This story was originally published by The 19th.
In the midst of federal efforts to expand the child tax credit and provide paid family leave, states are now turning to private employers to help bridge the gap for working parents by focusing on child care benefits.
According to the National Conference of State Legislatures, 17 states currently offer child care tax credits to employers who either operate or contract out child care services for their employees. These states include Arkansas, Colorado, Connecticut, Georgia, Illinois, Iowa, Kansas, Maryland, Mississippi, Montana, New Mexico, New York, Oregon, Rhode Island, South Carolina, Virginia, and West Virginia.
Eric Syverson, a senior policy specialist at the National Conference of State Legislatures, noted a growing bipartisan consensus at the federal level to support parents and families in need of child care services through tax code adjustments. This renewed focus has led many states to consider enacting their own measures to benefit from federal increases in tax credits.
Despite the popularity of these tax credits, a relatively small percentage of companies actually take advantage of them. High startup costs for child care facilities and a lack of awareness among larger businesses are among the reasons cited for this low participation rate. According to the Bureau of Labor Statistics, only 12 percent of all workers had access to child care benefits through their employer in 2023.
One company making a positive impact in the child care space is Upwards, a child care marketplace connecting families with providers. By partnering with employers, Upwards helps match employees with suitable child care options, offering a more cost-effective solution compared to building on-site facilities. Additionally, data insights allow Upwards to tailor child care benefits based on employee needs, such as providing backup care credits for non-traditional hours.
Jessica Chang, the co-founder and CEO of Upwards, emphasized the importance of collaboration between employers, government entities, families, and child care providers to address child care challenges. She sees child care benefits as a crucial employee perk, likening it to health insurance and advocating for long-term solutions rather than temporary patches.
While federal progress on child care policies has been slow, there have been recent bipartisan efforts to encourage companies to support their employees’ child care needs. The CHIPS and Science Act, passed by Congress in 2022, allocated funds for companies providing child care facilities along with expanding semiconductor operations. This initiative highlights the consensus among lawmakers of all political affiliations to address the child care crisis.
However, some experts caution against relying solely on employer-sponsored child care as a solution due to equity concerns. Elliot Haspel, a senior fellow at Capita, advocates for a publicly-funded child care system to ensure accessibility and affordability for all families. He points to states like Vermont that have successfully implemented employer-based taxes to support child care initiatives.
