who have access to affordable childcare can go into the labor force, if they choose. Less financial stress and more household income benefits families and our economy. Currently, we need more people in the workforce: There are about two jobs available for every one person in New Hampshire’s labor force. If parents can’t go into the labor force, that limits the hiring pool available to businesses. Limited business growth impacts the overall economy. Finally, and possibly most importantly, high-quality early care and education is important for the healthy growth and development of our youngest Granite Staters. Positive early care and education can help buffer against adverse early experiences and have long-term positive impacts that benefit both individuals and society overall.

What are some challenges facing the childcare workforce?

A big challenge is a shortage of childcare professionals. New Hampshire Employment Security projected an annual turnover rate of 17% for childcare professionals in the "child care worker" occupational category every year between 2022 and 2032, and in Spring of 2023, the Department of Health and Human Services reported a 26% vacancy rate for early childhood educators. The high turnover and vacancy rates are likely due to the low wages for childcare professionals in the "child care worker" occupational category, which were lower than the median wages for retail workers in 2023. But people in the professional childcare sector need a specialized skillset. I have heard teachers indicate that the job is rewarding, but it’s also very difficult. Current salaries and wages don't reflect the skills these professionals need – and the challenges they face – in their classrooms. If there aren’t enough teachers, providers might need to close classrooms. That limits the number of childcare slots – which in turn can further contribute to the workforce and childcare shortage.

How much does an average New Hampshire family pay for childcare?

For center-based care in 2023, a family with an infant and a preschooler paid an average annual tuition of just under $32,000. The median income for a married couple with children that year was about $145,000 in New Hampshire; $32,000 a year is approximately 20% of that income. When we add the high cost of housing into consideration, families do not have much left over for food, for baby supplies, for student loan payments, for emergency savings – or for saving for retirement. For many families, the high cost of childcare doesn’t allow for wealth building.

What does the financial burden on childcare providers look like?

Some research suggests typical profit margins for childcare providers may be lower than one percent. With high teacher turnover rates, providers are regularly hiring and training new employees, which takes time and energy away from other administrative and teaching tasks. Due to the workload, being an administrator in early care and education can be draining, and burnout is real – especially for providers who may regularly need to close classrooms if too many teachers are sick at the same time. If enough teachers are sick, an entire center might have to close for a few days – and that has ripple effects for parents as well as local employers.

Why does childcare cost so much?

There’s a mismatch between what childcare actually costs and what providers are charging families for childcare. Maintaining a safe and healthy environment for kids requires small child-to-teacher ratios. For example, in New Hampshire the ratio for infant classrooms is four infants to one teacher. Keeping infant classrooms small is expensive for providers, but putting more children in a classroom to generate additional revenue isn’t safe for the children or the teachers. There's also other overhead associated with running a childcare business, like liability insurance and mortgage or rent. On top of that, to ensure high-quality care and educational experiences for the children, childcare businesses need to provide professional development and required training for their staff. To stay afloat, providers are often forced to subsidize tuition prices by paying staff less – because parents can't afford to pay more. Providers do not charge enough to cover the true cost of care, but they can only charge so much before parents can’t afford care. It's not a sustainable business model.

What solutions are on the horizon?

There have been some exciting changes in state legislation in the past couple of years. Policymakers are listening to parents, childcare professionals, and childcare providers. In the 2024-2025 state budget, $15 million was allocated for recruitment and retention of the childcare workforce – known as the Childcare Workforce grant. This one-time funding may help providers hire more people, keep their workforce, and increase the number of childcare slots. The current budget also expanded childcare scholarship income eligibility to up to 85% of the state median income. During the 2024 legislative session, a pilot program was approved that will give childcare teachers an opportunity to enroll in the childcare scholarship program if they earn less than 100% of the state median income. Overall, future policies that help ensure providers can be reimbursed the true cost of care – rather than what providers are currently charging – will be critical. A multi-prong approach will be vital to decrease childcare costs for low- and moderate-income families, address workforce shortages to recruit and retain teaching professionals, and ensure childcare businesses can remain open in our local communities.