What is the child care cliff? Its effect on families and caregivers, explained

For many families, securing quality and affordable child care is an uphill battle. Today, families spend, on average, 27% of their household income on child care expenses. Meanwhile, many daycare providers continue to struggle with staffing issues and budget constraints exacerbated by the pandemic. As if parents and caregivers need more stress, the complex child care landscape is about to contend with a new hurdle: As of September 30, 2023, the U.S. will face a steep dropoff in federal child care funding provided under the American Rescue Plan during the pandemic. 

“The funding that stabilized the child care sector is going to expire at the end of the month unless Congress acts,” explains Julie Kashen, a senior fellow and director for women’s economic justice at The Century Foundation. “Our research shows that the drop off in federal investment will put 3.2 million child care slots at risk, as providers are forced to raise their tuition and fees, close classrooms or close down altogether.”

This “child care cliff,” as it’s being called by experts, is projected to have far-reaching impacts for parents, the economy and the child care industry as a whole. According to Care’s new Child Care Cliff Survey, 81% of parents say they’ve heard of the child care cliff, but only 21% actually know what it means. Yet, upon learning more, 92% of parents noted that they are concerned about this impending crisis. New legislation has been introduced to prevent the worst effects, but it needs congressional support. Here, all the details about the imminent child care shortage and what experts say parents and child providers can do to take action.

What is the child care cliff?

In short, the “child care cliff” is the term being used for the abrupt end to pandemic-era funding that has kept thousands of child care programs afloat nationwide. In 2021, Congress passed the American Rescue Plan Act (ARPA), a $1.9 trillion federal emergency relief bill that included what Kashen calls “a historic and unprecedented federal investment to stabilize the child care sector.” 

The plan allotted $24 billion to aid child care programs in covering basic operational costs, program materials, wages and benefits. “It reached more than 220,000 providers, helping them keep their doors open and keep the children they serve safe, healthy and nurtured,” explains Kashen.

Now, without further congressional action, the support allotted by the American Rescue Plan is set to expire, and with that funding dropoff comes dire consequences. In addition to millions of children potentially losing their child care spots, a recent report by The Century Foundation finds:

• The child care sector could lose more than 200,000 jobs.
• Millions of parents will be forced to leave or change jobs or reduce work hours to manage care for their children.
• Lost tax and business revenue could cost states $10.6 billion in economic activity.

“When parents can’t find or afford child care, not only is it a challenge for their family, but it impacts the whole economy,” points out Kashen. “Many parents — especially moms — will be forced to cut back their hours or leave the workforce entirely, and we will be worse off for it.”

According to the Child Care Cliff Survey, parents anticipate the impact will include: 

• Children being denied care (55%). 
• Fewer spots available for new children (50%). 
• Fewer resources for children (48%). 
• Daycare layoffs or staffing changes (47%). 
• Rising daycare rates (40%). 
• Complete closures (36%).

How many child care centers are closing?

While there won’t be a single, sudden mass closure of daycare centers, the Century Foundation predicts that more than 70 thousand child care programs will permanently close. The number of licensed child care programs could be cut by half or more in Washington, D.C., as well as in the following five states:

• Arkansas
• Montana
• Utah
• Virginia
• West Virginia

Additionally, the number of licensed programs could be reduced by one-third in at least 14 other states. 

Unfortunately, there’s no surefire way to tell exactly which child care programs will be impacted by the child care cliff. An interactive map created by The Century Foundation shows state-by-state how many programs could close and how many children are projected to be left without care.

Of parents polled in the Child Care Cliff Survey, 53% of parents have received communications from their daycare about the childcare cliff with nearly 24% reporting that their daycare may have to close and 31% being told definitively their daycare will be impacted. And should their daycare close its doors, only 28% of parents have an alternative childcare plan in place.  

“It won’t happen all at once, and in some states, state funding is going to help mitigate some of the risks, but we expect over the next year that the impacts will be felt across the nation,” says Kashen.

How will this child care crisis affect U.S. families?

Given that child care is essential for the majority of families with young kids, a dropoff in funding for these programs will have serious and far-reaching consequences for many working parents. 

Child care will get more expensive

“We expect that child care providers will do their best to stay open as long as they possibly can,” says Kashen. “Many will likely raise rates before closing down.”

The U.S. Department of Health and Human Services (DHHS) classifies child care as “affordable” when it costs no more than 7% of a family’s household income, yet 67% of parents surveyed in the 2023 Cost of Care report say 20% or more of their household income goes towards child care. The looming child care cliff could increase that cost burden as care providers struggle to make up for missing program funds by raising rates.

In the case that a family’s daycare shutters, 87% of parents expect they will spend even more on child care, according to the Child Care Cliff Survey. In order to afford the increase, 57% say they will take on extra work or start a side hustle, 54% will cut back on spending and 51% will dip into savings.

Child care will be harder to find

“If funding goes away, parents are going to be looking at a loss of slots for their children in child care,” says Karin Swenson, the executive director of Meadow Park Preschool and Child Care Center in Rochester, Minnesota, and a member of Kids Count On Us. 

These losses will not only be caused by centers and programs closing, but also by the lack of funds available to recruit and retain enough child care workers at livable wages. “In many states, I know already of child care centers closing, of family child care providers leaving the workforce,” notes Swenson. “If we don’t have the staff and the teachers to be doing this important work, we don’t have a system, and then, where are children going to go?”

In the Child Care Cliff Survey, more than half (67%) of parents say it will take at least a month to put new child care in place. 

Parents will struggle to stay in the workforce

The pandemic brought record numbers of job losses, and parents — especially mothers — left the workforce by the millions. And while the number of working women rebounded to an all-time high in June, the child care cliff threatens to cause yet another employment crisis. 

Parents of the 3.2 million kids projected to lose their child care spots may be forced to change jobs, work fewer hours or stop working entirely, says Kashen. 

This echoes results of the Child Care Cliff Survey which found parents whose daycare is closing are willing to look for a new daycare (81%), pay more for the services they need (75%), rely more on family (71%) and shift their work schedules (70%) before making the decision to leave the workforce. Still, 51% of parents say it’s likely they will ultimately have to quit their job to provide care for their children.

How will the child care cliff affect the care workforce?

A large majority of daycare workers (83%) report having heard about the child care cliff, according to the Child Care Cliff Survey, and 91% are concerned. That’s no wonder, given that the child care sector is already one of the slowest to recover from the impacts of the pandemic. 

While many sectors have returned to pre-pandemic employment levels, the number of child care workers is now 4.8% lower than it was in February 2020. Fewer care workers means daycares are unable to take as many children and enrollment fees rise.

When we reach the child care cliff on September 30, the child care labor shortage is likely to get even worse. An estimated 232,000 child care positions could disappear, many of which are disproportionately held by women and women of color, according to The Century Foundation.

In fact, in Care’s Child Care Cliff Survey, 34% of daycare workers know for certain that their daycare will be impacted.

Early childhood educators are historically underpaid, with a median wage of just $13.71 per hour. Swenson, who runs a nonprofit preschool and child care center, says 93% of her current budget goes towards staff pay, and still “the average wage here is only a little over $14 an hour.” As she explains, a dropoff in child care funding will only exacerbate the problem by cutting wages even further and making it impossible for providers like her to recruit more staff or to retain the workers they have. 

Daycare workers are anticipating these pay cuts (74%) as well as having to file for unemployment (74%) and leaving the care workforce altogether by finding a new job in a new profession (71%), according to the Child Care Cliff Survey.

“It’s on our shoulders,” says Swenson. “And, because we’re women — and many times women of color — we are expected to keep going, but if we don’t have a workforce, we will not have child care for people.”

What can parents do about the child care cliff?

If you’re worried about the status of your current child care program, you can meet with your provider to discuss how care may change in the coming months. There are also several steps you can take to advocate for improved child care benefits at work and nationwide. Here’s what experts suggest.

Support the Child Care Stabilization Act

Congress acted once to stabilize child care, and they have the power to create long-term solutions. Earlier this month, several congressional leaders introduced the Child Care Stabilization Act to help stave off the worst impacts of the child care cliff by providing $16 billion in mandatory funding for the next five years. Now, it needs support to pass. 

“Let your congress members and your senators know that you care about child care and tell them how losing child care would impact your family and your business,” advises Kashen. “If you are seeing child care price hikes or closures in your community, share those stories.” 

Contact your state legislators

While federal legislation is vital to addressing the national child care crisis, it’s important to work with local leaders as well, says Swenson. In Minnesota, Swenson and others were instrumental in getting historic legislation passed to fund child care in the state, including $600 million to retain quality child care workers.

“We put emails together to send to leaders, we went to the state capitol, we sent over 8,000 postcards,” says Swenson. “The more people you get involved, the more power you gain.”

When you call or email local leaders, Swenson says to be vocal about two points:

• No family should pay more than 7% of their income towards child care costs.
• Child care providers in your state must be guaranteed a living wage.

For more information on how to get involved, you can visit the Early Childhood Funders Collaborative or the National Child Care Association.

Advocate for employer child care benefits

“The challenges of the COVID-19 pandemic for parents were exacerbated by the lack of a publicly supported care infrastructure or family-forward workplace policies — policies that support caregivers to both provide and care for their family members,” says Kashen.

As we face the child care cliff, it’s vital for employers to implement policies that reflect the needs of their employees and support parents in finding and paying for the child care programs and providers that allow them to be at work in the first place. In addition to contacting government leaders about child care policies, become an advocate within your workplace as well.

Fight for long-term solutions

While U.S. families need leaders to act in the short term to avoid the child care cliff and prevent a national child care crisis, there is also a dire need for permanent solutions. According to experts, these include:

• Increased wages and guaranteed benefits for child care providers.
• Programs to train, hire and recruit quality early educators.
• Investments to increase the number of programs available, especially in child care deserts.
• Policies for families that permanently address the cost of care.

For this reason, it’s not enough to simply call legislators during a crisis. We also need to vote for leaders who prioritize child care and demand policies that support the changing needs of working parents, says Swenson.

“For decades, the U.S. has left families to ‘DIY’ child care without creating the structures to support them to both work and parent,” adds Kashen. “At the height of the pandemic, Congress acted, and the policies made a huge difference in supporting children, families and the child care sector. The problem is, it was never only a pandemic-era challenge; those challenges have long been here and long been felt.”

Alternative child care solutions for families

As leaders work toward long-term solutions to the child care cliff, the child care landscape may look different. More skilled child care workers and early education specialists will be in need of work, and there could be new opportunities to start careers in nannying or provide in-home care. Additionally, parents will need more readily available care alternatives, such as:

As parents search for alternative care options, work-sponsored, backup care programs, such as the ones offered through Care for Business, provide a solution by connecting them to in-center child care, as well as in-home options at low or no cost to employees. Working parents may want to consider advocating for a backup care program like this in their workplaces. 

The bottom line

The ARPA provided vital funding to the child care sector during a crisis. Now, as that funding expires, American families need permanent solutions to avoid the loss of vital child care spots and to support the child care providers whose work makes it possible for children, parents and the economy to thrive. Parents can help prevent the child care cliff and join the movement to rebuild the child care sector by:

• Supporting the Child Care Stabilization Act.
• Talking to their employers about expanded care benefits.
• Calling on both state and local legislators to address the problem. 

The majority of Americans already support child care reform. The child care cliff is an opportunity for U.S. leaders and employers to re-invest in the child care system and to create policies that support working families, including those who work within the child care sector itself.

“Building a comprehensive child care and early learning system is possible, necessary and popular,” says Kashen. “When children have high quality child care, they’re healthier and able to thrive. That isn’t something that should be reserved for the wealthy few. If we believe in the American dream, we should believe in giving every child a shot at it, and that starts, literally, with child care.”

Child Care Cliff Survey Methodology: 

Care.com’s 2023 Child Care Cliff Survey surveyed two samples. Sample A was 1,000 U.S. adults from September 14 to 16, 2023. All respondents are parents of children under 15 years old who currently use child care services at either a daycare center or in-­home daycare, confirmed by both consumer-matched data and self-­confirmation. Sample B was 600 U.S. adults surveyed September 14 to 17, 2023. All respondents are currently employed for wages as professional childcare providers at either a daycare center or in-­home daycare, confirmed by both consumer-­matched data and self-­confirmation. DKC Analytics conducted and analyzed this survey with a sample procured using the Pollfish survey delivery platform, which delivers online surveys globally through mobile apps and the mobile web along with the desktop web. No post-­stratification has been applied to the results.