Aligning childcare with business objectives at Childcare Innovation Lab - women.nyc

by Anthonia Carter

The Challenge

The US federal government sees childcare as affordable if it does not exceed 7 percent of income. It may be no surprise that licensed 0-3 home-based and center-based childcare is unaffordable for most New York City households. Moreover, unmet childcare needs come at a cost to businesses. Before COVID-19, employers lost $12.7 billion a year due to employee childcare challenges. COVID-19 related school and daycare closures exacerbated these losses, as millions of women left the workforce.

The Discovery and Exploration Process

Aligning caregiving and work is vital to building an equitable and thriving economy. The Childcare Innovation Lab has been instrumental in working towards this goal and has developed a toolkit for NYC employers that outlines five strategies businesses can use to support caregivers. Building upon this work, my task over the summer was to scope out potential funding solutions for childcare based on existing models applied in other fields. Specifically, I focused on applying a tuition assistance model to childcare. Tuition assistance (also known as tuition reimbursement) is an employee benefit where an employer pays a predetermined amount for continuing education credits or college coursework applied toward a degree. 

I began my internship reviewing industry reports and articles on the history and mechanisms of tuition assistance. For example, I learned that although businesses spend billions of dollars on tuition assistance programs, tuition assistance is largely underutilized. Moreover, federal and state tax incentives exist for eligible company educational assistance programs. This review provided a background of how tuition assistance works in practice.

Additionally, I led a design thinking activity with the Childcare Innovation Lab team to ideate around the value of education and childcare to employers and employees. The team brainstormed the tangible benefits of applying a tuition assistance model to childcare and what a tuition assistance-inspired childcare financial instrument could be. The leading question driving this activity was: How might we expand or reframe the definition of tuition assistance to capture childcare? The team and I captured values and risks associated with offering tuition assistance-inspired childcare benefits.

Proposed Financial Instrument for Childcare

My review of tuition assistance and the design activity informed my process of sketching a financial instrument inspired by tuition assistance for businesses to defray the cost of childcare. The model I developed consists of a childcare turnover calculator, cost of childcare formula, and return on investment (ROI) calculator. 

First, there are turnover costs associated with childcare since some individuals choose to leave the workforce due to childcare. As the 30-39 age range had the highest fertility rates in NY in 2018-20 and most adults over 30 are likely to be well into their careers at the mid to senior level, the cost of replacing an employee at an organization can range from 50% to 200% of their annual salary. This cost increases as an individual’s seniority level increases. 

Second, I explored a financial instrument the Childcare Innovation Lab was researching, namely a tuition assistance-inspired childcare financial instrument, where the employer pays an upfront amount for childcare (e.g., $5000/year) to an employee that can be used for childcare. In return, the employee must be retained for a period in which, for every year, the employee owes the employer less.

To this end, I developed a working model, which included constructing an ROI formula which is the difference between the retention savings (due to offering childcare assistance benefits) and the cost of childcare.

Anthonia Carter

Impact and a Path Forward

As the model that I developed relies on several underlying assumptions, such as average salaries at various seniority levels, the next steps would be to collaborate with partner companies to test the validity of this model. In testing the model, companies would need to collect childcare utilization data and turnover rates and use these values to see whether offering tuition assistance-inspired childcare benefits would generate an ROI. I learned a lot from this experience and look forward to seeing how NYCEDC continues to advance childcare innovation.