OnsiteKids In the News: A $3.5B Problem in North Carolina

Michele Miller-Cox has run the gamut of child care models in the Triangle.

From a small family child care home in Raleigh to a teacher at the on-site child care center of SAS in Cary to her current role as executive director of First Presbyterian Day School in Durham, Miller-Cox has been in the child care industry for decades.

It’s an important issue for North Carolina, as having a robust child care infrastructure is essential to attracting and keeping talented young workers in the area. Experts and business leaders also say a strong child care system is a pivotal building block in educating and nurturing future workers.

No matter where she was, though, Miller-Cox said, several challenges remained consistent. Namely, child care professionals are paid terribly compared to other professions, and the low-margin industry hasn’t received much support from public- and private- sector entities to help recruit workers.

“Child care plays a huge role in the business success of this state,” Miller-Cox said. “Without child care, people can’t go to work. If the child care industry were to shut down for a day or two, the vast majority of workers would not be able to go to work. I just don’t think people really value that.”

North Carolina can rank poorly compared to other states.

• Per a January report from WalletHub, a personal finance company, North Carolina ranked No. 37 for states to raise a family. And much of that boils down to issues surrounding child care. More specially, the state ranks:

• 22nd in child care services per capita;

• 19th in child care quality;

• 38th in child care costs, adjusted for median family income; and

• 38th in number of child care workers per total number of children.

Parents are feeling the burden from the volatility of the industry. On average, it costs more for a North Carolina parent to enroll their infant in a child care facility in the state for a year ($9,480) than to enroll their kid at UNC-Chapel Hill ($8,998) or N.C. State University ($9,105) for a year.

And with child care centers closing at a dramatic clip – 592 facilities shuttered between December 2018 and December 2023, per data from the North Carolina Division of Child Development and Early Education – parents are left with a difficult choice: pay a fortune for child care, find alternative arrangements — or leave the workforce.

According to a February 2023 report from ReadyNation, a bipartisan nonprofit organization of executives, the North Carolina economy is losing $3.5 billion annually in lost wages, productivity and revenue from inadequate child care supply for children age 3 and under.

And it’s a concern both across the Triangle and one that ripples out to the counties across the state.

“My concern from an economic development standpoint is, if people start to weigh their options, we’re going to lose very qualified individuals in the workplace, and our employers are going to suffer,” said Linda Parsons, president and CEO of the Moore County Chamber of Commerce.

Ariel Ford, director of the North Carolina Division of Child Development and Early Education for the Department of Health and Human Services, said “we do not have enough child care in our urban areas, especially infant and toddler care.”

“For families who are coming to the community wanting to start raising their family – we don’t want one of those parents to have to leave the workforce for two, three or four years,” Ford said. “It is critical for us to address this now. It is now a problem, and as our state grows, it’s just going to become a bigger problem.”

Child care capacity and cost issues

One of the chief issues is capacity. Unlike in an elementary school classroom, where one teacher can run a class of 25 to 30 students, infants and toddlers require more individualized care – increasing the staff-to-student ratio.

For example, the state requires that for classrooms of children zero to 12 months old, there can only be five kids for every teacher, and only 10 kids in a classroom. And to be considered a 5-star licensed center – the top recognition for quality in the state – the ratio drops to 1:4 for that age group.

Obviously, being able to take in less students leads to less revenue for child care centers. And it has contributed to what Ann Hentschel, director of early learning for The Hunt Institute, a nonprofit group based out of Cary that focuses on education reform, calls a “trilemma” for the industry.

The trilemma, as the name implies, focuses on three interrelated areas for the child care industry to succeed: quality, availability and affordability. The difficulty is providing all three at once, Hentschel said.

“Historically, the reason why we’re in this child care crisis right now in North Carolina and nationwide is because the infrastructure for early childhood has been a fractured, broken system that has been subsidized on the backs of those working for those children and families,” Hentschel said.

The average salary for a child care worker in North Carolina is $12, according to the latest data available in 2019. For context, the minimum starting wage to work at Walmart is $14, and there are far fewer education and training requirements to work at the big-box retailer.

Pay might soon become a bigger issue.

After the passage of the federal American Rescue Plan Act in 2021, North Carolina distributed funds to thousands of child care centers to help offset the pandemic’s impacts. Around 4,540 North Carolina child care programs received more than $1.01 billion in stabilization grants, per data from the N.C. Division of Child Development and Early Education. And most centers used that to increase teacher wages, according to a March 2023 survey from the N.C. Child Care Resource & Referral Council.

But those funds were set to run out at the end of last year. And while the North Carolina state legislature voted to extend funding through June, it ultimately did not pass a $300 million earmark endorsed by a bipartisan coalition of representatives to keep funds going through June 2025.

Thus, if the legislature does not pass a stopgap measure to extend these stabilization grants during its session starting in April, child care centers may have to decrease teacher’s wages, according to state Sen. Jim Burgin, a Republican from Harnett County who is the co-chair of the state’s bipartisan Early Childhood Caucus.

“When you give somebody a raise, and now they’ve had it for two years, you can’t take it away,” Burgin said. “We can’t go back in and say, ‘Oh, sorry, the federal money ran out and now you’re going back to your previous wage.’

“That will cripple the child care industry. We have to do something.”

Losing potential employees due to lack of child care

In a move most businesses in the area cannot financially pull off, SAS and communications technology company Bandwidth (Nasdasq BAND) offer on-site child care for their employees in the Triangle.

But for smaller businesses operating at the margins, and for more rural outlying counties that don’t have a SAS or Bandwidth, though, on-site child care isn’t an option.

And business leaders are worried this will hurt the ability to recruit workers.

“I believe the further east (in North Carolina) you go, for the most part, the more difficulties you have to attract people to stay there, to work there, to live there,” said David Farris, the CEO of the Rocky Mount Area Chamber of Commerce.

“We have some really great smaller daycare centers in Rocky Mount, but capacity is limited. And as we grow the industry here, we’ve got to be able to handle an influx of families that are coming here and be able to have that child care.”

Nash County is one of the few outlying Triangle counties whose populations shrank between 2010 and 2020, according to estimates from the U.S. Census Bureau. Though the number has risen in recent years, the population dipped from 95,840 residents to 94,970 residents that decade.

Ensuring Moore County employees and residents have high-quality child care in the county is also a focus of Parsons. When she and her husband moved to the county in 2004, the average age was in the 60s, per Parsons. But as younger people have moved into the county, that average age has dipped to 44.

 “So one would assume that demand has increased for care,” she said.

But Moore County has also seen a decline in centers, dropping from 70 in December 2018 to 63 in December 2023, per state data.

The problem has persisted in urban cores, too. Wake, Orange, and Durham counties have collectively lost 56 sites in that same five-year period. But the need for care has only grown.

In those three counties, 70 percent of kids who are under the age of 6 live in a household where all their parents are employed, according to data from the Child Care Services Association, a group based in Chapel Hill and Durham that advocates for high-quality and affordable child care. Yet roughly only 45 percent of that group – 33,633 of 75,414 – are enrolled in licensed child care programs.

Ford, the director of child development and early education, said child care infrastructure is equal to housing in its importance for continuing population growth in and around the Triangle.

“We are going to have to have places for people to live in and places for the little ones to go during the day or during the afternoon while there are families or at work,” Ford said. “So it is absolutely imperative.”

Durham leading the way for child care

Well before the pandemic, Durham County put together an early education task force to focus on the county’s youngest residents.

Out of that came an initiative Durham still touts today: Durham PreK, a no- to low-cost collaborative that helps provide education to all 4-year-olds in Durham County. It is one of a handful of programs in the state that provides universal preschool. 

The county uses braided funding from federal, state and local funds to help enroll students in preschool – both in Durham Public Schools and other facilities.

Through the program, families below 400 percent of the federal poverty level do not have to pay a cent to participate in the Durham PreK program. Meanwhile, families at or above 400 percent of the federal poverty level participating in the program pay a monthly calculated at 2 percent of the family’s gross monthly income.

County Commissioner Wendy Jacobs, a former elementary school educator and chair of the county’s Board of Commissioners from 2016 and 2020, helped lead the charge for Durham PreK in 2018. Durham County has invested $10 million annually into the program, which as of December 2023, creates 653 funded seats for PreK classrooms in the county.

“About 10 years ago, we had a child poverty rate that I believe was about 24 percent, which is astounding in a community like ours that has so much opportunity and wealth,” Jacobs said. “The latest data is that we have a 19 percent child poverty rate, which is still unacceptable. … For me as a county commissioner, I have to think about what is the most effective use of the money that we have. And so one of the answers is investing in early childhood education.”

Linda Chappel, one of the architects of the plan and a senior vice president at the Child Care Services Association, said that unlike other counties and municipalities relying on temporary funding, “Durham is unique in that from the very beginning — the investments were part of the actual county budget and were planned for to be recurring expenses.”

So if no additional state or federal funding comes Durham’s way for child care, its universal preschool program will continue to exist. Chappel said the eventual goal is to create enough preschool seats available through the program to accommodate 75 percent of the county’s 4-year-old population. Currently, it can accommodate roughly 47 percent, Chappel said.

Additional capacity is soon coming to the county. As part of a redevelopment of a building in downtown Durham at 300 E. Main St. that will include 105 affordable housing units, the county is seeking a company to lease and operate a child care center on the first floor that will serve approximately 86 students. Durham County has set aside $100,00 to help build out the facility.

Chappel said these types of investments have made Durham County, whose population has increased by more than 55,000 between 2010 and 2022, an attractive place to live.

“Durham clearly can demonstrate progressive thinking around how we can invest so that our community is better,” Chappel said. “And people see that. That’s why they come here. They see opportunity.”

Searching for solutions to the child care crisis

Durham isn’t alone in trying to brainstorm solutions.

Burgin, the state senator, is challenging North Carolina’s 58 community colleges to provide child care – only 14 are doing so at the moment, he said. Farris, of Rocky Mount, said businesses should consider making child care subsidies an option through a cafeteria plan, or employee benefit plan that allows staff to choose from a variety of pre-tax benefits.

And Parsons, from Moore County, helped conduct a child care survey last summer that collected responses from hundreds of employees to learn more about their child care arrangements. In that survey, roughly 250 employees indicated child care issues have caused them to call off work.

“We’re focused on educating the employers on different ways they can support their employees, whether it’s providing them with a list of child care centers that have availability or talking to them about programs,” Parsons said. “There’s a lot of different things that an employer can do. It doesn’t necessarily cost them money.”

At the state level, North Carolina is launching a pilot of a “Tri-Share” program, modeled after a public-private program in Michigan. Through the pilot, three regional hubs — Moore, Cleveland and Martin/Pitt counties — will split $900,000 in funding from the state as employers, eligible employees and the state split child care costs.

“It’s still relatively new in Michigan and a few states that are using it,” said the Hunt Institute’s Hentschel. “That being said, my understanding is it’s a real game-changer.”

Meanwhile, others in North Carolina aren’t waiting.

Carmi Medoff, a Greensboro native and Duke University graduate who currently lives in New York, founded a startup in 2022 called OnSiteKids, which is focused on developing and operating on-site child care centers for front-line workers.

“We are very much attempting to bring a high-quality solution at an affordable cost to a whole new swath of parents that have never received this sort of benefit,” she said.

Medoff said the company is focused on building modular child care centers, allowing for easy transportation and less capital investment from companies. 

She adds the group is close to announcing pilot partners for the model, and that she is in discussions with companies in North Carolina.

And Medoff said two major employers coming to Chatham County – electric vehicle manufacturer VinFast (Nasdaq: VFS) and semiconductor maker Wolfspeed (NYSE: WOLF) – should be considering on-site child care centers as a benefit for employees.

“On-site centers for manufacturing, particularly for VinFast and Wolfspeed, are no-brainers,” Medoff said.