Report: Post-COVID-19, Child Care Industry Revenue Up, In Part, by Federal Funds Infusion

In the face of a rapid and outsized decline in revenue triggered by the pandemic, the US child care sector demonstrated strong perseverance against significant challenges. Revenue for the industry reached $68.5 billion in 2022, of which 86% represented revenue from center-based care. However, the economic impact varies greatly within and across states.

That’s according to a new report from the Committee for Economic Development (CED), the public policy center of The Conference Board, examining the child care sector’s response to COVID-19 and its overall recovery.

Revenue in the child care sector declined 36% in Q2 2020, in the early days of the pandemic, compared to 9% across all service sectors. But by Q3 2021—about one year later—the sector had returned to prepandemic revenue levels. And by Q3 2023, revenue exceeded forecasted trends, reaching 26% above prepandemic levels. Revenue was bolstered in part by a $52 billion supplemental infusion of federal relief funds between March of 2020 and March of 2021 as Congress sought to stabilize the child care market, providing parents access to child care to return to work.

In Q2 2020, child care employment decreased 31%, or 290,000 lost jobs, which resulted in a 28% decline in total compensation paid by the industry. Industry employment has continued to recover but lags behind prepandemic forecast levels. Wages surged more than 31% above prepandemic levels but remain relatively low at an annual wage of $28,185 in 2022 (in center-based care).

“The resilience of the child care sector is evident, but it’s unclear what will happen once all federal and state relief funds—which have been crucial to the industry’s recovery—have run out,” said Cindy Cisneros, Vice President, Education Programs, CED. “Child care is critical in supporting working parents, children, and the US economy. Continued attention is needed from both public and private stakeholders to ensure the industry's stability and growth and provide working parents with adequate care choices within their communities.”

The CED signature report, Child Care in State Economies (2024), is the second in a 3-part series produced with the support of a grant from the W.K. Kellogg Foundation. Key findings include:

The US child care sector experienced a significant economic disruption due to COVID-19, with the decline in revenue for employer-based child care roughly four times larger than the full services sector.

• Revenue for child care facilities that are employers plummeted by 36% in Q2 2020, compared to a 9% decline across all service sectors during the same period.
• Throughout 2020, child care facilities, both employer and nonemployer (home-based businesses offering child care services), faced a revenue decline exceeding 10%.

The sector adapted mostly through employment and wage adjustments, not permanently ceasing operations.

• There was a rapid and pronounced 31% reduction in employment in Q2 2020, a loss of 290,000 jobs.
• Employment has recovered slowly, with the current total number of child care workers not yet reaching the pre-pandemic trend level despite full revenue recovery.
• Total wages paid to workers in the child care sector declined 28% in Q2 2020 but rebounded robustly.
• By Q2 2023, total wages for child care workers had surged more than 31% above prepandemic levels, reaching $30 billion annually. The average annual wage for child care workers increased by 27% in the period, reflecting the sharp rise in total wages.
• But wages for child care workers remain relatively low. The average worker in a child care center earned annual wages of $28,185 in 2022.

Despite a steep downturn in child care usage during the pandemic, the sector remained resilient, achieving a full revenue recovery.

• The sector‘s recovery was notably supported by federal and state interventions, including a total of $52 billion in supplemental federal aid.
• After a brief decline in 2020, the number of child care centers began to expand, with a 5.3% increase in employer establishments compared to prepandemic (an increase of 3,900 child care centers).
• Revenue for child care centers grew by 25.8% from prepandemic levels as of Q3 2023, although workforce numbers per establishment have not fully recovered.

Family child care homes, long a more affordable option for families, continued a steady decline.

• Home-based care declined by 17,235 since 2019.
• The average revenue for home-based care was $17,472, with estimated earnings of $10,400 after operational costs.
• The decline in home-based providers impacts the range of child care options available to working parents, effectively reducing access to what is typically the most affordable form of child care.

The sector’s growth underscores its critical role in supporting working parents and the US economy.

• The child care industry plays a vital role in parental labor force participation and significantly contributes to the economy, with revenues reaching $68.5 billion in 2022.
• As of 2022, there were 624,300 child care businesses, providing jobs for 1.5 million people.
• The industry continues to shift from nonemployer (home-based) to employer (center-based) establishments, indicating a trend that may affect future affordability and accessibility.

The economic impact of the child care industry varies significantly across states.

• The economic impact of the child care industry across states is influenced by the number of children in paid care and the types of child care providers.
• Twenty-three states reported child care industry revenues exceeding $1 billion, with California the highest at $9.1 billion and Wyoming the lowest at $87 million.
• Rural and Farm Belt states derive a larger portion of their child care revenue from family child care homes, whereas urban and certain states like New Hampshire, New Jersey, and the District of Columbia see less revenue from home-based providers.
• The state-level breakdown further underscores the diverse economic roles of child care across the U.S., emphasizing the need for continued attention and support to ensure the sector’s stability and growth and provide working parents with adequate care choices within their communities.

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The Committee for Economic Development (CED) is the public policy center of The Conference Board. The nonprofit, nonpartisan, business-led organization delivers well-researched analysis and reasoned solutions in the nation’s interest. CED Trustees are chief executive officers and key executives of leading US companies who bring their unique experience to address today’s pressing policy issues. Collectively, they represent 30+ industries and over 4 million employees. ConferenceBoard.org/us/Committee-Economic-Development