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Lack Of Childcare Leaves Money On The Table

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POST WRITTEN BY
Becky Allen
This article is more than 6 years old.

Childcare. It’s far more than a women’s issue – or even a family issue. It’s a business challenge.

And, according to new data, providing childcare is also a potential boon for the bottom line.

A growing body of research documents the relationship between the availability of quality childcare and benefits to business, including reduced absenteeism, employee turnover, and productivity loss, as well as improved reputation and recruitment of skilled employees. The lack of access to childcare is also a major barrier to women’s labor force participation across the globe, contributing to a gender gap of 18 percentage points – a gap which, if closed, could add $12 trillion to GDP by 2025.

Why then is it proving challenging for businesses to offer childcare to their employees?

In part, the answer can be found in a mountain of hurdles facing businesses that do want to offer care for kids. For onsite daycare, a business must deal with the licensing laws, the liability, the upfront fixed costs of creating a child-proof space with appropriate toys and furniture, not to mention the ongoing financial investment in quality caretakers. Even providing subsidies to parents or reserving spaces in third-party daycares poses challenges – reduced influence on availability of care and hours of operation, for example – while costs may remain high.

But, as the International Finance Corporation’s (IFC) seminal report on Tackling Childcare shows, providing employees with childcare options – whether on or offsite – is good for business. The research holds true across regions, income brackets, and sectors.

Take the Bank of Tokyo-Mitsubishi UFJ, Ltd in Japan, for example. The bank experienced more than a four-fold increase in the number of new mothers who continued their employment following the bank’s investment in childcare services in 2007. Today, 90 percent of mothers remain at the bank. In comparison, 70 percent of all working women in Japan quit their jobs for at least a decade after having their first child. The change has produced an estimated $45 million in financial returns for the bank, completely covering its childcare expenses.

The effect holds true across the developing world, too. In Vietnam, for example, employee turnover at Nalt Enterprise, a textile producer, dropped by one-third when the company introduced an on-site kindergarten with extended hours in case employees need to work overtime. Nalt Enterprise calculated the cost of replacing and training a new employee to total about 85 percent of the annual salary of a single factory worker, meaning the kindergarten produced significant savings for Nalt.

In some cases, the savings from employee retention can be even greater. One analysis suggests that turnover costs could be as much as 213 percent of a worker’s salary for senior level jobs that require higher levels of education and more specialized training. These costs stem from increased errors made by new hires, loss of institutional knowledge, and lower productivity rates among colleagues who need to train the new recruit.

In addition to saving on reduced employee turnover, companies can boost employee productivity and lower absenteeism simply by investing in childcare services. In the United States, alone, employee absences stemming from childcare crises cost businesses $3 billion per year. Likewise, Red Lands Roses, a floriculture business in Kenya, saw a 25 percent decrease in employees taking unplanned leave to care for children within a year of opening a nearby daycare center. Significantly, the correlation between unplanned leave and productivity is strong: according to an analysis of 455 U.S.-based companies, unplanned leave results in higher productivity loss than planned leave. Specifically, unplanned leave causes 21 percent of productivity loss per day – meaning 21 percent of work either isn’t completed or is postponed – compared to 15 percent of daily productivity loss caused by planned leave. The difference largely stems from colleagues’ inability to cover work during unforeseen absences.

Finally, introducing a childcare option can improve a company’s reputation, helping it attract top talent in an increasingly competitive global playing field. According to a survey of nearly 10,000 adults from Brazil, China, Germany, Japan, Mexico, the United Kingdom, and the United States, more than 60 percent of millennials reported on-site or subsidized childcare as an important factor in a job. With 75 percent of the global workforce slated to be comprised of millennials by 2025, childcare benefits can offer a way for companies to attract and retain top employees.

The idea of employer-supported childcare is not new. Here in the United States, companies such as Patagonia have been providing childcare with positive returns on investment for decades, while the IFC’s Better Work program has proven the benefits in the developing world as well.

Still, despite the evidence, many companies – at home and abroad – don't yet offer onsite daycare or other childcare benefits, such as subsidies or reserved spots at nearby daycare centers. According to a 2016 report by the Bureau of Labor Statistics, for example, only 10 percent of employees in the private sector in the U.S. receive childcare benefits. Even Silicon Valley’s major tech companies such as Apple – which recently built a new $5 billion campus across 175 acres with perks ranging from a two-story yoga room to thousands of drought-tolerant trees – neglected to install a daycare.

Among Silicon Valley’s tech giants – and other well-endowed industries – lack of childcare may stem from lack of knowledge (or indifference) to strategies for boosting gender equality in the workplace. In other industries, the upfront costs or liability issues may scare companies away from reaping the well-documented benefits of employee-supported childcare.

But nevertheless, the bottom line remains: companies are leaving money and employee potential on the table by leaving childcare out of the equation.

 

Gayle Tzemach Lemmon contributed to this piece.