The US childcare crisis is a $122 billion economic threat

First her 5-year-old son had a fever. Then her 2-year-old daughter developed a cough. That left Massachusetts-based Jamie LaDuca spending two weeks caring for her sick kids while also trying to run her business. 

“It’s chaos,” LaDuca tells Fortune, adding she feels like she gets calls from daycare to come pick up her kids when they’re not feeling well much more often than she did pre-pandemic. And that, of course, impacts her work as a co-founder and partner of the boutique public relations firm 143 Communications.

LaDuca is just one of millions of Americans struggling with childcare issues—and those challenges have serious economic ramifications. The lack of adequate childcare for infants and young children across the country is now estimated to cost the U.S. $122 billion annually in lost earnings, productivity, and revenue, according to new research shared exclusively with Fortune by ReadyNation, part of Council for a Strong America, a bipartisan nonprofit focused on education and childcare policy. 

That’s more than double the $57 billion cost that researchers estimated inadequate childcare was costing the country back in 2018, prior to the pandemic, which intensified the issues facing the parents and providers. 

The ongoing childcare crisis and the fallout from COVID-19 pandemic not only poses an economic problem for Americans, these forces are reshaping the landscape for working parents. 

In fact, childcare issues were one of the big reasons LaDuca left her corporate PR job in 2021 to start the firm with a fellow mother of young children. “The path of my career if I were still working in my previous job wouldn’t be possible—I would have to be in meetings all day, really a slave to other people’s schedules,” LaDuca says. “I completely changed what I thought my life was always going to be like—that coveted communications corporate role—because I was like, This is unsustainable.”

Photo courtesy of Jamie LaDuca

Yet even as an entrepreneur, it’s not easy to juggle childcare issues. Last year, when both of her children came down the COVID-19 and were home for 21 days, LaDuca calculated that the family paid about $6,300 for childcare they didn’t use—not to mention the hit to her business output. 

Over the course of the last two weeks, LaDuca says she’s definitely seen a loss in her productivity. “I’m trying to jam-pack all of this work into three hours of nap time in the afternoon and then I get back on later once everyone’s in bed and settled. It definitely makes it difficult, certainly, to have a business and to grow a business.” 

About 51,000 Americans officially missed work last month due to childcare issues. While that’s down from the record high of 104,000 childcare absences reported in October 2022, it’s still above pre-pandemic levels. And it’s likely an underestimate since that number doesn’t include the many parents who cared for their sick kids while working. And then there are the men and women dropping out of the workforce altogether because they can’t secure childcare, because it’s too expensive or not easy to access.

“As we’ve seen in the past four years—and as the new report shows—the infant-toddler childcare crisis is a problem that is worsening rapidly,” says Barry Ford, CEO at the Council for a Strong America. “Businesses aren’t as productive, parents’ careers can be disrupted or derailed, and, crucially, without high-quality early supports, the next generation becomes less likely to grow up to be successful.”

Who’s bearing the brunt of the economic cost?

The pandemic fundamentally changed the landscape for working parents, DuLuca says, making childcare far less stable and eliminating many of the safety nets that were available before. Pre-pandemic, if her son got sent home because he had a fever or something like that, LaDuca says could call in backup—her mom, her dad, even her sister-in-law—and ask them to help her out. These days, that’s not as acceptable. 

“There’s a lot more consciousness around keeping people isolated [when they’re sick],” LaDuca says. “Pre-pandemic, you could have a kid with a cough and send him in [to daycare]. You can’t do that anymore.”

Having flexibility with work isn’t a nicety, it’s imperative. “I am very fortunate, and I realized that—I have been able to make a leap and change the way that my career works and make it kind of fit. But not everybody has that ability,” LaDuca says. 

These challenges have an economic cost. Families, unsurprisingly, are hit hardest by the lack of affordable, quality childcare. Annually, parents lose approximately $78 billion in the form of forgone wages and decreased productivity, according to the report. 

But it’s not just working parents who are affected—or even childcare providers. Employers are losing $23 billion annually in the form of reduced revenues and inflated recruiting costs to replace parents exiting the workforce. Those costs have also risen steadily from the $12.7 billion reported in 2018. That lack of childcare not only suppresses workforce productivity, but it keeps many parents out of the workforce and drives up competition for new hires.

Even those without children or with adult children are impacted by the childcare crisis, the report finds. Taxpayers of all stripes lose an estimated $21 billion per year due to lower federal, state, and local tax revenue. 

Why is the cost rising so rapidly and where does it go from here? 

The dramatic rise in the economic burden of the childcare crisis can be attributed to the fact that the issues facing this sector are much more widespread and severe than they were four years ago, says Sandra Bishop, author of the report and chief research officer at the Council for a Strong America. “A combination of COVID-19 and insufficient policy action have now significantly worsened the infant-toddler childcare crisis,” Bishop tells Fortune. 

Parents, for example, reported childcare problems caused them to be fired nearly three times more often in 2022 than in 2018, according to Bishop. Additionally, the percentage of parents experiencing some type of negative impact on their career due to insufficient childcare—such as being late for work, reducing work hours, and turning down a promotion—is higher now than reported pre-pandemic. 

In addition to the stress the pandemic put on the existing childcare system, other factors like high inflation and the Great Resignation also play a role. During the pandemic, for example, female labor force participation dropped significantly more than that of males, and lack of childcare was an important driver of women exiting the workforce, Bishop says. 

About 16% of the U.S. workforce, roughly 26.8 million people, rely on childcare to allow them to work. Yet a major part of the issue is that the supply has not kept pace with demand—and pandemic closures of childcare centers and in-home providers have made things worse. 

In total, about 12.3 million children in the U.S. have working parents, but there’s only about 8.7 million licensed childcare slots available, according to Child Care Aware of America’s latest report: The Year in Child Care: 2021 Data, Analysis and Recommendations. That leaves a potential gap of about 3.6 million slots. 

Photo courtesy of Jamie LaDuca

For both of her kids, LaDuca says she called daycares to get a spot for them before she even told her parents she was pregnant. And with her son, even that wasn’t enough notice. He was put on a waitlist and couldn’t start daycare until he was five months old. “ It’s even worse now,” LaDuca acknowledges. 

This scarcity means that cost—which has always been a major hurdle—is an even bigger burden now for families. On average, the annual cost for childcare nationwide is approximately $10,600 per child, according to Child Care Aware. To secure childcare in Massachusetts—one of the most expensive states for the service—LaDuca says she currently allocates about 40% of her salary directly to daycare costs. When she and her husband were discussing having a second child, cost was a major consideration. We asked ourselves: “How are we going to make an extra $20,000 a year to put this kid in daycare?” she says. 

“He wants to work. I want to work. We both worked hard for our careers,” LaDuca says, adding stepping out of the workforce wasn’t an option either wanted to do. Their solution? They turned a small apartment on their property into a vacation rental on Airbnb and that helps pay for one kid in daycare per year. 

Yet even as parents come up with creative solutions, the challenges facing Americans with infants and toddlers aren’t going away any time soon—and they’re difficult to plan for. “We can talk about it and say, yep, it’s hard. But until you’re in it, you really don’t get it,” LaDuca says. “The reality is that for the foreseeable future, this is definitely one of the things that’s just going to be hard.”

But while families have to be practical and find solutions in the midst of the chaos, Bishop says that policymakers and experts need to understand and prepare for the long-term consequences of a childcare crisis with no end in sight. 

“These economic costs occur every year a child is under age 3—for each successive cohort of children,” Bishop says. “Unless we strengthen the country’s fragile childcare infrastructure, the long-term economic losses will grow for each new birth cohort.”