[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
TAKING CARE OF BUSINESS: HOW CHILDCARE IS IMPORTANT FOR REGIONAL
ECONOMIES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON RURAL DEVELOPMENT, AGRICULTURE, TRADE, AND
ENTREPRENEURSHIP
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
FEBRUARY 6, 2020
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-070
Available via the GPO Website: www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
39-604 WASHINGTON : 2020
HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
JUDY CHU, California
MARC VEASEY, Texas
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
Melissa Jung, Majority Staff Director
Justin Pelletier, Majority Deputy Staff Director
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Hon. Abby Finkenauer............................................. 1
Hon. Jim Hagedorn................................................ 3
WITNESSES
Ms. Cindy Cisneros, Vice President, Education Programs, Committee
for Economic Development of the Conference Board (CED),
Arlington, VA.................................................. 5
Mr. Dan Levi, President, Levi Architecture, PLC, Cedar Falls, IA,
testifying on behalf of the Black Hawk Child Care Coalition.... 7
Ms. Sarah Piepenburg, Owner, Vinaigrette, Minneapolis, MN,
testifying on behalf of Main Street Alliance................... 8
Dr. Veronique de Rugy, Senior Research Fellow, Mercatus Center,
George Mason University, Arlington, VA......................... 10
APPENDIX
Prepared Statements:
Ms. Cindy Cisneros, Vice President, Education Programs,
Committee for Economic Development of the Conference Board
(CED), Arlington, VA....................................... 21
Mr. Dan Levi, President, Levi Architecture, PLC, Cedar Falls,
IA, testifying on behalf of the Black Hawk Child Care
Coalition.................................................. 33
Ms. Sarah Piepenburg, Owner, Vinaigrette, Minneapolis, MN,
testifying on behalf of Main Street Alliance............... 38
Dr. Veronique de Rugy, Senior Research Fellow, Mercatus
Center, George Mason University, Arlington, VA............. 43
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
First Five Years Fund........................................ 50
TAKING CARE OF BUSINESS: HOW CHILDCARE IS IMPORTANT FOR REGIONAL
ECONOMIES
----------
THURSDAY, FEBRUARY 6, 2020
House of Representatives,
Committee on Small Business,
Subcommittee on Rural Development, Agriculture,
Trade, and Entrepreneurship,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:08 a.m., in
Room 2360, Rayburn House Office Building. Hon. Abby Finkenauer
[chairwoman of the Subcommittee] presiding.
Present: Representatives Chabot, Finkenauer, Craig,
Hagedorn, and Stauber.
Chairwoman FINKENAUER. Good morning. The Committee will
come to order.
I want to make sure I thank everybody this morning for
being here, especially those who flew a long distance from Iowa
or Minnesota. It means a lot that you are here to talk about
this very important issue facing our country.
In Iowa, when I talk to employers about workforce
development and ways to bring new investment into our region,
access to affordable childcare almost always comes up and it is
almost always at the top of the list.
Parents are turning down raises and promotions because they
are afraid to lose childcare assistance benefits or just
leaving the workforce all together because it is less expensive
to stay home. Our businesses are losing thousands of dollars
due to employee turnover because their workers cannot find
reliable childcare. Jobs are going unfilled, and employers are
struggling to attract talent because of the lack of affordable
childcare in our communities. It is feeding our state's
workforce shortages, and our entrepeneurs are feeling the
effects as well.
I met a young mom named Phoebe, who recently moved back to
Iowa and opened a restaurant in Cedar Rapids with her husband.
Her heart is in the business, but they are struggling to find
childcare for their new little one. They actually had to hire
front-house help that used to be Phoebe, which is kind of
disappointing because she wanted to be part of the business as
much as possible and now has had to step back partly because of
the lack of childcare. Fortunately, they actually have family
in the area, so they have been able to step up and help. But
that is not the case for everybody, and it should not have to
be. In Iowa in particular, more than 350,000 kids live in
communities where they do not have access to childcare, meaning
that thousands of parents are being forced out of the
workforce.
With the lowest unemployment rate of any state in the
nation, this is an issue that we cannot afford to ignore in
Iowa, and Mr. Levi, we are grateful you are here to talk about
that. When parents cannot access affordable childcare, the
effects are felt across the entire economy. This issue is
especially pronounced in rural communities. In Iowa, more than
one-third of our rural residents are living in areas considered
childcare deserts, places where demand for childcare exceeds
supply by more than three to one.
For our rural businesses that already struggle to attract
talented employees, access to childcare is another challenge
they have to overcome when it comes to recruitment and
retention. Even in areas where there are enough providers,
childcare is so expensive that some families cannot afford it.
Over the last decade, the cost of childcare has increased
by 25 percent. A family of four in Iowa is paying as much as
$1,300 a month to cover the cost of childcare. Some of my
colleagues here today are from states where the average cost is
much higher. In some parts of the country, the cost of
childcare is even as high as college tuition.
When I talk to business owners about access to affordable
childcare, they want to be part of the solution. They do not
want people to have to choose between a paycheck and starting a
family. They know that a strong workforce is not just good for
business--it is good for the future of their community.
During today's hearing, I hope to explore how childcare can
drive economic growth and help our small businesses thrive. We
will look at how access to childcare, along with policies like
paid family leave, can contribute to improved productivity and
retention in the workplace. Our witnesses will also speak to
some of the challenges and opportunities for small business
owners who want to improve access to childcare, not only for
their employees but for their own families as well.
Small businesses are much less likely than larger firms to
offer childcare benefits. For some small operations with razor-
thin margins, they might not have the resources or the
expertise to even offer common benefits like childcare referral
services or dependent care assistance plans, let alone onsite
child care.
Helping support small businesses and rural communities that
want to improve access to affordable childcare will be an
important part of our conversation here today.
I also want to take this opportunity to announce that later
today I will be helping introduce legislation led by my
colleagues, Congresswoman Susie Lee and Congressman Pete
Stauber, who sits on the Small Business Committee. This
legislation would expand financing options for childcare
operations through the Small Business Administration. Thank you
for your leadership, Ms. Lee and Mr. Stauber.
Today, we will also be hearing from Mr. Levi, who I talked
about earlier, who came all this way from Iowa and we are
grateful that he made the trip. His partnerships with nonprofit
childcare centers is an example of how we can improve access to
care.
Lastly, I hope to touch on the importance of our childcare
providers who are often small business owners themselves.
Whether they operate a center or run their business out of
their home, providers are the people on the ground trying to
improve access. Federal proposals to increase access to
affordable childcare will only further drive demand for
childcare services. For example, the Child Care for Working
Families Act would create 700,000 new jobs for childcare
providers. We are going to need our small businesses to help
meet this demand.
Thank you all again so much for being here today. It means
a great deal, and this is going to be a very important
discussion and something that we need to be having in
Washington and across our country.
I would now like to yield to our Ranking Member for the
day, Mr. Hagedorn.
Mr. HAGEDORN. Well, thank you, Madam Chair. I appreciate
your fine opening statement. And you holding this hearing. It
is a very important issue. Something that many of us have been
working toward. And I am also on that legislation with you, to
make sure that we can focus SBA monies to loans and so forth to
get providers going. Very important.
So like health care, the childcare industry presents many
challenges, especially for those in rural communities. Lack of
access, lack of choice, and high cost consistently discourages
parents from reentering the workforce. This reduces demand for
the few childcare entities in those areas and raises costs
while eliminating jobs. That is not good.
Programs like Head Start or suggested universal childcare
programs may only fill part of the gap, but a vibrant private
sector option must be part of the calculus. And I think that is
one of the things that we are going to focus on today is to
make sure that that is available and there is great opportunity
in those areas in the private sector.
Each community, each parent, and each child has unique
wants and needs that are better served when choices are
expanded. With fewer restrictions and fewer regulations in
those areas that do not increase health and that do not
decrease or in any way get in the way of our health and safety
outcomes for children, you know, more opportunities are often
provided. So, when there are more choices for child care,
parents are more likely to obtain full-time employment and
promote economic developments in our communities.
In my home state of Minnesota, child care costs are over
$16,000 per child annually, and that comprises about 21 percent
of median family income. I represent southern Minnesota, and in
that our largest city is Rochester, and the average cost in
Rochester is approximately $1,200 per child per month. So, it
is pretty extraordinary when you think about it.
According to the U.S. Department of Health and Human
Services, child care is considered affordable if it costs no
more than 10 percent of a family's income. Yet, Minnesota is
not alone in being unaffordable. In fact, every state in the
union, including D.C., is unaffordable by that standard. So
that is quite something.
These costs only increase when variables, such as
additional children, medical requirements, and single parents
are in the mix. So that is pretty much best-case scenario is
$16,000 per child in Minnesota. That is best case scenario, and
from there it gets higher.
I look forward to hearing the challenges presented within
the childcare industry and what we can do to reduce burdensome
regulations and costs within this field. I would note for the
record that there are people that have traveled even further
from the great state of Minnesota. I am looking forward to all
the testimony from our witnesses. And thanks again for holding
this hearing.
Chairwoman FINKENAUER. Thank you, Mr. Hagedorn. The
gentleman yields back.
If Committee members have an opening statement prepared, we
would ask that they be submitted for the record.
I would now like to take the opportunity to explain our
timing rules. Each witness gets 5 minutes for testimony. There
is a lighting system to assist you. The green light will be on
when you begin, and the yellow light will come on when you have
1 minute remaining. The red light comes on when you are out of
time, and we ask that you stay within the timeframe to the best
of your ability.
I would now like to introduce our witnesses who have taken
time again away from their families and their businesses to be
here today for this important hearing.
Our first witness is Ms. Cindy Cisneros. Ms. Cisneros is
the vice president of Education Programs at the Committee for
Economic Development. She is responsible for leading their
portfolio of education work, which includes early childhood
education, K-12, postsecondary, and workforce development. Ms.
Cisneros has in-depth experience providing technical assistance
to state and district educators on the successful
implementation of national education laws. She previously
worked for the U.S. Department of Education.
Thank you so much, Ms. Cisneros, for being here today.
Our second witness is from my district, Mr. Daniel Levi
from Cedar Falls. Mr. Levi is the principal and owner of Levi
Architecture, an Iowa small business. Levi Architecture has
worked on a variety of projects, including commercial,
industrial, residential, and educational, with a special
interest in childcare facilities. Mr. Levi has been
instrumental in development of childcare infrastructure.
Through his work as a board member of Exceptional Persons,
Inc., and the Black Hawk County Child Care Coalition, which is
an incredible organization and group of folks, Mr. Levi has
been working alongside community partners, businesses, and
childcare providers to address the need for childcare in
northeast Iowa.
Thank you for all that you do and for taking time away from
your business and your family to be here. We look forward to
hearing from you.
Our third witness is Ms. Sarah Piepenburg.
Ms. Piepenburg is the owner of Vinaigrette, a family-owned
and operated food store in Minneapolis, Minnesota, with five
employees. A former HR consultant, Ms. Piepenburg and her
husband have firsthand experience struggling to find affordable
childcare for their family, and they work hard to provide a
supportive work environment for their employees. Ms. Piepenburg
is the mother of three, a board member of Ripples of Kindness,
the Minnesota Breastfeeding Coalition, and a member of Main
Street Alliance.
Thank you for taking time away from your business and your
family and traveling all the way here.
I would now like to yield to our Ranking Member for the
day, Mr. Hagedorn, to introduce our final witness.
Mr. HAGEDORN. Thank you, Madam Chair. I appreciate that.
Our final witness today is Veronique de Rugy. Doctor,
before I go any further, did I get that close? All right. That
is not too bad. You know, for southern Minnesota, not too bad.
A senior research fellow at the Mercatus Center at George
Mason University, where I went to school, George Mason, a fine
institution of higher learning. Her expertise includes the U.S.
economy and taxation. Before her tenure at the Mercatus Center,
she was a resident fellow at the American Enterprise Institute,
a policy analyst at the Cato Institute, and a research fellow
at the Atlas Economic Research Foundation. She also oversaw
academic programs in France for the Institute for Humane
Studies here, received her M.A. in Economics from Paris
Dauphine University, and her Ph.D. in Economics from the
Pantheon-Sorbonne University.
All that pretty good so far? Good.
In addition to her extensive knowledge and expertise in
economics, she is an acclaimed writer with articles published
in the New York Times, the Wall Street Journal, and many
others. She was named one of Politico's Top 50 Thinkers, Doers,
and Visionaries Transforming American Politics in 2015. Thank
you for taking time to speak with us. We look forward to your
testimony.
Chairwoman FINKENAUER. Thank you, Mr. Hagedorn.
Now I would like to recognize Ms. Cisneros for your opening
statement.
STATEMENTS OF CINDY CISNEROS, VICE PRESIDENT, EDUCATION
PROGRAMS, COMMITTEE FOR ECONOMIC DEVELOPMENT OF THE CONFERENCE
BOARD; DAN LEVI, PRESIDENT, LEVI ARCHITECTURE, PLC; SARAH
PIEPENBURG, OWNER, VINAIGRETTE; VERONIQUE DE RUGY, SENIOR
RESEARCH FELLOW, MERCATUS CENTER, GEORGE MASON UNIVERSITY
STATEMENT OF CINDY CISNEROS
Ms. CISNEROS. Good morning. My name is Cindy Cisneros and I
serve as the vice president of Education Programs at the
Committee for Economic Development, or CED, which is the public
policy center of The Conference Board (TCB), and it is a
nonprofit, nonpartisan, business member-driven organization.
Our business leaders know that a skilled workforce is paramount
to economic prosperity.
From CED's perspective, access to quality affordable child
care is a two-generation strategy. It helps fuel economic
growth by supporting working parents and supporting the healthy
development of young children.
Americans are working today, including mothers of very
young children. Over 15 million children under age 6 have
working parents.
In 2019, CED released a study, Child Care in State
Economies, which reviewed the use of child care by families and
the economic impact on states. We found that child care is an
industry that plays a significant role in economic growth. The
industry, which includes both center-based and home-based child
care, had a total economic impact in 2016 of $99.3 billion.
This includes $47.2 billion in revenue, plus another $52.1
billion in spillover in other industries.
Service industries of comparable size include medical labs
at $47 billion, and spectator sports at $46 billion. In terms
of jobs, the spending of 1.5 million sole proprietors, or home-
based providers, and wage and salary employees in the childcare
sector, support more than 507,000 workers in other industry for
a total jobs impact of over 2 million.
CED's study analyzed the use of market-based care--that is
paid childcare services using the U.S. Census Bureau Economic
Census, County Business Pattern Data, as well as Non-employer
Statistics data from 2016.
Without access to child care, parents reduce their hours or
opt out of the workforce, and 94 percent of those are women.
The use of paid child care is highest among two-parent families
working full time at 88 percent, and single-parent families
working 35 hours or more per week at 83 percent. Both family
types far exceed the overall usage rate of 59 percent.
Families regularly struggle with the availability,
affordability, and quality of child care. Employers are
impacted, with some estimates by more than $4.4 billion per
year in lost productivity. Just last week, the Center for the
Study of Child Care Employment estimated that parents forego
about $30 to $35 billion in income because of challenges with
child care.
The supply of child care is uneven across communities.
Childcare centers open in areas where the population is dense
enough and has sufficient income to sustain a viable business
model. Of concern, particularly in rural areas is the decline
in family childcare homes, which we estimated at 20 percent
over the past 10 years. For home-based providers, the hours are
long, and the fees charged to parents do not offer an economic
incentive to stay in business. Average revenue is only about
$15,000 per year, which is below the poverty line for even a
family of two.
The current business model for childcare centers, which
also depends on parent fees, is challenged to keep rates low
enough for parents to pay but high enough to hire and retain
high-quality staff. This has led to a childcare workforce that
earns low wages at about $11 an hour and has high turnover. And
yet, the childcare workforce is critical as it is the workforce
that literally supports all other workforces.
There is no easy way to make quality child care more
available and affordable. However, there are approaches that
can be considered.
First, the National Academy of Sciences released a report
in 2018 suggesting ways to better finance our Nation's
childcare system. CED was represented in a NAS public hearing
to inform that report with a business leader perspective. This
set of recommendations is worth reviewing.
Second, to help fill the gap between what parents can
afford to pay and a livable wage for individuals working in
child care, Congress could enact a refundable workforce tax
credit that is linked to achieved competencies in early
childhood education.
Third, expand Small Business Development Centers (SBDCs).
Child care is a business, yet many who operate within the
childcare industry know early childhood but not best business
practices. SBDCs could be required to partner with state
childcare agencies to offer business technical assistance for
centers and homes.
Thank you for your time today. I am pleased to answer any
questions.
Chairwoman FINKENAUER. Thank you, Ms. Cisneros.
Now, Mr. Levi, you are now recognized for 5 minutes.
STATEMENT OF DAN LEVI
Mr. LEVI. Thank you very much. Appreciate the opportunity
to speak today.
My involvement with child care started through a very
personal opportunity with a nonprofit we are associated with
that houses our childcare resource and referral. We had a
recruitment and retention problem. Part of that issue is the
pay structure. We had opportunities but our community was not
involved in the conversation that child care was a legitimate
crisis in our area, and it is a crisis in our county.
Over the last 5 years, the trends are we have lost 37
percent of the childcare centers in our area, and it is
continually impacting my clients in my professional practice
where they are unable to expand due to lack of talent.
So, we decided to attack the problem through a coalition of
volunteers called the Black Hawk County Child Care Coalition,
specifically addressing the private sector, making this a
bottom-line issue, a cost issue, a quality control issue, and a
recruitment issue. The state of Iowa has record-low
unemployment as we have seen across the Nation. We have had
this conversation with CEOs, CFOs, decision-makers at small-
and medium-size businesses across our area to try to impede on
them what the impact is if they are willing to listen. And many
businesses already had the data and are now looking into that
data.
Our coalition quickly expanded, and we were asked to expand
our reach just beyond our county. We are now into counties all
across the state of Iowa, and all of these small towns have the
same thing. They say we have a lack of talent for our
businesses to expand and we have moms and dads moving away from
our small towns. It is hurting rural economies. It is hurting
our communities. We are seeing school districts reduce in size.
Child care can be one of those economic drivers in the
smaller communities. We have a series of examples that we have
been engaged with, one of which is work through the Iowa
Women's Foundation where we created a Center in a Box. It is
not a very creative name but what we did provide was
communities an opportunity to see what a child care actually
could look like on paper in terms of its size and its cost
while meting all of the state requirement regulations. The most
important piece to that is a business plan that goes along with
that model so these communities can understand what it is going
to take not only to start a center from a startup cost
standpoint, but also sustainability. We cannot have centers
that open and close. It hurts the economy. It hurts the
vitality of our small communities. And leaves moms and dads in
a very difficult position where they may choose not to be
employed any longer. Mr. Hagedorn brought that up specifically
in his opening statement. We see that on a regular basis.
So, what we have done is when we get into these communities
through volunteerism, we talk to them about the resources that
they need and the resources that they may have available to
them. They simply do not know in many of these communities,
they have neither the expertise, the talent, or the experience
to understand how to attack these problems. When we involve the
private sector and we partner with our school districts and we
partner with other nonprofits and foundations, rather than just
adding together our resources of varying types, we actually can
multiply those resources to create something much better than
we could when we try to do it all on our own.
The smaller the community, the more important the school
district can be in that they have different types of resources.
Businesses have different types of resources that they can
bring to the table that moms and dads do not. And when we start
to get the private sector to understand that this is a black
and white issue for them, this is a bottom-line issue for them,
they have willingly come to the table and enthusiastically get
involved in our conversations.
In one example in Cedar Falls we have a co-op opportunity
where we have major businesses sponsoring, and in exchange,
they take down one of the two significant barriers to child
care, access.
In Black Hawk County, the average center has 37 kids on the
waiting list. It could take a year or more to get a child into
your center. When businesses partner in this way, they have
guaranteed slots in the center. Then, on top of that, if they
choose, they have the flexibility to also supplement or provide
benefits to their employees to reduce the cost, but we leave
that up to the individual employer. So, we try to create a
system where there are flexible options to bring on different
resources, people with different talents, people with different
interests and different scales at all times. We found that this
model works very well, and it is scalable, and it has been very
successful across the state of Iowa so far.
Specific examples of how policy, not more money, can make
significant change is the state of Iowa has tied the quality
rating system to centers to change the reimbursement structure
on childcare assistance, which encourages centers to either
expand the number of children that they take on assistance, or
it actually makes them break even on that, reducing the
incentive to cap their childcare assistance.
Thank you very much.
Chairwoman FINKENAUER. Thank you so much, Mr. Levi, for
being here.
Ms. Piepenburg, you are recognized now for 5 minutes.
STATEMENT OF SARAH PIEPENBURG
Ms. PIEPENBURG. Chairwoman Finkenauer and members of the
committee, thank you for this opportunity to testify today
about how a robust infrastructure for child care would
support my small business and other Main Street businesses.
My name is Sarah Piepenburg, and I am a small business
owner of Vinaigrette, a specialty oil and vinegar shop in
Minneapolis, Minnesota. I have been running my business since
2009 and currently have five employees. I am a member of Main
Street Alliance, a national network of more than 30,000 small
business owners.
In Minnesota, we have the fourth highest costs in the
Nation for infant care with the average cost for enrolling a
Minnesota infant in a childcare center running $310 per week,
or over $16,000 per year.
For 2 years after we had our son, we did our best to piece
together daycare and work. We sat on countless waitlists. I
even delayed taking a job until my son had aged out of the most
expensive infant care category, which costs more than in-state
college tuition.
I then took a part-time job and put my son in part-time
child care. Even with all our juggling, I was still only taking
home $244 a paycheck after childcare expenses.
It did not seem worth it. I quit my job to stay home, but I
knew we would have to find another solution.
My husband and I became small business owners for a reason
that does not fit neatly into our marketing materials. We
needed child care and we could not make it work any other way.
For my husband and me, the best choice was to go into
business ourselves, arranging our schedules as best we could,
and getting help with child care from family and friends. We
used the $16,000 we would have put into child care to launch
our business.
While this may seem like an extreme solution, it is more
common that you might think. In a Small Business Majority
survey of small business owners, 29 percent stated that lack of
access to child care was a major reason for starting their own
business, due to the need for increased flexibility in their
work schedules. But an even larger portion of entrepreneurs
surveyed, 36 percent, say the lack of access
to affordable, high-quality child care is a barrier to
their business.
Small businesses like mine operate on thin margins and
cannot match the more generous childcare benefits offered by
larger employers, resulting in a hiring disadvantage. A more
robust childcare infrastructure would level the playing field
between small and large businesses. Even if parents can afford
child care, they often cannot find it. In my state, for
example, 44 percent of Minnesotans live in a child-care desert,
where there are simply no spots for anyone. That is lower than
the average. More than half of families in America live in
childcare deserts, areas where licensed child care is scarce
and does not meet the needs for the number of children in the
area.
Rural and low-income urban communities are hit hardest by
this lack of childcare infrastructure. Creating childcare
infrastructure in these communities would increase labor force
participation among parents driving local economic growth.
Work schedules are also a challenge. Most daycares close at
6 p.m., but my shop opens at 11 a.m. and closes at 7 p.m.
Finding childcare coverage is even more complicated for shift
workers and 24-hour employees in other industries.
We need innovative solutions like the Child Care for
Working Families Act to address the crisis from three fronts:
maintaining quality, ensuring jobs, and capping costs for
families.
Passing Paid Family and Medical Leave would also help solve
a key part of the childcare puzzle. A social insurance program
like the Family Act would provide families with two caregivers
up to 24 weeks of key bonding time with a new infant and 6
months less of expensive infant child care. That is why small
businesses overwhelmingly support paid family and medical leave
policies like the Family Act.
All of these challenges affect a robust small business
economy. If we believe in small business, we need our lawmakers
to change this system. Child care is not only a family issue;
it is an economic one, too.
Chairwoman FINKENAUER. Thank you so much, Ms. Piepenburg.
Again, we really appreciate that you came here all the way from
Minnesota.
Now we would like to recognize Dr. de Rugy for 5 minutes.
STATEMENT OF VERONIQUE DE RUGY
Ms. DE RUGY. Ms. Chairwoman, Mr. Ranking Member, and
members of this Commitmtee, thank you for having me today to
testify.
Ensuring that a family can afford to raise children in
America is an uncontroversial public policy concern. Many
families have difficulty finding affordable and quality child
care. In some places like Washington, D.C., daycare for infants
and children younger than preschool age costs an average of
$24,00 per child. This is a serious problem for most parents,
especially for lower-income parents.
Thankfully, not all states face the same childcare cost
burden. But understanding what is driving the cost of child
care in some areas and not others is key to designing the right
policy. Before we start throwing more money at the problem or
assuring new regulations, we must look at one important barrier
to affordable childcare provision, and that is childcare
licensing laws and requirements.
I will share here three main findings from the academic
literature on the issue.
First, however well-intentioned, the imposition of strict
licensing requirements actually restricts the supply of health
care and make it harder for families by raising prices.
Two, strict licensing requirements raise barriers to jobs
for childcare workers.
Three, this increase in cost is not accompanied by
commensurable increase in quality or safety.
So, what comes next in my testimony is an overview of the
economic literature on occupational licensing across
industries.
So, first, licensing requirements generally restrict the
supply of services in a licensed industry by prohibiting some
perfectly competent workers from working as a provider.
Occupational licensing laws also impose a high cost on the
employees by forcing them to pay high fees, undergo many days
of training or experience, or earn arbitrary certification.
My written testimony includes some charts to that respect.
By restricting competition between providers, occupational
licensing also increases the price of goods and services for
consumers.
An often-cited report by the Obama Administration Council
on Economic Advisors found that licensing laws can increase
prices by 16 percent. Higher prices are hurting low-income
consumers the most, obviously.
Second, licensing hurts low-income workers as well.
Economist Morris Kleiner found that restrictions from
occupational licensing can result in up to 2.85 million fewer
jobs nationwide and an annual cost to consumers of $203
billion. The Obama Administration's report noted that these
costs fall disproportionately on certain segments of the
population--immigrants, military spouses, and reformed
convicts.
Other research supports these findings. Licensing laws are
also a serious impediment to income ability by making it more
difficult for low-income Americans who reach the first rung in
their climb out of poverty.
In addition, these licenses also operate as a substantial
barrier to interstate mobility; hence, better labor markets as
the licensing requirements vary between states and cannot
transfer usually from state to state.
Third, licensing requirements are often justified on the
ground of quality control and public safety, and in theory,
licenses might increase quality if it acts as a well-designed
screening system. But on the other hand, it might decrease
quality by limiting competition.
Reviews of the academic literature suggests that the two
effects cancel each other out, though more studies find that
licensing reduces quality then find that it enhances it.
Finally, the occupational licensing literature that focuses
on childcare industries specifically reveal exactly the same
pattern. Excessive staff-to-child ratio education or parking
requirements increase the cost to the supplier, restrict the
supply, and ultimately increase the price for parents.
The solution to the current shortage of affordable care is
not to drive costs higher with more money and more regulations.
The first step is for state and local officials to look at ways
to reduce excessive regulations that contribute to the high
cost of child care.
For instance, estimates suggest that relaxing the average
mandate staff-to-child ratio by just one child across all age
groups would reduce childcare prices by 10 percent or more. In
Minnesota, that is $1,600. In D.C., it is $2,400. I mean, it is
important.
In order to fight the high childcare costs and lack of
child care availability, Arlington County where I live, the
County Board adopted a change to allow small, in-home daycare
providers to care for up to nine kids without having to go
through the county's extensive use permitting process. They
also reduced parking requirements for childcare centers after
business owners complained they were extensive and county staff
found parking spaces were often unused. Other state and local
governments follow this example.
But I want to leave you with one warning. While these
reforms might not be the whole answer to the challenge of high
childcare costs, a failure to make these challenges will make
other reforms by the Federal Government ineffective. Thank you.
Chairwoman FINKENAUER. Thank you, Dr. de Rugy, for being
here today as well.
Now we will start our questions. I yield myself 5 minutes,
and I would like to start with Mr. Levi.
One thing I know you talked about in your testimony was the
fact that people are struggling to move back to Iowa, or they
are even leaving, because they cannot find childcare. I have
seen this firsthand. I am 31 now. I have a lot of friends that
I graduated high school with who went off to college, would
love to move back home, raise their family, and be close to mom
and dad in Iowa. However, they are struggling to do it, facing
barriers related to jobs or to childcare. This is such a huge
issue, so thank you so much for all that you have done with the
Black Hawk County Child Care Coalition.
One of the things I know you talk about with the Black Hawk
County Child Care Coalition is the ``Child Care Center in a
Box,'' which offers sample budgets, business plans, and other
resources for childcare centers. That is huge.
Can you talk about the need for this type of support and
technical assistance, how folks are reacting to it, and what
you think we can be doing to make sure that more people have
the assistance that you have been putting out there?
Mr. LEVI. Sure. I would be happy to.
Again, the Black Hawk County Child Care Coalition was
formed to address the crisis in Black Hawk County specifically.
And as we started to do some speaking engagements, as our
childcare resource referral department headed through EPI is
doing talks over 19 counties, they started to get more and more
inquiries. We started to see that this was far beyond our issue
of just Black Hawk County. To do that Child Care in a Box, we
partnered with the Iowa Women's Foundation who was across the
state and regularly fields these questions of we also have a
childcare problem. What can we do about it? We do not know what
the next steps are. A small community, again, lacks the
expertise and the experience. They would be referred to our
coalition. We would pile in the car and make a road trip.
And so now we found ourselves over about two-thirds of the
state now, which does not speak to our expertise. It speaks to
the need and the lack of expertise and the lack of resources
that small communities have, not knowing even how to address
the problem.
Chairwoman FINKENAUER. Yeah. Have you found federal
resources to expand on these efforts at all?
Mr. LEVI. No.
Chairwoman FINKENAUER. No?
Mr. LEVI. It is all at the state or volunteer level.
Chairwoman FINKENAUER. Yeah. Thank you for everything that
you are doing. This is where we really need to be stepping up
in this area.
Ms. Cisneros, I know you had the opportunity to hear from
Mr. Levi as well about his efforts to partner with businesses
to start childcare centers in northeast Iowa. We know that more
investment from the federal level is needed to address the
childcare crisis. However, we also need an ``all hands on
deck,'' approach to solve this.
Can you talk about successful public-private partnerships
that have been implemented to address this issue similar to Mr.
Levi's or in that same space?
Ms. CISNEROS. Yes. It is inspiring to hear what Mr. Levi
had shared. There is a lot of creativity happening out there in
the states. And there really are some innovative public-private
partnerships, and that is something that CED has also promoted
in terms of problem solving.
One aspect in terms of thinking about these issues is
really bringing all stakeholders or nontraditional
stakeholders, like the business community, together.
So, we have an example from Minnesota that we wanted to
highlight, and that is First Children's Finance, which is
headquartered in Minneapolis. And it is a nonprofit financial
intermediary that works not only in Minnesota but also in 12
other states throughout the Midwest. And First Children's
Finance, they provide loans and grants to expand the supply of
child care and improve the quality, and also provide that much-
needed technical assistance on running a business and being a
business owner. They work directly with communities in both
urban and rural areas. They help actually launch new childcare
businesses, and they help provide support, again, to better
manage the business aspects of operating a childcare business.
And they help businesses expand.
I thought these were great details about the project, and
it has involved 19 rural communities. It has created 533 new
childcare slots, 583 participants came together in town halls
to develop right size solutions to increase the supply of
affordable child care, and 87 percent of childcare businesses
that participated in the project improved their business model.
Chairwoman FINKENAUER. Interesting. Well, we are running
out of time here, but I do want to ask you one other question.
How would you change or improve the Child Care Development
Block Grant to improve access to childcare and better support
public-private partnerships?
Ms. CISNEROS. In brief, wow, that is a big question because
it does not really address the supply of child care. But it
could be considering different uses of the Child Care and
Development Block Grant such as for construction and things
related to facilities and the condition of facilities. So,
while the reauthorization in 2014 did put a higher emphasis on
safety and development for kids, there are other considerations
for use of that money to states as well.
Chairwoman FINKENAUER. Thank you so much. Again, I
appreciate your expertise and being here today.
With that, I am out of time, so I will yield to Mr.
Hagedorn for 5 minutes.
Mr. HAGEDORN. Thank you, Madam Chair.
Like I said at the beginning, it is a very important issue,
and we talk with folks all across southern Minnesota and
elsewhere about how difficult it is across the board. Obviously
for our families with the extreme cost. I mean, that is taking
money out of their back pockets and it is putting enormous
pressure on our families. And from that standpoint alone it is
an issue that we are going to continue to work on this, but we
should be focused on it very intently.
The other part of it though is when you get into some of
the rural areas that I represent, you can get into towns where
they do not have any providers. And then you start to think,
well, how is that town going to continue to thrive and maintain
its schools, because it is tough to attract teachers in who
might be of child-bearing age, for instance, if you cannot find
anybody to take care of the kids and you have to travel 20-30
miles for that. Pretty soon they will want to go to some other
town to teach. And on it goes.
And so, you know, across the board, do we support the tax
credits? Of course. Yes. And I think they need to be increased
from even where they were under the tax bill. Individual Tax
Reform is coming along so that is something that I am going to
support wholeheartedly.
But then we get into you talk about the different types of
providers. So, Julie Eberhart of Rochester, she is an in-home
provider as is another lady that I spoke with in Springfield.
Two different towns. One is 115,000 people, the other is 2,000.
But Ms. Eberhart tells me that these regulations in Minnesota
are just unbearable. We started printing them out. There are
250 pages of them here. There is another 150 to 200 pages of
them, just the state of Minnesota, what they have to comply.
So, if you are an in-home provider, you need to figure out what
is in all this paperwork and then you have to comply with it.
And that is on top of the work that you do which is incredible.
It is driving up your costs, making your life miserable. So, we
are going to encourage the state of Minnesota to make sure that
this is streamlined, and we can do everything possible.
But Doctor, you mentioned this a little bit. Could you
maybe expand upon the cost and the enormous problems that they
face because of these regulations?
Ms. DE RUGY. Yeah. I mean, it is unquestionably a real
problem. And as I said at the end of my oral testimony, I
actually think that this is the number one thing to focus on
because you can subsidize, you can give tax credits, you can do
all of that stuff. If you do not actually do the fundamental
work to lower the cost of being a supplier and being willing to
supply, because here you are talking about the cost for people
who are already in the business. But what is harder to see is
all the people who do not get into the business precisely
because of these costs. And the academic literature seems to
suggest that it is not insignificant. It does really shrink the
supply of child care. So, this should be the number one
priority.
The question for the Federal Government is what can the
Federal Government do? And that is the hardest question because
these are state and local regulations. I do think that there is
hope because there is a big bipartisan movement right now to
try to kind of highlight the cost of these regulations, but it
is certainly, I think, the number one problem.
Let me just say, you are trying to expand child care or
make child care more affordable by subsidizing it. The problem
is, if you subsidize it, you may increase the demand, right,
and that increase in demand may trigger an increase in the
supply but it will not be enough if the regulations are so
strict that no one wants to get in. And what you are going to
have is basically an extra increase in the price of child care.
So, it is going to be counterproductive. This is why it is
important to focus on this first because it is going to make
any other policies you are trying to put in place not
effective.
Mr. HAGEDORN. Point well taken.
So, Mr. Levi, I appreciate what you are doing and
encouraging, for example, businesses to partner up. The City of
Luverne, I was just there a couple weeks ago. They have a
childcare issue, and I was talking with the mayor and others
and I said, you know, maybe one of the deals is, you have a
very forward-thinking city here, maybe some of these
businesses, they are expanding, about 400 jobs in a city of
5,000, so what are they going to do with the kids? So, you
start getting the businesses to partner together, and I would
open it up to anyone, what can we do at the Federal level to
facilitate that? To make sure that that is possible and to
encourage that? Because that seems to make a lot of sense.
Mr. LEVI. The encouragement of getting, especially in
small, rural communities, getting businesses to move to those
communities or to expand, child care is obviously a significant
issue. If you would tie dollars to mandated public-private
partnerships, require communities to step up to the plate in a
more significant way than they have been. That means the
private sector needs to get involved because they have to
understand this is affecting their bottom line. And if we want
to get real movement on that, the private sector has to come to
the table on this. This cannot be just the Federal Government
paying for it, but it has to be something where we are tying
any kind of assistance, be it CDGB funds or other programs, it
has to be tied to a partnership.
Mr. HAGEDORN. I do not know if I want to mandate and do
those types of things. I just want to see that if they have the
interest, that we do not stand in their way and we do
everything we can to facilitate it. But I think the competition
that the doctor and others were talking about makes the most
sense.
With that I will yield back. Thank you. Appreciate it.
Chairwoman FINKENAUER. Thank you, Mr. Hagedorn.
With that, I will recognize my good friend from Minnesota,
Ms. Craig, for 5 minutes.
Ms. CRAIG. Thank you so much, Madam Chair.
I would just like to note for the record that we have
perfect attendance from Minnesota on this Committee this
morning. It is a great bipartisan delegation. So, it is great
to be here.
Honestly, I have four boys, and they are 22, 22, 21, and
16, and I am having flashbacks of multiple car seats in the
back seats here this morning. So, thank you. Thank you for that
anxiety-ridden morning, Madam Chairwoman.
Look, this is a critical issue across my congressional
district and across the state of Minnesota. And what is
stunning is it is so interrelated to the other issues that we
face in our local communities. For example, the great city of
Red Wing in my congressional district, we have got good jobs.
What we do not have is affordable, accessible housing and child
care. In fact, my local businesses often tell me that they have
got an employee who is willing to move from the cities to Red
Wing and there is a 9 month waitlist for daycare or child care
in that community, and that is just something that parents
really struggle with in our community.
So, I will start with Ms. Cisneros just with a question.
Especially in our small cities and our rural communities, at
the Federal level, what would you have us really focus on? And
then I am interested in Mr. Levi's response to sort of the
regulation question. And then Ms. Piepenburg, you, being from
Minnesota as well, anything that you would have to add to that.
Ms. CISNEROS. So I definitely agree, it is an issue trying
to figure out how to really create additional supply in rural
areas. And we have talked about this partnership approach is
really a primary strategy. There are a number of states who
have really just taken it upon themselves and their communities
to figure out with employers because they know employers need
to rely on employees. Employees need to know that there is
available child care. That will help draw industry. So, it is
really pulling together and problem solving at a very local
level. And so, we would support that type of grassroots
approach rather than trying to mandate something at the Federal
level.
There are a lot of communities, such as in Charlotte, North
Carolina, who came together and the business leaders decided
they wanted to expand these opportunities and create more
access for children, for 4-year-olds in terms of pre-K, and
they funded a feasibility study and they got together with the
county and said we are going to invest in this. They ultimately
provided funding for scholarships so that they could get more
educators, early educators into the field to help increase the
supply.
Ms. CRAIG. Is there an increased role for SBA in financing
and helping to start up these businesses?
Ms. CISNEROS. I think we would need more information in
terms of what is really the need. If it was available, how
would it be utilized? And with loans, it is challenging because
you have to present a viable payback plan. And so, for this
type of industry, not a lot of income, not a lot of annual
revenue, and that could be problematic, but I think it is worth
exploring.
Ms. CRAIG. Thank you.
Mr. Levi, would you care to comment on the regulation point
my colleague made a moment ago and just where I should be
focused on this?
Mr. LEVI. Certainly. There are two kinds of regulations.
There is obviously the licensing, the programmatic side, and
then there is the physical plan. And so obviously, as an
architect, I am going to go into facilities existing and new
facilities and look at the physical plan. The State of Iowa
administrative code combined with the building code is pretty
strict. It has some very significant barriers, especially on
renovation of existing buildings. It makes it extremely hard to
be cost effective. If you really want to make some change about
competition and you want to make these businesses, people
expand and get into the industry, it needs to be profitable.
So, it is an actual career path for individuals. And the only
way you are going to do that is you have to attack the number
one cost and that is labor cost. We design buildings
specifically, very detail-oriented, around the student-teacher
ratio. Classrooms are exact minimum sizes to maximize those
ratios. You cannot have six infants in a room when your ratio
is one-to-four. That room has to be sized exactly for four or
eight or 12. It has to be on that ratio. If you change that
ratio, we can change room sizes. We can get more kids in the
room and we can reduce the cost across the individual students.
That is going to change the bottom-line profit and loss of a
childcare center.
Ms. CRAIG. Ms. Piepenburg, I did not leave you any time so
maybe we will come back to you in a moment.
With that, Madam Chair, I yield back.
Chairwoman FINKENAUER. Thank you very much, Ms. Craig.
We have the other Minnesotan. I would like to introduce Mr.
Stauber, Ranking Member of the Subcommittee on Contracting and
Infrastructure.
Mr. Stauber, you have 5 minutes.
Mr. STAUBER. Thank you, Chairwoman Finkenauer, and Ranking
Member Hagedorn, for allowing me to speak at this Subcommittee
hearing today.
We all know child care is a pressing issue for many
individuals in my district, and I am grateful to have the
opportunity to be a part of this conversation this morning.
With more and more parents choosing to dually work and
raise their family, child care is hurting across the Nation now
more than ever. Those in rural America are particularly
impacted by this shortage, and we cannot continue to punish
those who choose to live in our rural areas in the communities,
like Minnesota's 8th Congressional District.
That is why I was happy today to report that I, alongside
Congresswoman Lee, and several members of this Committee,
including Chairwoman Finkenauer and Congressman Hagedorn, to be
introducing the Small Business Child Care Investment Act. This
legislation will allow nonprofit childcare providers to apply
for SBA loans. These loans will go a long way in keeping the
doors open at childcare centers and providing for families that
want to participate in the workforce.
Additionally, I am also the cosponsor of the Family Care
Act. This legislation will allow families with permanently or
totally disabled dependents to claim the Child Tax Credit,
which is worth up to $2,000 per qualifying dependent. Just
another example where we are trying to help families as they
try to provide care for their kids.
I want to thank all the witnesses here today for sharing
your testimony and expertise. It is you who help us as
legislators create good public policy.
I just want to ask a general question of each of you. What
is the most pressing challenge regarding child care for future
businessmen and women?
And Doctor, you can go first.
Ms. DE RUGY. So, I mean, as I said in my testimony, I think
increasing the supply of child care is important and one of the
ways to do it, and you have to do this, you know, first I think
is to lower a lot of the requirements that are not, I mean, I
am not saying just get rid of all the requirements but there
are a lot of very strict requirements which do not add in terms
of quality, increased costs, reduced supply, and then
ultimately increase the price of child care. And this would be
a priority.
Mr. STAUBER. State and local rules and regulations?
Ms. DE RUGY. Yes. And that is what makes this issue so
difficult. That said, as I said, I think there is hope because
there is a bipartisan consensus on this and I think President
Obama's report on the issue got a lot of traction and is
actually drawing a lot of attention to something that a lot of
people were already talking about. And more half of this body
in terms of information as opposed to regulation or money is
worth doing.
Mr. STAUBER. To your point, I know that the childcare
provider for my four children is contemplating leaving the
business because of the redundant rules and regulations, and so
far their family has stayed in it but that is a real choice for
her and her family to continue.
Ms. DE RUGY. And it prevents new providers from entering.
Mr. STAUBER. Stay that again?
Ms. DE RUGY. It prevents new providers----
Mr. STAUBER. Sure, absolutely.
Ms. DE RUGY.--from entering the market.
Mr. STAUBER. Absolutely.
Ms. DE RUGY. As people leave.
Mr. STAUBER. I concur with you.
Ms. Piepenburg from the great state of Minnesota, can you
answer that question? What is the most pressing challenge for
those businessmen and women who want to start up reference
child care?
Ms. PIEPENBURG. Well, as a small business owner and a
mother, I mean, if businesses lose over $4 billion because of
absenteeism, and as a small businessowner I need people to work
in my store. I would like to expand my business, but we need
help in getting child care and to level that playing field
because I cannot compete with Delta Airlines that has a
childcare facility. And so, I need actual bodies, and so I need
people to be able to work in my store.
Mr. STAUBER. So is it a combination of child care and lack
of workforce?
Ms. PIEPENBURG. Absolutely.
Mr. STAUBER. Thank you.
Mr. Levi?
Mr. LEVI. I would say the number one issue facing child
care is the fact that they are simply not profitable. It is a
business model that, at least myself as a small businessowner,
I would not get into when you look at the labor cost associated
with it and the potential revenues that you can reasonably
charge a mom and a dad, you can strip regulations and you can
reduce any of the expenses you want, that labor ratio based on
the amount of income you can bring in simply is math that does
not work. So, others have to come to the table. It has to be a
community solution to a community problem.
Mr. STAUBER. Thank you.
Doctor, I wanted to talk to you about the regulations. As
Ranking Member Hagedorn just showed, these are Minnesota's
regulations. And you talk about people looking at this, a lot
of paperwork, to get into child care. That is daunting for
them. These are just the State of Minnesota's.
Ms. DE RUGY. It is. These regulations are often put in
place in the name of the quality of service and safety. And
unfortunately, at least the academic literature that has looked
at this issue, both for the childcare industry and for all the
other industries, shows that on average a majority of these
requirements do nothing to increase quality for consumers and
safety. And in fact, there are more regulations that harm that
aspect.
Now, quality is hard to measure, right, but so it is a real
problem because among all these regulations, some of them may
be extremely valid and important to have. But many of them are
either poorly designed or they are driven actually by special
interests trying keep out the competition. So there is a lot of
problems and it would be so important for state and local
governments to really go and check each one of these
regulations and really assess what is it they are doing and
what they are achieving really and the impact they have on
costs because everyone talks about an educator as a childcare
provider. This is well and fine if there is no cost at all, but
everything is a matter of actually not driving providers out of
the system in order to increase the degrees of educators or the
number of educators in the field. It is a tradeoff. Everything
is a tradeoff.
Mr. STAUBER. Thank you very much for that answer.
Ms. Cisneros, I am out of time, and I apologize.
Chairwoman Finkenauer, thanks for the extra couple minutes.
Chairwoman FINKENAUER. Thank you, Mr. Stauber. And again, I
appreciate your work on the issue.
I just cannot say thank you enough to all our witnesses for
your expertise on these issues. As we have heard today, access
to affordable childcare is not just a family issue--it is an
economic issue. Ensuring that the youngest and most vulnerable
among us are safe is also something that Democrats and
Republicans can both agree on. States differ on how they
regulate childcare providers, yet the cost of childcare has
increased around the country over the last decade. Whether for
a small home-based business, a licensed provider, or a large
childcare center, regulations are there for a reason. There are
bad actors, but most of our providers get into this business
because they love our kiddos. They care about their health and
well-being. In Iowa, however, seven children have died in
childcare since the beginning of 2018. Many of those deaths are
the result of safety and licensing standards not being met. It
is important that we enforce those standards and make sure that
folks are following them. At the same time, we must continue to
look at ways to meet the growing demand for child care by
supporting providers, helping communities invest in childcare
solutions, and making it easier for our businesses to be part
of the solution. I strongly believe that this is an area where
we can find bipartisan agreement.
We just heard from the President on Tuesday about the need
to further expand access to childcare. I hope that he and our
colleagues in the Senate are willing to work with the House
represented here in a very bipartisan Minnesota and Iowa way
today on this issue across the aisle and across chambers. It is
incredibly important to address this crisis and bring down the
cost of childcare for working families.
Thank you again so much to our witnesses who in some cases
have come a long way to share your perspective with us.
I now ask unanimous consent that members have 5 legislative
days to submit statements and supporting material for the
record.
Without objection, so ordered.
If there is no further business to come before the
Committee today, we are adjourned. Thank you.
[Whereupon, at 11:10 a.m., the Subcommittee was adjourned.]
A P P E N D I X
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]