Originally Posted by Myst_Seattle:
The need would still be there, but you won't have to wait for it. Just like you can always buy a plane ticket for Christmas, even if it costs a lot more than on other days. Likewise it is easy to buy a house in Seattle, although you need a lot of money to afford one.
Having a long waiting list means parents who both want to work full-time are unable to do so, even if they have the funds to pay for childcare. I personally know people who are struggling with this issue. Increasing the price would increase the profitability of daycares and make access to their services easier to plan for.
It is easy to demonstrate why this is true with an exaggerated example. Let's say you increase your daycare price to $100,000 per week. At those rates only someone like Bill Gates would be able to afford it and the waitlist would be gone. Obviously you can't charge $100k per week, but there is always a price point at which the waiting list would become minimal without hurting your profitability. In economic theory this is referred to as the "supply and demand" curve.
I completely agree that overregulation is the root cause of the daycare deficit! However that doesn't explain the business practices of daycares in the existing legal environment 
Ok, let's break this down into
real-world.
Your supply and demand theory is seriously flawed when it comes to this particular issue (waitlist) and this industry.
Let's pretend for a moment that Provider Amy does as you suggest and raises her rates- double what she currently charges. She lets everyone on her waitlist know that's what she's doing.
Likely, nobody on her waitlist will drop because they are not currently paying her that rate until they enroll. They will wait to make that decision until they know if they have a spot.
Provider Amy then lets her current clients know she's doubling their rate. For argument's sake, let's say 3/4 of them can't afford that and leave.
Amy then goes through her waitlist only to find that 1 of them will pay double fees.... she's not making any additional profit with this new fee.
She's lost 3/4 of her clients who used to pay reasonable fees and only gained one who pays more.
She's now working TWICE as hard in the future to find those clients who will fill those premium $ spots, because
those clients are few and far between. She also takes a higher risk when those clients leave for the inevitable name brand preschools (the spots will be vacant-making $0).
While those spots are vacant- insurance and utilities are still due, licensing costs money and zero is being contributed to her retirement funds.
Had she kept her reasonable fee, her clients likely stay longer in the long run (in-home typically costs less than centers and less than formal preschools), which means less turn over, less advertising, less effort and supplies used to fill vacant spots (that again- make $0). She would also be making a nominal fee from waitlists (IF she charges one) and again, working less to fill spots when children age out or leave.
Job security.
Sure, your waitlist may be gone but Provider Amy did not profit and works harder to find the $ in the haystack. You may think that "well, when the clients DO come, there won't be a wait for them". True. But Amy took a loss waiting for them.
There are so many behind the scenes intricacies of this business that so many outsiders don't realize.