top of page

Understanding the Roots of America’s Childcare Crisis with Innovator Liat Krawczyk


For more than a dozen years, Liat Krawczyk has worked in economic development, building solutions to pressing social, economic, and tech infrastructure challenges. She is a vice president at the New York City Economic Development Corporation, where she heads economic mobility, including the Childcare Innovation Lab. The Lab leads research on child care as economic infrastructure and catalyzes public and private sector innovations that pave a more accessible and equitable future of care. Krawczyk’s work focuses on emerging industries, including cybersecurity, FamTech, infrastructure tech, and PropTech/FinTech data intelligence. She is also co-founder of The Jeneba Project, a nonprofit that runs an excellence high school for girls in Sierra Leone.


Krawczyk spoke with Carefully about the driving forces behind America’s child care crisis.


What are the root causes of America’s child care crisis?


When we hear about childcare on the news or in conversations, we often hear about four crises: a crisis of affordability, a crisis of supply, a crisis of wages, and a crisis of quality. But these are actually symptoms of the crisis. The root of the licensed childcare crisis comes down to providers’ lack of operating margins.


Lack of operating margins—say more about that.


At its core, childcare is a market failure. Even though households are paying a large percent of their income on care, that’s not enough to cover the actual costs of care. As a result, providers have very small—or no, or negative—operating margins, which leads to the larger crises we see such as supply, wages and quality.


Can you give an example of how this works?


If you want to start a childcare business, you will find it almost impossible to get a loan given thin margins and cash flow realities. You therefore may not have enough liquidity for unexpected needs like property repairs. In other words, it is hard to both start and maintain a childcare business, which in turn leads to a lack of supply. Razor-thin operating margins also result in an inability to pay staff, leading to abysmal worker wages.

“Here in New York City, childcare work is among the bottom five paid occupations.”

Here in New York City, childcare work is among the bottom five paid occupations. When wages are so low, you have turnover of qualified staff, and because there are not enough childcare slots, you have no ability to vote with your feet as a parent, so if you don’t like your daycare, you can’t just move to another one that you think is better quality. All that converges to create inconsistent quality of childcare.


Let’s talk solutions. Do we need to change our approach to solving this crisis?


If we want to solve the childcare crisis, we need to focus on the root issue of expanding provider operating margins. Any solution that doesn’t do that will not be sustainable—and will also rely on the underpayment of childcare workers, who are majority women, and primarily women of color.


What are some innovative solutions that might actually work?


For licensed care, we need to focus on the root problem of shifting operating margins. That means looking at supply (providers) and demand (beneficiaries of care, like employers, families, and government).


Okay, let’s break it down. First, providers.


The first thing we can do is make sure providers maximize their business operations. A lot of people who run childcare facilities have expertise caring for children, but not necessarily running a business. For example, they’re not maximizing the revenue they can get by filling vacant seats as soon as they’re open or aren't able to recoup uncollected revenue.

“When wages are so low, you have turnover of qualified staff, and because there are not enough childcare slots, you have no ability to vote with your feet as a parent, so if you don’t like your daycare, you can’t just move to another one that you think is better quality.”

Second, we can lower provider costs such as space via tax incentives, such as the ones being rolled out by the city, or experiment with alternative ways to build facilities such as modular construction solutions.


Third, we have to recognize that the majority of care facilities are for-profit businesses, so while we treat childcare like a public good, it is very often run as a private one. We need more thinking on innovative pathways to ameliorate the burden on these businesses, such as special tax credits or non-profit status for family childcare facilities that are sole proprietorships, so an owner of a daycare can pay themselves minimum wage—which they often can’t afford to do today.


What about the consumers? How do we make every beneficiary of child care become a better payer of childcare?


Let’s start with employers.


Employers increasingly are interested in supporting caregiver employees. But that’s not enough. There are clear barriers to implementation. First, there are few case studies on the return-on-investment for providing care support. Second, businesses don’t have a concrete list of solutions that can be tailored to different types of employees. Third, even once you identify options (providing after-hours care, securing daycare spots, supporting parent coops), who oversees it all? Most HR departments are overwhelmed—they need FamTech companies that can operationalize solutions. [FamTech refers to technology that supports families.]

Photos via Liat Krawczyk


To respond to some of these challenges, the Childcare Innovation Lab released an employer toolkit with concrete solutions, and held roundtables with dozens of New York City employers to talk them through how to address the above challenges. For example, employers say, ‘What am I supposed to do to support my overnight working caregivers?’ We’ll highlight interesting solutions, such as parent cooperative apps, which allow employees to work with a cooperative parent who might not be working those hours and share care.


In addition, New York State recently rolled out some really exciting policy measures, including an employer-supported tri-share pilot, in which businesses, families, and the government split the cost of care, new tax credits and abatements for employers, as well as a business navigator program.


Those cover businesses supporting working parents. What about solutions for families themselves?


Even though care is one of the greatest expenses for many households—oftentimes more than college and a mortgage—we don’t have financial instruments to help parents understand how to pay for care. Parents are relatively young and will make more money over time. But if someone drops out of the labor force early, the cost to that person is so immense, but they often don’t realize it.

“If we want to solve the childcare crisis, we need to focus on the root issue of expanding provider operating margins. Any solution that doesn’t do that will not be sustainable—and will also rely on the underpayment of childcare workers, who are majority women, and primarily women of color.”

Can we have reverse 529s? What about tuition assistance equivalence? A company pays upfront the liquidity for child care, and the longer you stay, the less you owe the company. They get retention and you get child care. We also want to provide an active marketplace to help parents—who often don’t know where to start to find care—understand who has spaces open, what they cost, and what their hours of operation are, which you basically can’t find today.


Here in New York there have been significant expansions of childcare supports, making families making up to 300% of the poverty line, or about $90K for a family of four, eligible to receive assistance. Families that qualify should apply to receive childcare assistance.


What is the role of FamTech in this?


At the Child Care Innovation Lab, we support growth of the FamTech sector. Many entrepreneurs are creating great backend solutions that help providers improve their business operations. Others work with employers to enable them to provide employees with care stipends that give families choice to pay both licensed providers as well as friend-, family- and neighbor-networks. This helps employees who work shifts create care cooperatives, or build childcare facilities at lower costs. In addition, entrepreneurs work to serve families directly by building marketplaces, which helps people navigate their options or manage childcare financial planning. A few also work closely with municipalities to help bolster their data and payment infrastructure. A lot of these companies are part of famtech.org where people can learn a lot more about these exciting developments.


Comments


bottom of page