politics

Covid-19 created a child-care crisis, and big providers aim to fill the void

Covid-19 created a child-care crisis, and big providers aim to fill the void

The biggest players in U.S. child care see an opening in America’s caregiving crisis. National operators such as KinderCare Education and Bright Horizons Family Solutions Inc. are buying up closed centers, reaching out to parents who lost care during the pandemic and signing contracts with employers to provide nannies and daycare for their workers. These big providers—with hundreds of centers across the country and thousands of employees—represent a sliver of the $40 billion-plus U.S. child-care industry. Some 95% of child care is provided by single-site operations and small local chains, industry analysts say. About 13,000 centers representing more than 20% of the nation’s child-care capacity, including those offering before- and after-school programs, shut down during the pandemic and haven’t reopened, KinderCare said in a regulatory filing. As many of half those centers may never reopen, industry analysts say. Many small players lacked the capital required to cover payroll and facility costs to stay afloat during Covid-19 shutdowns. Operating a daycare facility is more costly now than before the pandemic because many providers have had to reduce capacity to make room for more social distancing. Also, a shortage of workers has led to higher wages and more competitive benefits. Large providers have more flexibility to offer medical and retirement benefits, along with wages well above the $11-an-hour national average for a child-care worker. “The reality is that working families need full-day coverage, said Mark Bierley, chief executive of Learning Care Group Inc. based in Novi, Mich. Learning Care is the nation’s second-largest, for-profit daycare chain after KinderCare with 1,000 locations. Learning Care has grown largely by acquiring daycare centers, many of which were hobbled by the pandemic. “We are able to leverage an infrastructure that’s already in place to get working-family solutions, he said. Mr. Bierley said the chain increased the number of facilities it runs by almost 10% during the past year, acquiring 80 locations. It now has capacity to accommodate up to 150,000 children. Large providers face an uphill battle in efforts to consolidate the sector, some industry observers say. The business of child care, for now, is constrained by the number of caregivers and available classroom space. And many families are drawn to local or family-run operations because they prefer the familiarity and personal connection. Large child-care companies are telling investors that they will use their scale and access to capital to weather the pandemic’s impact. KinderCare, which plans a Nov. 18 initial public offering that could value the company at $3 billion, says that its size helps it offer more flexible options for parents and employers. For instance, the company said, it has a team devoted to helping families access public child-care funding, which can be complicated and time consuming. KinderCare reported revenue of $1.4 billion in 2020, down 26% from the year before, which the company attributed to Covid-related closures. Revenue for the first half of 2021 was $857 million, and the company swung to a profit after incurring losses the previous two years. Small companies are reeling, many kept afloat by increases in federal child-care funding during the pandemic. Around $50 billion in federal Covid-19 relief funding has gone toward child care since last spring, with the White House pushing for universal funding for prekindergarten and other child-care programs, as well as tax credits for businesses that build on-site child-care facilities. Owners of some smaller programs are staying afloat by putting payroll on their credit cards, but many lacked the funds to reopen after Covid-19 shutdowns, said Rhian Evans Allvin, chief executive of the National Association for the Education of Young Children, a trade group representing daycare and early-childhood-education workers. “When there’s no access to credit you have to try to weather a storm in a different way, she said, KinderCare and Bright Horizons have yet to return to their pre-pandemic capacity, and Bright Horizons on Nov. 2 said its recovery would take longer than anticipated because of a worker shortage. The fastest-growing piece of Bright Horizons’ business is providing backup care, which provides higher profit margins than a typical child-care business because it generally doesn’t require a dedicated facility and draws steady funding from employers. But a slower-than-expected return to in-person work has dented demand for worksite-based programs, another Bright Horizons mainstay. While the company has been working to expand its employer-funded child- care business, those programs remain relatively rare among employers. Roughly 1% of employers provide services such as backup child-care or on-site facilities, according to the U.S. Chamber of Commerce Foundation. Looking to get workers back, more employers are adding child-care funding to worker benefits. About 3.5 million mothers living with school-age youngsters lost their jobs, took leave or left the labor market when Covid-19 hit last year, Census Bureau data shows. A lack of child care kept Sarah Samuel home for months longer than she planned after giving birth to her daughter in the spring. Ms. Samuel intended to return to her job at an organic soap company in July, but despite $7,500 in child-care assistance offered by her employer, she was unable to find an affordable option. Her older daughter now attends a Montessori school, which she picked, in part, because it reopened for in-person attendance while public schools were still teaching remotely. She eventually found a part-time nanny. “I have a full-time job from home with part-time child care, said Ms. Samuel, 38 years old and from Oceanside, Calif. “Especially with Covid, those villages that we lean on are a lot more deteriorated so our child-care providers are more important than ever, yet also less accessible than then ever. Last year, as Learning Care reopened during the pandemic, it raced to outfit the bulk of its centers with cameras and Wi-Fi capability that allowed parents to watch their child’s class remotely. Many child-care centers no longer allow parents into classes or buildings as a Covid-19 precaution, a potential source of anxiety in cases where children are attending new schools or have switched classes. Before the pandemic, a few hundred centers were able to stream videos from their classrooms; now almost all have that ability, Mr. Bierley said. Download.

politics 2021-11-19 Livemint