Minneapolis Fed report shows child care industry struggling, despite some improvements
The child care industry is struggling. A new Federal Reserve Bank of Minneapolis report shows the number of active licenses are down 33% compared to a decade ago.
“I’ve been working in this field for over 30 years now and I have never seen things as they are right now,” said Amanda Schillinger, the director of Pumpkin Patch Childcare and Learning Center. “This is our lowest point as an industry.”
Schillinger has been providing care to children for three decades. Her career has been fueled by her belief in the importance of early education.
The industry, however, is under increasing pressure. Costs are rising due to inflation and there’s a persistent workforce struggle.
“There were times where I would … just have this constant influx of people applying whether we had positions open or not,” Schillinger said. “Now you find I had a job posting listed for one year. I had three applicants. Only one of them was qualified, and she took a job outside of the field that paid more.”
It’s a challenge highlighted in the Federal Reserve’s report. In its March survey, 61% of child care centers reported hiring was “very difficult” despite offering higher pay and incentives. It reflected an improvement from the year before, when 73% said hiring was very difficult.
More than 1,000 owners and managers responded to the survey, which accounts for about 13% of the state’s licensed providers. The nonprofit First Children’s Finance conducted the survey in partnership with the Minneapolis Fed.
“One of the things about the child care business is it’s intense. They’re long days,” said Suzanne Pearl, the Minnesota director of First Children’s Finance.
She called the level of uncertainty in the industry right now “extremely concerning.”
“One of our questions in the survey was, ‘How long do you expect to stay in business?’ and 20% of the providers in the survey say, ‘One year or less,’” Pearl said. “Then, 50% of the respondents said they have no idea. So that’s 70% of our survey respondents saying, ‘Yeah, maybe I have a year,’ or ‘I don’t know.’”
According to the report, the licensed providers lost over the last decade were primarily family child care (FCC) providers. These smaller businesses typically operate a home and serve about 10 to 14 children, according to Pearl.
The report goes on to say, “Providers licensed as child care centers (CCC), which are larger and typically located in commercial spaces, have increased in numbers and capacity but not enough to make up for the loss of FCC providers.”
“A lot of places of Greater Minnesota, in rural areas, they don’t have enough families, enough people or enough staff to support a larger center,” Pearl said. “So a lot of the new, expanded capacity that we’re seeing is centralized around population centers, which is leaving what we call child care deserts across the state.”
The larger centers are also dealing with staffing challenges. Sixty-three percent of child care centers reported they don’t have the staff to support their licensed capacity. According to Pearl, more than 200 center directors reported a total of 625 open teaching positions, with a corresponding 3,300 or more unfilled child care slots due to those open teaching positions.
“When you can’t find staff, you find that your directors and owners spend their days working in the classroom and their evenings doing all of their administrative work,” Schillinger said. “You can only sustain that pace for so long.”
She has used Child Care Stabilization Grants to increase employee pay, as did a majority of providers who participated in the Federal Reserve’s survey.
The state program was funded by the American Rescue Plan Act. Providers were required to use at least 70% of the grant money for increasing pay and benefits for employees. The program expires in June, although state lawmakers are considering extending it.
“When you don’t know how long this industry can sustain itself, it is really scary because I can’t imagine the impact it’s going to have on families,” said Schillinger.