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If Childcare is "Expensive" then Why Don't Daycares Make More of a Profit

  • 1.  If Childcare is "Expensive" then Why Don't Daycares Make More of a Profit

    Posted 05-28-2020 11:40 AM
    Everyday we here that childcare is "Expensive" and what we need is "Affordable Quality Childcare" available to everyone.  The assumption is that because childcare is "Expensive" and childcare employee wages are low, the childcare center owners must be making a huge profit.  The reality is just the opposite and the narrative needs to be changed.  The idea that childcare is "Expensive" is relative to where you live and the type of service the childcare center is providing.  In low income areas, childcare rates can run from $80 a week up to $120.00 per week depending upon the size of the center and the programs they offer.  Parents in those areas think childcare is "Too Expensive".  In middle income areas childcare rates can run from $120.00 per week up to $180.00 per week and parents in the areas think childcare is "Too Expensive".  In upper middle income areas and more affluent areas childcare can run from $200.00 per week up to over $300.00 per week and parents in those areas think Childcare is "Too Expensive".  So you get the picture?  No matter where childcare is provided, parents, academia, and politicians all say "Childcare is Too Expensive."  So if childcare is so "Expensive" why have so many childcare centers struggled to survive both before and now during the Covid Crisis.  The rates charged for childcare vary drastically based on the economics of where the childcare center is located and what the market can bare based on what parents are making.  Universally, all childcare programs whether they are home based, non-profit, or for profit have the same categories of expenses in order for them to operate their programs.  There are facility costs such as rent, utilities and maintenance.  There are labor costs such as wages, taxes, training and possibly benefits such as sick leave and vacation.  There is liability insurance and licensing fees, along with city inspection fees and other equipment inspection fees annually.  And there are supply fees that include equipment, curriculum and other educational materials for the program.  And if they provide meals, there are food costs and employee cost associated with that service.

    The cost of all of these elements, plus the licensing ratios that are allowed for each age group they plan to serve and how large or small a program they will have, go into determining what a center will need to charge per child in order to cover the expenses and still make a profit.  If a business,(for profit or non-profit) wants to sustain itself over time, it must bring in enough revenue to cover its expenses and make a  profit to build up its financial reserves to help it maintain during a downturn in the economy or during a disaster situation as we are facing now.  In the past childcare providers have only been able to charge tuition rates that the market can bare for the area they are in.  In order to do that they must strictly monitor and restrict their expenses, which means keeping labor cost low with minimum wage employees and little to no benefits, finding locations with low rent although the physical quality of the building may be sub par, providing very minimal training to their staff, have minimal supplies and equipment for their classrooms or participate is subsidized programs that dont fully reimburse them at their published rates and then have to right off the difference at a loss. If childcare providers charged what they should charge based on acceptable business practices in order to make a profit, then parents would really see a sticker shock of what they should be paying for childcare.

    As you look at the different economic areas where childcare centers are located, the expenses to provide the service tend to increase which is then reflected in the increase in rates.  And yet even those centers have not been able to make huge profits, because parents are only willing to pay up to a certain tuition point, before they too start to say childcare is too expensive.  So again, we need to change the narrative.  The narrative should be "It is expensive to provide quality childcare, so we need to determine if that is what the public wants and needs, and if so ,who should pay for it"? (Is it the parents, the tax payers or a combination of both?)

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    Tim Kaminski
    Director/Owner
    Gingerbread Kids Academy
    Richmond TX
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  • 2.  RE: If Childcare is "Expensive" then Why Don't Daycares Make More of a Profit

    Posted 05-29-2020 06:28 AM
    Good morning Tim,

    First and foremost thank you for sharing your thoughts around this subject. Now more than ever we as a community need to communicate the "True Cost of Care", to our parents, legislators and advocacy organizations. I am so perplexed at how long some organizations have been around with the same team members, yet there's no substantial change in the funds allocated on a state level or locally to support a "Worthy Wage" for ECE professionals. What steps do we take nationally to address this problem?

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    Latonta Godboldt
    Small Wonders FCCH
    Philadelphia PA
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  • 3.  RE: If Childcare is "Expensive" then Why Don't Daycares Make More of a Profit

    Posted 06-01-2020 07:02 AM
    Good Morning Tim:
    Thanks for sharing and educating. Continuing the discussion, below are my shared views:

    When it comes to childcare, varied options are ranging from custodial care to quality childcare. Similar to other services, there is a price range associated with each option. For this discussion, this response focuses on the business of quality childcare. When it comes to early childhood education programs, quality is critical. High-quality preschool gives children a strong start on the path that leads to a sustainable life choice of college or a career.

    The underline goal of all quality childcare programs is to build a solid early learning foundation to prepare children for school readiness, academic, and life success. Early childhood educators know the complexity of this building block, the resources, and the time and human capital required to accomplish the stated goal. 

    Let's take a quick look at the business of a quality early childcare program, the components of such a program, and its funding requirements: listed below are the fixed expenses to fund the building blocks of a quality program.

    Quality Child Care Fix Expenses:

    • Real estate and the cost associated with ownership or lease.
    • Furniture, equipment, and supplies
    • Daily operating expenses
    • Educators Salaries- Which in most cases are below industry standards.
    • Professional Development and implementation of best practices - Well-prepared/equipped teachers who provide engaging interactions and classroom environments that support learning. 
    • Curriculum- Early learning standards and curricula that address the whole child, are developmentally appropriate, and are effectively implemented. The last check on one of the QRIS recommendations for the basic package was over $2,000.00
    • Compliance with mandated state quality rating requirements.

     It's the early learning foundation on which all else is built, "Developmentally, the early years are the most important." Unlike the rest of the educational building process, this foundation is fragmented, underfunded, and neglected by our purse-string manager. Misinformed misguided managers lack the architectural knowledge of early foundational learning building for the nation's youngest citizens.

    What is the primary reason for childcare? Childcare supports working families and their children's development. Childcare is foundational to business and the economy. The user/beneficiary of childcare services is the one who should pay for the services. This concept is economics 101. This financial knowledge is the message that I would like parents to understand (I am a strong advocate that we need parents' active involvement.)  Businesses and our elected officials already know this. We need to educate parents to make informed choices when it comes to electing and holding elected officials accountable.



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    Monica Jackson
    Owner
    Jackson Child Care
    Springfield VA
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  • 4.  RE: If Childcare is "Expensive" then Why Don't Daycares Make More of a Profit

    Posted 05-29-2020 10:32 AM
    This has been very challenging for our small NEAYC accredited program.  Our program is almost 40 years old, but we are unable to offer health benefits, which is a big drawback to get the most highly qualified staff long term.  We are already at the top end of tuition in our area, competing with comparable preschool programs in the area which are not accredited, but tout that they have 'licensed teachers'.  Until COVID-19, we were working towards yearly pay increases for our staff, but, of course it is no where near that of an elementary school teacher.  At this point we are working hard enough to keep our jobs, let alone make them the high pay we deserve for the high quality education we put out.

    Thanks Tim for all you do to advocate for ECE!

    Gwyn Welliver
    Director
    Trinity Learning Ministry
    New Albany, IN

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    Gwyn Welliver
    Director
    Trinity Learning Center
    New Albany IN
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  • 5.  RE: If Childcare is "Expensive" then Why Don't Daycares Make More of a Profit

    Posted 05-29-2020 12:14 PM
    Thank you for sharing how most of us are feeling!

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    Cynthia Bohrer
    Director
    Kids International Early Childhood Education Cente
    Ellisville MO
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  • 6.  RE: If Childcare is "Expensive" then Why Don't Daycares Make More of a Profit

    Posted 05-30-2020 11:36 AM
    I do not know how much a daycare should be making in profits, but some daycares thrive while others do not. I recently worked in a daycare where our owner owned more than one site. We were also helped by an outside agencies that provided classroom  supplies, staff training, resources, and even parent supplies. In this situation,some of the expenses were covered. Also because of the sizes of the center, there was an expectation of better profits,(I can't confirm) but I saw some many corners being cut,that I really assumed that in this area , the budgeting is off ,probaly intentionally. So I beleive that proper budgeting, resource availabilty ,  and other factors can help a center be profitable.


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    Angie James
    P.O.Box 371
    South Holland IL
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  • 7.  RE: If Childcare is "Expensive" then Why Don't Daycares Make More of a Profit

    Posted 05-31-2020 07:54 AM
    Thanks Tim

    I agree that we have turn the narrative.  When you consider the costs at the other end of childcare (college) Early Childhood is very undervalued.  A metric I have used with parents/state legislatures is the average pupil cost to educate a child in the local school district.  If a school with a teacher ratio well above childcare needs to spend x then think about how much childcare needs to spend with lower ratios, longer hours, and critical, harder work.

    The argument about location justifying differences in tuition is tricky for me (yes there should be some difference in prices based on location) but this argument has been continuously used to underfund early education to our most vulnerable populations.  During this crisis our government is funding early childcare for healthcare / first responders at a cost of $1,650 per child per month.  Yes, the programs for single parents going back to work or school are funded at less than $600 a month.  The options available to those sets of parents are so vast and this perpetuates the opportunity gap.

    Annemarie

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    Annemarie Maini
    Director
    South Orange Country Day School
    South Orange NJ
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