First published in Business NH Magazine, July 2, 2024

Access to affordable, high-quality early childhood care and education in NH is limited, in large part due to a shortage of child care professionals. In spring 2023, the NH Department of Health and Human Services reported a child care educator vacancy rate of 26%. Recent projections from NH Employment Security estimate an annual turnover rate of 17% among these workers between the second quarters of 2023 and 2025. That equates to about one in six workers transferring to another occupation, or exiting the workforce entirely, each year.

A Strained Business Model

In NH, child care tuition prices are rising. Child Care Aware of America’s most recent report estimates the average price of child care in 2023 for a NH family with an infant and a preschooler in center-based care was $31,868 annually. This is equivalent to nearly 22% of the median household income for a Granite State married couple with children, which was about $145,000 based on U.S. Census Bureau data from 2018 to 2022. This is more than three times the 7% considered affordable by the federal government.

Despite high tuition prices, child care business revenues often do not cover operating expenses associated with a high-quality program. Although child care programs have traditional business costs like payroll, rent or mortgage payments, utilities costs, and insurance, they also have educational costs. These added costs might include professional development for teachers, curriculum materials that create developmentally enriching environments, and adherence to maximum class sizes to help ensure child safety and program quality.

Unlike other businesses, child care providers are limited in the ways they can streamline or consolidate operating expenses. For example, a child care center may be unable to combine an infant classroom with a pre-K classroom due to space constraints or differing developmental needs of the two age groups. Additionally, child care businesses can only raise tuition rates so much before families can no longer afford the service.

To balance their budgets, child care businesses must substantially limit staff wages. In 2023, the median salary for a NH child care worker was roughly $32,500. This was only $2,500 more than the 2023 federal poverty guideline for a family of four, and approximately half of the 2023 median salary of NH’s kindergarten teachers, most of whom work in public schools. Additionally, child care businesses typically make small, if any, profits. In 2021, the U.S. Department of Treasury reported profit margins for child care providers were usually less than 1%.

Without enough early childhood educators, many NH child care programs have closed classrooms, reducing business revenues and further limiting the number of child care slots available to families.

Impact on NH’s Economy

In the short-term, children attending high-quality programs demonstrate improved school readiness in areas including math, pre-reading, and socioemotional skills that promote healthy social interactions. Estimates from a 2023 Tax Policy Center report suggest that for every dollar spent on pre-K programs for 3- and 4-year-olds in families with low incomes, there was a $4.20 return on investment when compared to non-participants from similar demographic backgrounds. Research indicates children who receive high-quality early childhood education often demonstrate greater educational attainment, higher earnings, lower rates of engagement with the criminal justice system, and reduced need for state and federal subsidies as adults.

From a workforce perspective, parents with child care can more actively participate in the labor force, increasing income for not only families, but also local businesses and the state. If child care is affordable, families have more funds to put toward wealth-building practices, such as saving for retirement or buying a house, as well as increasing spending at local businesses.

Continued Investments

Since 2020, nearly $161 million in one-time federal and state funds were invested into NH’s child care sector to stabilize the industry in response to the COVID-19 pandemic. The remainder of these funds, however, must be spent by September 2024 or they will expire.

Without additional, on-going investments, NH’s child care industry may destabilize, resulting in potential closures of child care programs and further exacerbation of the child care shortage.

Nicole Heller, PhD, is a senior policy analyst at the NH Fiscal Policy Institute, an independent, nonprofit, nonpartisan public policy research organization based in Concord. Learn more at www.nhfpi.org.