Why parents, day care owners and day care workers are trapped in a broken market

Transcript

MICHEL MARTIN, HOST:

You've probably heard stories about how hard it is to get child care if you can't afford it. But all over the country, there are people who can and are willing to pay, and they still aren't getting it. Sarah Gonzalez with our Planet Money podcast explains that parents, day care workers and day care owners are all trapped in a very weird, very broken market.

SARAH GONZALEZ, BYLINE: For months, Wesley Wade and his wife ended their days the same way.

WESLEY WADE: We're Googling, we're on waitlist at multiple places.

GONZALEZ: Trying to find day care for their youngest daughter.

WADE: My wife and I are divvying up our area geographically, and we're spending all this extra time when we, you know, still have to cook dinner, maintain the house, you know, give our kids love, spend time for ourselves.

GONZALEZ: And this family is not in, like, a day care desert. They are in Durham, N.C. - big university town, lot of jobs, lot of people. Wesley is a mental health counselor getting his Ph.D. His wife is an attorney. They are both pretty good at researching. They just can't find a spot. They are lowering their standards.

WADE: There were places that we never considered for our first child - you're like, oh, no, my baby is going to be in the most pristine care, right? - that we said, OK, if they're able, if they're open - because your options are limited.

GONZALEZ: But even the places they definitely did not want to send their two daughters to were full.

WADE: So I actually ended up leaving my full-time job just so I could be the flexible parent that can stay home.

GONZALEZ: This is a person who wants to pay for a service, who has the money but can't. He was being put on waitlists - six months, nine months. In traditional economics, waitlists are a sign that something isn't right. It actually means that the price is too low. But how can that be? Take any child care spot, like this one in Iowa.

KELSEY ANDERSEN: So we call ourselves Bluff's Little Thinkers.

GONZALEZ: Bluff.

ANDERSEN: Yup, like Sergeant Bluff.

GONZALEZ: Who's Sergeant Bluff?

ANDERSEN: So Sergeant Bluff is our town, like the suburb. Yup.

GONZALEZ: Oh.

Kelsey Andersen is the director of Bluff's Little Thinkers.

UNIDENTIFIED PERSON: That feel cool?

GONZALEZ: They have babies from 6 weeks old to 5 years old.

ANDERSEN: Yup. The - 6 weeks old is the youngest that they can come, for sure.

UNIDENTIFIED PERSON: No, no, no, no, no?

GONZALEZ: And child care for infants, for the baby babies, is the most expensive for parents and for day cares.

OK, let's talk about your books.

ANDERSEN: So I do have a printout here...

GONZALEZ: Oh, OK.

ANDERSEN: ...Of the books. So, like, anywhere between forty to fifty-five thousand for a deposit, like, for the month.

GONZALEZ: Deposits are what parents pay you?

ANDERSEN: Yes. Yep.

GONZALEZ: And then how much money do you pay in labor?

ANDERSEN: Our payrolls, monthly, would definitely be over 30,000.

GONZALEZ: In a month when they're bringing in $40,000 from parents, $33,000 goes to labor. It's more than 80% of their costs. In other industries - like, say, fast food - labor is, like, 25% of total costs. And if you're thinking at least day care workers are getting paid well, right? Well, they are not. Kelsey pays 12 to $15 an hour.

Is that enough to, you know, really get by in Sergeant Bluff?

ANDERSEN: It's not a livable wage.

GONZALEZ: It's not, OK.

ANDERSEN: It's absolutely not a livable wage in any way, shape or form.

GONZALEZ: In Sergeant Bluff, Iowa, or in Durham, N.C., you can make more money walking someone's dog than taking care of their kid or being a parking attendant, working in retail.

ANDERSEN: Yep. Yep. So Starbucks, Target - I mean, just anything that we have in our...

GONZALEZ: They all pay more?

ANDERSEN: Oh, absolutely. Like, I saw a Chick-fil-A sign the other day that said starting at 16.75.

GONZALEZ: But Kelsey says she can't pay as much as these stores do because she has a lot more people to pay. In child care, there are laws about child-teacher ratios. For Kelsey's 72 kids, she needs 25 people on staff. Jessica Brown is an economics professor at the University of South Carolina's business school, and she's a mom of four.

JESSICA BROWN: Yeah, the baby's 3 weeks old.

GONZALEZ: Wait, he's 3 weeks old?

BROWN: Mmm hmm.

GONZALEZ: I feel like I should not be talking to you.

BROWN: (Laughter).

GONZALEZ: You, of all people, should be, like, no, I'm drawing a line.

BROWN: (Laughter) I'm not good about that.

GONZALEZ: Jessica decided to study the child care market when she was getting her Ph.D. in economics at Princeton while looking for child care and not finding any.

BROWN: If we had, you know, perfect markets, then the markets should adjust and the supply should come up. But it's not.

GONZALEZ: Theoretically, the supply problem should kind of solve itself. If day cares charged more to take care of kids, that would make more child care centers open up. Yes, it would price some parents out of child care. But in cold, hard econ land, you would say, oh, well. We're making a profit. Sorry, parents. But this is not happening.

BROWN: And so there's something else going on.

GONZALEZ: Jessica says if the price of day care goes past a certain point, some families will say, well, we're not going to pay that. We'll just find a cheaper option or we'll hire a nanny. And this threat of outside options, of nannies, keeps a ceiling on what day cares can charge. Jessica says having a waitlist actually is kind of the only way that child care centers can afford to stay in business.

BROWN: Child care facilities rely on having full enrollment basically at all times. They can't afford to have unfilled seats. So child care facilities rely on having a waitlist so that when a child leaves, they're able to fill that slot with someone from the waitlist.

GONZALEZ: By the way, Wesley's daughters did eventually get off a waitlist.

Sarah Gonzalez, NPR News.

MARTIN: So, Rob, what's it like in Berlin, where you live?

ROB SCHMITZ, HOST:

Yeah, well, in the city where I live, Berlin, it is - child care, from birth, is free.

MARTIN: Free.

SCHMITZ: It's free.

MARTIN: OK. So this is another area where Europeans think we're crazy.

SCHMITZ: I think that, yes, they probably do. But I think that the idea behind it is that child care is a right. It's not something - it's something the state should provide.

MARTIN: So do you have room for me in your place in Berlin? Just kidding. Just kidding.

SCHMITZ: (Laughter).

MARTIN: Thanks.

(SOUNDBITE OF PIA NOUVELLE'S "MAD WORLD") Transcript provided by NPR, Copyright NPR.