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The cost for quality childcare while you work

The interview posted above is from SDPB's daily public affairs show, In the Moment with Lori Walsh.

What kind of public investments in early learning gather the best returns for all of us?

Today we're talking about the economics of early learning. Joining us for the conversation, we welcome Ben Horowitz, Marcy Drew, and Kayla Klein. Horowitz is project director of community development with the Federal Reserve Bank of Minneapolis. Drew is director of education with SDPB, Klein is director of Early Leaner South Dakota and also an SDPB contract employee.

The following op-ed was co-authored by Ben Horowitz and Monument Health.

Early childhood education benefits more than just South Dakota’s children and their parents. Investments in the state’s littlest learners benefit the state’s entire economy and society at large. When parents know they can choose a high-quality source of care for their children, they are empowered to pursue career opportunities while their children are more likely to thrive.

The Federal Reserve Bank of Minneapolis published a report last year on early childhood development in South Dakota. The report summarizes findings from the bank’s two decades of work to understand the public’s large return on investments in high-quality early childhood education for families with low incomes. It also highlights key data on South Dakota’s children and early childhood development ecosystem. For example:

- Most of South Dakota’s parents work and are a crucial part of the state’s employment base, with a labor force participation rate that outpaces parents’ in other states across the nation.

- Child care is expensive for many of these working parents, particularly for those with young children. Full-time care for an infant or toddler in a typical child care provider can cost from $5,200 to $8,700 per year, depending on a family’s location and the type of provider.

- Finding high-quality child care in South Dakota is difficult, partially due to the structure of the state’s licensure system and lack of a way to inform parents about child care providers’ quality of care.

- As of January 2022, nine counties have no licensed or registered providers. Most of the others have very few licensed seats relative to potential demand for high-quality child care.

Why are the Minneapolis Fed and Monument Health focusing on early childhood education in South Dakota? Both of our institutions have seen the importance of child care quality and access for our region’s parents and children. Sometimes we see it firsthand. For example, Monument Health’s workforce needs safe, accessible, and flexible child care options for their children while they go to work. Even with the employee child care benefits Monument Health provides, that isn’t easy to find.

And access to early learning is also important for Monument Health’s patients. High-quality early learning environments improve children’s immediate and future well-being by introducing them to lifelong healthy habits, important socioemotional skills, and a foundation for K-12 education.

The Fed’s work has tracked the financial returns on these benefits as they accrue to the public and found that they outpace gains made by the stock market. Children who receive a high-quality early childhood education are less likely to need remedial education. And as those children grow older, they are less likely to interact with the criminal justice system or access the public social safety net.

The public’s returns are highest when investments in early childhood education reach children who might not otherwise have the opportunity. For example, families whose parents have low incomes may not have access to an affordable, high-quality early childhood education. Quality is also important, and investments should support parents by reflecting their preferences and engaging them in their child’s development.

Unlike K-12 education, family tuition payments comprise most of the revenue in the child care market. While some parents succeed in finding an affordable quality option, many families face a lack of available supply or can’t afford the prices. And yet parents’ tuition payments barely sustain the market.

Child care providers typically operate on thin margins, and most child care employees in South Dakota earn $10 per hour or less. Low wages make achieving quality challenging as potential talented early childhood educators and care providers can earn more for less demanding work.

What can South Dakota do to better support their working parents, young children and economy? Economists, neuroscientists and health care professionals agree that understanding — and improving — the state’s landscape for its smallest residents is a critical first step.

Lori Walsh is the host and senior producer of In the Moment.
Chris is a producer for In the Moment.