Parents are stumping up thousands of dollars a year for childcare, but preschool workers say they're underpaid and the industry has struggled to expand.
Some 58% of working parents with children five years old and younger — about 6.38 million parents in the US — rely on childcare, according to a survey by the National Household Education. And the cost for preschool is becoming a growing problem for families — one that has gained more urgency in the aftermath of the Covid-19 pandemic. President Joe Biden has made more affordable childcare an administrative priority, announcing a series of measures last month aimed at increasing access to high-quality childcare and boosting wages for early educators.
Finding an effective way to significantly expand the availability of early childhood education starts with an understanding of what’s causing the disruption: if preschool fees are so expensive, why aren’t workers being compensated fairly? And what would it take to pay educators more, all while keeping care affordable for families that are struggling and also encouraging the childcare industry to expand capacity?
In the latest episode of the Odd Lots podcast, Matthew Bateman, co-founder and vice president of pedagogy at Higher Ground Education, which owns and operates more than 100 schools around the world, unpacks this preschool puzzle.
“The reality is most centers don’t make much money. I mean, a lot of them lose money. A lot of them close, a lot of them have razor thin margins,” he says.
Regulatory and labor complexityOperational complexity, tight margins, and overhead play a large role in low wages for preschool educators. Bateman explains that creating a one-size fits all billing system is tough since child care businesses can vary from a sole proprietor mom-and-pop service to nationwide franchise centers, making it hard to collect payments on-time and in an efficient way. That means preschools tend to hire a lot of administrators, which eats into teachers’ overall pay.
“It’s actually pretty difficult to get it set up and chasing payments and chasing parents,” Bateman says.
He also says that the early childcare sector is not only a labor-intensive industry — given that there are minimum standards for how many teachers need to be assigned to supervise children — but preschools are also selecting staff from a narrow pool of available talent. Teachers have to meet qualifications and obtain the necessary credentials in order to be considered.
“It’s not just like you can tap into a wide hiring pool, a wide labor market,” Bateman says. “And so all of these things kind of intersect to being like, okay, you need to have a certain ratio. You’ve got some overhead, there’s a lot of operational complexity, so maybe you should add another person to your staff. And if you add another person to your staff, which is the easiest way to solve a lot of these problems, you just kind of over-staff, you end up paying everybody less.”
Competing on costsChildcare is also unusual in that providers face a constantly changing pool of clients, as kids naturally “graduate” from care. That means providers are constantly competing for new customers, which drives down their pricing and can encourage them to keep costs as low as possible. Many parents also don’t pay the list tuition thanks to graded discounts.
“There is some price insulation there, but even there it’s not totally inelastic. We raise prices and then we find that it’s too much and we have to backtrack,” he stated. “If you raise prices and none of your existing families disenroll — which isn’t going to be the case necessarily — but if you raise prices and 25% of your families are new families, you have to compete for those families on the new rates.”
Babysitting or long-term career?According to Bateman, staff turnover is another metric used to evaluate the overall success of a daycare center. Of course, lower wages are associated with a higher rate of staff turnover, but he also points out that it’s important to hire staff that see childcare as a long-term career. Early childhood educators shape the trajectory of a child’s cognitive development and Bateman says attitudes towards the field have to shift from looking at it as a stop-gap measure or an easy side-gig.
“Seeing it as a kind of expertise and a kind of wisdom and there's curriculum here and there are things that you can do and master, and there are growth paths. I think that that’s the biggest thing,” he said. Having employees that care about their work is crucial, he says.
“We’re going to kind of deprogram you from your traditional thinking about education and open your eyes to a new way of thinking about children, about learning, about curriculum, about development, about growth. And there are certain people [who] love that. It's a calling for a certain kind of person,” he adds.
Reinvention of a flawed systemBateman suggests that in order to create balance between the cost of preschool and wage growth for educators, disaggregating these main components and attempting to implement more innovative structures is a first step to rebuild the business model of early childhood education.
“The thing that’s going to change early childhood education is changing how we approach it at the level of the classroom and the programming,” Bateman said.
Amid economic uncertainties and a fragmented market, parents continue to struggle with pricey preschool services and educators are left underpaid, while the industry still struggles to ramp up capacity. However, Bateman believes with the right approach, improvements can be made.
“If you squint and you look at the industry as this is where it's at right now, it looks very dark. It's like there's a labor crunch,” Bateman says. “Education is very bimodal, it's hard to expand capacity, but if you step back and you say parents are really skeptical of existing institutions and people are hungry for something different, I think you can be a lot more optimistic and I think we will see changes in the next 10, 20, 30 years in this space.”