April 27, 2022

ICYMI: Warren, Child Care Provider, Small Business Owner, and Economist Call for Investments in High-Quality, Affordable Universal Child Care to Expand Workforce and Fight Inflation

Warren: “The American economy depends on working parents. And working parents depend on child care. But our child care system is in crisis, and that’s keeping parents out of the workforce, which in turn limits our productive capacity and contributes to inflation.”

“It’s critical that we invest in high-quality, affordable child care for every American family. It's going to lower the cost for those families and help make our economy more productive.”

Washington, D.C. – In case you missed it, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy, United States Senator Elizabeth Warren (D-Mass.) questioned witnesses about the importance of providing high-quality, affordable child care and how it will help get parents back into the workplace and fight inflation. 

During the hearing, witnesses, including Melissa Colagrosso, the owner and director of A Place To Grow Children’s Center in Oak Hill, West Virginia, highlighted the labor and cost challenges that child care providers and families face. “We have waiting lists for every age group, all the way from infants up through school age, some of those are months long. Regularly, on a regular basis, I have somebody call who has a job, new job to start and we can't help them, so they have to turn down the job,” said Ms. Colagrosso.

Economist Dr. William Spriggs spoke about how the lack of child care is holding back the economy – the economy is facing a labor shortage and millions of parents cannot get back to work because they do not have access to affordable child care. He highlighted how expanding the labor supply will help drive prices down and fight inflation.

Senator Warren called for the passage of Congressional Democrats’ child care proposal, which would give parents resources to afford child care, and give child care providers the funding they need to hire more workers and meet the demand for child care. 

Transcripts and videos from 3 rounds of Senator Warren’s questions below:

Transcript: Child Care and Other Policy Tools to Combat Bottlenecks and Inflation
U.S. Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Economic Policy 
Tuesday, April 26, 2022

Round 1 of Questions below and video HERE:

Senator Elizabeth Warren: So, I'm going to start with Round 1 on our questions. The American economy depends on working parents. And working parents depend on child care. But our child care system is in crisis, and that’s keeping parents out of the workforce, which in turn limits our productive capacity and contributes to inflation. Even before the pandemic, over half the families with young kids lived in “child care deserts,” areas where there just simply aren’t enough child care slots. Then COVID hit, forcing thousands of child care providers to close their doors – many of them for good. Today, when families can find a child care option, it’s often too far away, has a years-long waiting list, and costs more than mom earns anyway. That’s a big part of why, in America, women’s labor force participation is so low compared with other developed countries. And it’s getting worse. Today, women’s labor force participation is lower than it was two decades ago.

Ms. Colagrosso, you run a child care center in West Virginia. So, let’s start with a really basic question and then we’ll build on this. Why do people need child care? What are the main reasons that parents bring their children to you?

Melissa Colagrosso, Owner And Director, A Place To Grow Children’s Center - Oak Hill, West Virginia: Mostly, parents to child care because they need or they want to work. They want to provide a better life for their families so they may take on a second job, but they, they want to work or pursue a career, maybe open a small business.

Senator Warren: Yeah. 

Ms. Colagrosso: For employment reasons.

Senator Warren: So, these are people that are doing all the things we want them to do. 

Ms. Colagrosso: Yes.

Senator Warren: For both themselves, as a senator Kennedy says, to have the opportunity to work and contribute to our economy. But parents need child care because they want to work. If parents can and want to stay home to care for their children, that’s great. But many folks want and need to work to make ends meet, to save for a rainy day, to set aside money for their own kids to be able to go to college. But without affordable child care, parents, especially moms, have to make excruciating decisions.

Mr. Rowen, you described your glass decorating small business that you run. And I want to see some samples before we get out of here. I hope you have pictures. But you were describing and I just want to ask it as part of the, make sure we get all this on the record --what happens when your workers aren’t able to find a child care provider with an opening, or at a price that they can afford?

Walt Rowen, President of Susquehanna Glass Co. and Co-Chair, Small Business for America's Future: Well, it's an instant response. So the story I gave you of Lexus, my, she's one of my production supervisors, and her father in law who was the childcare provider for her. Lexi is one of my best employees: dependable, loyal, she's worked for me forever, but the minute something happens with her child care and, and we run a family business, and we say it's a family business in lots of ways and one of the ways that we say is that if you're a parent and your child is sick, your place is not here at work, it's at home. 

Senator Warren: Yeah.

Mr. Rowen: So, you go home and take care of your child. Now, that doesn't apply to everybody and it can't be a business model for everybody, but that's what happens when a parent, if a parent doesn't have a childcare alternative or an option, they can't work. 

Senator Warren: So they're just gone?

Mr. Rowen: Everything stops for them financially. It's a catastrophe for them and for the business because we have people that come in and need, fit different models that have to be produced. 

Senator Warren: Right, right. You have deadlines to meet.

Mr. Rowen: Absolutely.

Senator Warren: Dr. Spriggs, you’re an economist who studies the labor market. When workers have to cut hours, work part-time instead of full-time, or leave the workforce entirely because of child care, does that mean that a lack of affordable child care is reducing labor force participation? I just want to but all the blocks here,

Dr. William Spriggs, Professor of Economics and Chief Economist, Howard University and AFL-CIO: It absolutely does. And because women are half the labor force, even if we have only four percentage points of women's labor force participation, that's two percentage points more of the total labor force. That's a lot of workers. That's a lot of output. And that changes the equation even for the Federal Reserve in considering are we gonna take labor markets, should we start slowing the economy?

Senator Warren: So, so let me ask you on this cause I want to draw this point out about -- what is the broader impact on our economy, on our productive capacity when there's reduced labor force participation caused by a lack of affordable child care?

Dr. Spriggs: So, a couple of layers. One, we instantly, of course, have a smaller economy because we have fewer workers, that means that there are fewer people to put behind the machines, provide services. Second, once you short the economy, now is gonna grow from a smaller base. And then third, you have what the Fed has to consider. If Congress doesn't build the infrastructure to get everybody to work, then the Fed's hands are kind of tied. They have to slow the economy before we would want them to slow the economy. So, the length of our expansions become shorter, so we get a smaller economy, slower future growth and slower, smaller future economy, and we slow the length of our expansions. That's lose, lose, lose.

Senator Warren: And Dr. Spriggs, just so I’m sure, we're having just a little bit of trouble understanding you and I just want to make sure I've got this. How many workers are we leaving on the sideline compared to our pure country's, the ones that actually invest in child care? And what is the impact of leaving those workers on the sidelines on our GDP? Do you have some numbers around that?

Dr. Spriggs: There are a couple of estimates from anywhere from 1% of GDP to 1.5% of GDP. If you can think about Canada, to our north, where they do make the investments in their children that we don't, this means a much higher labor force participation rate for their women, anywhere from 2% would be a good estimate. And so we're talking about hundreds of millions of dollars that we are leaving on the table because we're not utilizing our workers to their maximum.

Senator Warren: So is the estimate, like I said, we're having a little trouble hearing you on our end is the estimate that about 5.2 million missing workers in America compared with other countries that provide child care assistance. Is that about the right number? And I think I heard you say one percentage point to a percent and a half in terms of the impact on the GDP. Do I have these numbers right?

Dr. Spriggs: Yes. And the 500,000 the we're, the number we're working that's kind of conservative because we're only looking at prime-age workers. And of course, a lot of women who need childcare are below the age of 25. And so we're missing some workers who are in the age group that actually need child care because their children are the youngest. So, that's a conservative estimate of how many workers we're missing compared to Canada. And I'm using Canada because it's right next door. We share the same sort of history timeline. And we have many of the same companies --

Senator Warren: Right.

Dr. Spriggs: -- many of the same industries. It just shows the difference we could have if we had the right policies.

Senator Warren: Wow, so think about that. That’s, that's really powerful, Dr. Spriggs. 5.2 million missing workers and we've actually graphed that here. And nearly one percentage point off GDP. And that percentage point really matters. You know, over the past decade, average annual GDP growth has been about 2%. One point higher compounds over time, and would mean a stronger economy and more opportunities for millions of people. Right now, Americans are getting hit by record shortages and price increases. It’s clear that we need to increase the supply of everything from food to cars to healthcare supplies.

So Dr. Spriggs, let me ask you one more question about this -- if we invested in child care and unlocked all of this labor supply and productive capacity, would that help prevent further inflation?

Dr. Spriggs: It will reduce the pressure for inflation in the future. And that's just being the cold-hearted view of the labor force. Economists know that investing in American children, all of the programs that we've had, have a high rate of return because in the future, they reduce costs on the government on the order of eight to nine times because the investment in the children also pays off. Those children are healthier. Crime goes down. They own homes. They're less likely to be poor and need government transfers. Those children are also part of the benefit of the equation.

Senator Warren: Oh, thank you very much, Dr. Spriggs. You know, we're talking about how without child care, millions of parents can’t work. I know this all too well. I nearly quit school and later I nearly quit my first big full-time job—all because I couldn’t find child care. I wouldn’t have made it without help from my Aunt Bee and thank you Aunt Bee, but not everybody has an Aunt Bee to make this work or a grandparent who's able to make all of it work. And that’s why it’s so critical that we invest high-quality, affordable child care for every American family. It's going to lower the cost for those families and help make our economy more productive. And with child care to unlock productive capacity, it's going to help prevent shortages and cut back on price increases across the economy. Thank you. I apologize to my fellow members here for going long, but I'm so glad to have these experts with us. Senator Kennedy.

Round 2 of Questions below and video HERE:

Senator Warren: – a series of questions I’d like to ask about if we can do that. One of them focuses on the provider perspective. So, we have talked about how child care is a critical pillar of our economy. It lets parents go to work, knowing that their babies will be cared for. For decades though, the United States has just under-invested in child care, essentially crossing our fingers and hoping that families will find a way to figure this out. But families can’t do it because as you have explained, Ms. Colagrosso, the numbers just don’t add up for parents. In many states, the cost of childcare outstrips the cost of college. Many parents are already out, priced out of childcare, which makes it cheaper for them to stay at home. And those parents who are scraping together enough money to pay for childcare simply cannot afford to pay another dollar more. Meanwhile, childcare providers are clearly not getting rich. The fees may choke parents, but they are barely enough for child care providers to make it from one month to the next. And one way that providers have kept this going is by paying childcare workers the absolute minimum that they can—not because they’re trying to be mean to childcare workers, but because it’s the only way they can try to hold this together. And the consequence is child care workers leave every year. Even before COVID, about 30% of childcare workers were leaving the field each year. Add this up, and we just have a massive shortage of child care that is getting worse and getting worse and getting worse.

So, Ms. Colagrosso, you’ve run a child care center in West Virginia for almost 30 years, I know that you know this issue. Are you able to serve all of the families who come to you looking for care?

Ms. Colagrosso: No. We have waiting lists for every age group, all the way from infants up through school age, some of those are months long. Regularly, on a regular basis, I have somebody call who has a job, new job to start and we can't help them, so they have to turn down the job.

Senator Warren: So, the need is vastly outstripping supply –

Ms. Colagrosso: Mhm.

Senator Warren: – in your area and we know the numbers show that’s true all around the country.

So let me ask the question, could you raise wages so that you could provide more childcare slots?

Ms. Colagrosso: Yeah, I'd love to raise wages, because ultimately that's, you know, the people that work for me deserve that, but I couldn't raise the wage of the subsidy that takes somebody a higher pay grade than me.

Senator Elizabeth Warren: Okay, so let me just stop, make sure everybody understands what you're talking about. If the family is of lower moderate income –

Ms. Colagrosso: Mhm.

Senator Warren: – and the pay the government, either state or federal government’s helping subsidize, that amount is already fixed. 

Ms. Colagrosso: Yeah, we don’t get to decide that amount. That’s a daily rate.

Senator Warren: That’s for us to do.

Ms. Colagrosso: A contract, right?

Senator Warren: Okay.

Ms. Colagrosso: And so, then if I had to raise the families that are outside of subsidy that much, I couldn't raise it enough to influence my employees' wages and still have people be able to afford it. 

Senator Warren: Right.

Ms. Colagrosso: People in our community would, would not even be able to afford child care at all, which is some of what you're seeing across the country.

Senator Warren: Right.

Ms. Colagrosso: People just say I can't afford it, so I'll just stay home.

Senator Warren: And let me ask you just one more, just to give us a little more flavor around this, how do the wages you pay compare with other entry-level jobs in your region?

Ms. Colagrosso: They're much lower, unfortunately. I can't pay as much as the Sheetz, that's a convenient store down the road. They're paying $18 an hour for entry level. Before the pandemic, I hired an entry level employee at minimum wage, which is 8.75 an hour in West Virginia. Now, just as Mr. Rowen mentioned that we have to offer a little bit more, so I'm offering $12 an hour, but I'm really not able to afford that, so when that relief money is gone, that won't happen. That's just because I have some relief money to get people in the door.

Senator Warren: So, working at a local convenience store pays more than you can afford to pay the people that are taking care of our children.

Ms. Colagrosso: Correct.

Senator Warren: You know, I think it’s clear that child care workers across this country are shamefully underpaid –

Ms. Colagrosso: Mhm. 

Ms. Colagrosso: – and the providers are barely staying afloat. The system is a broken system, and the only way it’s going to get better is if the government steps up. So, let me ask about one more piece in this. West Virginia has a preschool funding program.

Ms. Colagrosso: Mhm. 

Senator Warren: Ms. Colagrosso, that means you get significant government funding for one part of your business. So, does that mean that you can afford to pay those teachers more and you’re able to retain them?

Ms. Colagrosso: Absolutely. In West Virginia, we do a contracted collaborative program. So childcare and public school work together and so I do get that public education dollar and that goes directly into the staff, the employees. So, I pay that teacher and that aid equivalent to the kindergarten teachers in our county.

Senator Warren: And does that mean you have more teachers and less turnover? 

Ms. Colagrosso: Just for that classroom.

Senator Warren: Just for that.

Ms. Colagrosso: Right. Unfortunately, the others, infants and toddlers and 2-year olds and 3-years olds, they don’t see that additional funding, but my pre-K program does.

Senator Elizabeth Warren: So then let me ask it that way – what would it mean if you had federal assistance to be able to pay your staff equivalently for taking care of 3-months old babies or 2-year old toddlers?

Ms. Melissa Colagrosso: It would be an incredible improvement in the Child Care Program and the quality. The number one determiner for infants and toddlers of quality is the same person, consistency, low turnover. They need to make those bonds with the people that are caring for them and the families need those bonds, but infants especially and toddlers.

Senator Warren: Yeah. Thank you very much. Thank you very much for the work you do. It’s critically important work and I just want to see us support it as we go forward.

Round 3 of Questions and Closing Remarks below and video HERE:

Senator Warren: I would also like to follow up, if I can, Mr. Rowen. You were having a conversation with Senator Kennedy about, who seemed to agree, that child care is very important. But the question is, how do we pay for it? 

So I just want to ask you a little bit more about that. Mr. Rowen, in 2020, Google paid an effective tax rate of 13.5%. And in that same year, 55 other highly profitable giant corporations paid zero in federal corporate income taxes. So let me just ask: do you pay more than that?

Mr Rowen: Pretty consistently, yes. And, all small business people that are running a successful business and making profit will be paying a higher rate than the 13% that Google was paying. I think the –

Senator Warren: Or the 0% that the 55 are paying. 

Mr. Rowen: Right. The only way that makes any sense is if those corporations are virtually on the verge of going out of business and not making any money. But how are they doing that year after year after year. 

Senator Warren: Yeah. 

Mr. Rowen: I think there was a study by the SBA that pegs the average small business rate of taxation at somewhere around 19, almost 20 percent. So right there, with Google and average small business people, you’ve got, what, a 7 percent difference. That just doesn’t sound equitable to me and I don’t think, if most Americans would know those numbers, they would agree. 

Senator Warren: Yeah, it doesn’t sounds fair because it’s not fair. Exactly right. So, one of the proposals that Democrats have put on the table is a 15 percent minimum tax, just for corporations that make more than a billion dollars in profits, and that’s in their book reporting, right, not in how many loopholes they work through on this. 

It turns out that that would raise about 320 billion dollars. So let’s just hold that number, if I had Katie Porter’s white board, I’d put that right up here. And then I’d add under it, how much we can save if we actually invested in the IRS and the IRS could go after the wealthy tax cheats, not just poor people whose numbers don’t match up between their W2 forms and what they were able to report, where someone’s made a mistake. 

But if they actually spent their time on the folks who are engaged in the most sophisticated of the tax dodges, and simply enforced current law, not fancy changes in the law, best estimate on that from the Treasury Department is that would raise another 400 billion dollars over ten years. 

So 320 billion, plus 400 billion, gives us about 720 billion. I think the estimate that Senator Kennedy was using for the full-scale, all the way, permanent version, of childcare, was about 75 billion a year. So it looks like, to me, we’re not quite there on those numbers, but very, very close. 

Just on two things: enforce the current tax laws, and put a 15 percent minimum tax for the billionaire corporations, and we could pay for child care. And that’s without having to talk about how you pay for child care by increasing GDP by a percentage point, how we pay for child care, as Dr. Spriggs suggested, about 5.2 million new workers back into our economy. Mr. Rowen? 

Mr. Rowen: One of the things that I will say is different between a small business, businessman, businessperson, and corporate businessperson is I live and work and, and visual contact with my employees, all the time. I just know them, they know me. 

So I am much more invested in their personal lives, and understand the consequences of the decisions that I make, or that the business makes, as we go forward. Corporate people are not quite like that. Now, I’m not taking that completely away from them, but what you just talked about, if you had a minimum 15 percent to the corporations–

Senator Warren: More than a billion dollars, this is not your small business, yeah. 

Mr. Rowen: You probably will get pushback from the corporate people that run the business, but I will also tell you, that the corporate, that the people that work in those corporations would go, thank you. Because they will finally get the same benefits that we’re talking about, that filter down to all of our young families, that effectively would be benefiting from this change. 

Senator Warren: Well, Mr. Rowen, you give us the perfect way to wrap this up. This is about the role of the government in helping make this economy work for everyone. Right now, it works great if you’re a corporation that’s making more than a billion dollars in profits and paying nothing in taxes. But it’s not working so great if you’re running a small business and your employees can’t find child care. It’s not working so great if you’re trying to run a child care business. And it’s not working so great if you’re one of the parents who can’t get into the workforce, or can’t take a full time job, or can’t take an extra job, because you can’t find the child care to put you in a position to do that. 

And that is our job, here in Congress. We can do a lot better in making this economy work, not just for a handful at the top, but for everyone. I want to thank you all for being here today. I want to thank those who joined us online, for being with us. And, with that, senators who may wish to submit questions for the record, questions are due one week from today, Tuesday, May 3. 

For our witnesses, you’ll have 45 days to respond to any questions. Thank you all again. This hearing is adjourned.