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The Price of Daycare

The Price of Daycare
 

We’ve had a number of conversations recently about the poor economy and how it has affected the “going rate” for child care. Many providers across the U.S. are experiencing low enrollment and few inquiries of potential clients. The calls they are receiving are primarily part time variable shifts that are not within the hours they are currently offering. Many providers feel they can’t stay in business without accommodating very part time hours and offering “discounted” rates for full time clients in order to attract and retain clients.

With unemployment being a pervasive issue in nearly every State the number of stay at home Mom’s have increased dramatically. These Mom’s are turning to child care as a way to make money from home while still caring for their own children.

When I first started caring for kids in my home it was common for the Mom’s to quit work to stay home when their third child was born. The money they could make working outside the home couldn’t cover the cost of three kids in care. In the late 1990’s and early 2000’s I began to see this trend when the second child was born. In the last two years, first time Mom’s faced with the prospect of paying for one child in care, are choosing to stay home and offering small scale child care to one or two families.

The net result is many more providers offering care and a significant decrease in children available. This influx of home child care workers and decline of children needing care has lowered the price of child care to average rates of nearly a decade ago.

In my state the rates for child care assistance families are now higher than the average rate for private pay. The state paid families with multiple children are now one of the most highly sought after subgroups of parents seeking care. Many providers are not able to fill their slots with private pay clients who are willing or able to pay at or above the current state rate.

Private pay parents are moving their children from licensed programs to informal child care settings. These options are less expensive and allow much more flexibility in core child care related services. Parents are able to negotiate longer hours for less money, decrease financial liability for deposits and notice, have markedly more say in specific policies of the child care, and much more leniency in the providers tolerance for policy violations.

Currently approximately half of our states allow providers to care for five or less children without licensing or registration. About one forth of the states allow up to four children without licensing and a forth of the states require licensing to do any non relative home child care.

With three quarters of our states allowing some version of unlicensed care without any safety standards or oversight we have a wide breadth of low priced care options. When we recognize that the requirements and start up costs for a child care business is very minimal and the regulations to maintain the business being nonexistent or minimal at best, we can see directly where the blunt of children end up when the economy takes a turn for the worse.

Providers who are licensed or registered have been in the business for a few years feel the competition from unlicensed and unregulated child care providers is the primary reason the overall rates for child care have plummeted in the last two to three years. There may be some truth in that but I see it differently.

I think the states intentionally keep these standards very low so that the low priced care unlicensed provider can enter the market when the economy slows down and unemployment rises. I think the plethora of new, unregulated, and cheap providers keeps the numbers of parents coming to the state to ask for assistance down. The lower paid provider cares for the children of parents who make too much to qualify for free or near free care and too little to pay for high quality care. The lower middle class, middle class, and even upper middle class parents are turning to these providers in record numbers.

It’s easy for established providers charging medium to higher rates for care to look at the lower priced providers as competition. Surely they set the lower bar of pricing but I think it’s misguided for us to look at them in relation to how they affect us. I think it’s a wiser approach to look at what they offer and the value of their services.

Even though parents may want higher end care for their children, the bottom line is that educated and experienced care givers, safe and healthy environments, and space come at a price. When money gets tight these are the attributes of child care that get compromised. The providers who are doing care for a couple of dollars an hour are valuable in this economy. In fact, I would venture to say they are the most sought after worker in child care today. There are way more parents out there looking for cheap care than there are parents looking for quality care.

Established providers are not going to lessen their space. They are bringing their experience and education to the table poor economy or not. They are going to continue their healthy and safe environment. There’s no going backwards with what you offer. Your current customers are paying for what you have to offer before the economy took a dive so unless you completely clean house and start over, it’s not realistic to lower your services.

Lowering rates for services and widening the time and variation of hours is what many providers are now resorting to in order to fill slots. That’s a natural response to the market. It’s not the best case scenario but for many providers it beats sitting with half of your child care empty.

There are a few things to keep in mind if you decide to lower your rates. One is that the incoming client doesn’t view the rate as a discount or a deal. They know from interviewing and checking the market themselves that the lower rates ARE the current rates. You can’t start a relationship thinking you are giving someone a “deal” when they see it as just the cost. Many view your lower fee as really high for what they want to pay for child care.

Your mindset has to change too. You have to come to the realization that in your business the overall value of your services has declined and the market for what you offer at your price point has dwindled. As in every other business, the market waxes and wanes. We are not immune to this because we take care of America’s greatest natural resource. We have to understand that the bad times come too and if you are in this for the long haul you have to accept that there are going to be blocks of time when the market floods with cheap and you have to figure out a way through it.

If child care is your long term chosen profession you have to accept that the very thing that allows most child care providers to easily open this business will come knocking at your door in the way of low priced child care competition in poor economic times. It goes both ways.

So coping with it means making some sound decisions. I advise not giving the super cheapo providers a second thought. They will come in and out of the business over the breadth of your career. I think a better investment of your energy is to really look at what you have to offer and see if there are any ways to trim the fat. Work harder on marketing yourself. Consider offering a niche service of education or health that sets you apart from the real competition. Consider flexibility in schedules that are more difficult to manage but may get you through this rough patch. If you do feel the only viable response to the market is to lower rates then lower them with your head held high and reset your mind to build back up from there.

Most importantly, take care of the families who take care of you. The people you work with now who are choosing you daily over the tempting cheap care  just around the corner, need to hear and see how valuable they are to you. Tell them thank you every single day. Do unexpected acts of gratitude that show them how much you appreciate them.

  1. Bridget05-10-11

    As usual, very well thought out.

    • Me06-15-11

      Really? I thought it was long and boring.

      • Stacey06-24-11

        Is it just me or are all your comments nasty and uneducated?

        • Me06-26-11

          Believe it or not, I’m actually a very nice person. This blogger just strikes me the wrong way. I’ll keep my opinions to myself if that’s how I’m coming off, because that’s not my intention.

          • Stacey06-27-11

            I would never ask anyone to keep their opinions to themselves. I would love to hear an awesome alternative if you feel what was said is somehow wrong. Don’t just tell someone they suck, tell them HOW they suck and offer something that would make them better? YKWIM? We are all here to share and learn.

          • torifees06-27-11

            Oh don’t keep them to yourself. You seem to be well versed and have well thought out ideas. Let’s hear them.

  2. ALS06-27-11

    Your article provided me with some great nuggets to add to my daycare staff meeting agenda this afternoon. THANKS!!!

  3. Birgit01-14-12

    Thanks Nan-

    As someone who left the business when things were good, and came back into it when things were not so hot, I appreciate this perspective!

  4. Stefanie03-26-15

    I really enjoy your articles, Nan. I know this is an old post, but I was wondering if your intention of this post is to correlate cheaper care with less quality care, or if I just read into that myself? I understand the idea of SAHMs who take a few kids for very little money and could be considered competition, as well as people who take in numerous children, regardless of ratios just to make money, but as a small time childcare provider, I offer competitive (market rate) prices and while I don’t have official academic childcare education, I find my 16 years in “the trenches” to be just as important (if not more)☺ This article just sort of made me think that you are only equating price wit quality and I feel that what you pay for daycare, whether high or low, has very little to do with how much quality you get out of them. Thank you for any response and again, I love reading your posts on these issues!

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