CareShare Development Research Sources and References

Child care cooperative businesses:
Preliminary report on Care Share and Shared Services
Cincinnati Union Cooperative Initiative (CUCI) Design Team
May 11, 2018

The following information has been selected and copied from the above report.

CUCI’s design team is modeling…cooperative business to better support child care …In an industry where large corporate players, lack of government support, and institutionalized racism and sexism have driven wages down to unlivable levels, everyone is feeling the squeeze. Teachers struggle to survive on low wages, low reimbursement rates, and unreliable paychecks. Given these challenges, many caregivers who would prefer to continue educating young children find it necessary to leave for higher-paying jobs in a different line of work. Those who remain are passionate about kids, but tend to struggle to make the business work. Parents face an acute shortage of quality, affordable care. Even with advanced planning, many parents are unable to obtain a slot for their child in a child care facility that meets their needs. Most families struggle to pay child care fees that feel out of reach, but necessary. Some parents are forced out of the labor market until their children get older. Others rely on a patchwork of unreliable care from friends, family and neighbors.

Care Share will bring together small groups of parents and a trained caregiver of their choice to care for up to 5 small children… in one of the family homes. Caregivers receive at least $15 an hour, in an environment created by the Families.

The Child Care industry provides essential services to working families. The industry can be broken into two primary categories: center-based cares and home based or family child care providers. Family child care providers usually consist of a single primary caregiver, a nonemployer, and thus have a much smaller enrollment because they are limited by the staff-to-child ratio.

Nonemployers comprise 89.6% of industry establishments. Nonetheless, center-based child care with multiple establishments and staff members generate the largest portion (65.4%) of industry revenue while nonemployers generate a much smaller portion (4.5%). However, the number of solo establishments in Cincinnati is much lower than the national average. In Cincinnati just over half of all providers are non-employers (Type B family providers). This means that centers and family providers with at least one additional staff person are likely to represent an even higher percentage of overall revenue in Cincinnati–and an even higher percentage of children served.

According to a 2016 survey by the Bureau of Labor Statistics (latest data available), an estimated 64.7% of mothers in the workforce had children under the age of six, up from a 59.7% share in 2014. As the share of working mothers with young children has increased in recent years, so too has demand for industry employees that specialize in child care.

Over the next five years, the number of enterprises is projected to decrease an annualized 0.2% to 721,910 operators nationwide in response to tightening regulations surrounding safety and quality.

Industry Key External Drivers

  • National unemployment rate (expected to decrease) ↓ Parents who are employed are unable to care for their children during the work day and will require industry services. This is an opportunity.
  • Per capita disposable income (expected to increase) ↑ Households with higher disposable income are more likely to be able to afford child care or switch to higher tuition services. This is an opportunity.
  • Number of births (expected to increase) ↑ As the population of children and infants grows, so does the need for their care. This is an opportunity.
  • Federal funding for social services (expected to decrease) ↓ Federal funding for social services is expected to decline, posing a potential threat to the industry. This is a threat.
  • Labor force participation rate of women (expected to remain the same) When the female workforce participation rate rises, there is generally increased demand for day care services. This is likely to cause no effect

Industry Key Success Factors

  • Must comply with government regulations. Compliance with government regulations is essential to maintaining a provider’s operating license.
  • Ability to alter mix of inputs in line with cost. Having flexible staffing arrangements will minimize the risks associated with any volatility in enrollment or revenue.
  • Recommendation/accreditation from authoritative source. Accreditation promotes the provider to parents and potential employees. It can also assist in identifying and correcting any areas that could compromise care.
  • Ability to vary services to suit different needs. Industry operators that have flexible hours and are able to cater to the varied needs of working parents will be more appealing to consumers.
  • Ability to take advantage of government subsidies and other grants. Federal and state governments provide various subsidies, including fee relief for low-income families. These subsidies promote demand for industry players.

Quality Child Care ‘Deserts’

Our coalition is concerned about the need for Preschool Promise resources to
go to Cincinnati’s most vulnerable communities, also known as ” Care Deserts.” The Rand report highlighted twelve neighborhoods, or sections of neighborhoods, as areas with high numbers of preschool age children in need of care, and low numbers of quality-rated and school-based programs. However, this mapping does not include family care providers or more recent work done through Preschool Promise. (Rand’s neighborhoods include: East Price Hill, West Price Hill, Mount Airy, Riverside/Sedamsville, Westwood/East Westwood, Avondale, Clifton, Evanston/East Walnut Hills/North Avondale/Paddock Hills, Hartwell, Walnut Hills, and Winton Hills.)

The vast majority of the licensed child care providers receive money from the state in the form of vouchers for providing care to children from families under the federal poverty level. The level of voucher reimbursement is determined by the Ohio child care Market Rate Survey, which is conducted every two years, most recent report came out in 2016. Currently the vouchers rates range from $5,512 to $10,504 per year per child for Type B providers and $7,644 to $14,352 per year per full-time child for Type A and Centers depending on the provider’s quality rating and the age of the child.

Child Care Providers

Given the overrepresentation of women of color in the sector, we expect that many providers will be women of color. Some are already professional caregivers. Those who are providing care in their own homes may be struggling with the high cost of food and supplies.

Needs

Many caregivers face low wages, a lack of formal power in advocating for themselves, inconsistent hours and payment, and the risk of finding themselves in a hostile work Environment. Caregivers seek job stability, child care for their own children, and economic and professional mobility. Some would also like opportunities to pick up extra hours, training
and professional development, and a true career ladder.

Solution for Caregivers

Care Share will offer providers the opportunity to work for fair wages and to become an owner of their care share cooperative. Caregivers could work full or part time. Caregivers’ most important needs will be met by reliable hours and payment, support from the co-op in advocating for workers with the families they serve, and family sustaining benefits. In addition, caregivers will benefit from a professional network, training, and professional development opportunities.

As we have conducted this study, teachers have been overwhelmingly receptive, including existing family child care providers who surprisingly consider care share to be a potential source of additional revenue or a way to tap into a new market. As a result, we have identified potential workers and a core group is attending coalition meetings on a monthly basis, helping build their co-op.

Parents

Parents who choose a Care Share likely do not qualify for child care subsidies, but are not earning enough to afford individual care in their own home. For context: Care.com’s 2017 child care report, cited by IBISWorld, estimates that 1 in 3 families spends more than 20% of their income on child care. The report also states that center-based care, which varies from about $6,600 to $20,200, averages $10,468 per year.

Needs

Parents face a frustrating search for quality care, long waiting lists, difficulty determining the quality of potential providers, and high costs of care. Parents want individualized learning, trustworthy providers, and input into the child care situation they create. Many parents will also be happy to know they are supporting good jobs for the person who cares for their children.

Solution for Parents

Care Share’s primary offering to parents will be affordable child care in an environment they create. Care Share could offer secondary services like child-proofing and occasional off-hour child care.

Our offerings will meet parents’ needs by providing an easy search through a digital platform to find other parents interested in splitting the cost of wages while eliminating the need for some parents to provide space, and eliminating the need for others to transport their children to and from care. Once parents have formed a care share group, we will connect them with 3-4 verified individuals who they can interview to pick a Caregiver.

Substitute Products and Services

Families who seek formal care are currently utilizing centers, family child care providers, and employer provided care. The costs for existing formal full-time care ranges from $88 to $316/week. Some parents decide to leave the job market and stay home with their kids, engage in informal child care swaps, or rely on friends and family.

Some of these informal care arrangements include “nanny shares” where a group of families hires a caregiver together to watch their children in their home. This is essentially the model of care share, however, there are currently significant barriers for this arrangement to be widespread. These barriers include the challenge of finding other families, and the challenge of finding quality caregivers.

Bargaining Power of Clients

For this analysis, we are defining clients of Care Share as the Parents of children under five years old. In our estimation, parents’ bargaining power is medium to low. While there are a good number of child care alternatives, there is nothing currently like the Care Share model in the local or regional market. As mentioned in the industry description, there are approximately 21,846 children under the age of five in Cincinnati and less than half of these children are enrolled in a program. In addition, we expect that buyer switching costs will be fairly high due to the hassle of finding a quality care at an affordable price. (This means that we may have an easier time attracting parents who have not yet established formal care. Even families who are dissatisfied with their existing care arrangement may be hesitant to switch unless they are confident that the new arrangement will be a big improvement.)

Studies have shown that there are not enough quality child care options. Although Care Share will not be able to participate in the “Step Up to Quality” rating system, the plan is to maintain standards that will align with state standards. Additionally, the fact that parents often have so little control over their child care arrangement, meaning waiting lists are long for top programs and child to staff ratios are high, means that the Care Share options will be appealing to a certain sector of working class parents in the Market.

Buyer price sensitivity is fairly high and needs to be thoughtfully considered. In the current financial models of Care Share, the price falls near the top of the range of rates in ODJFS’s survey. While this data is two years old and mostly reflects establishments that accept subsidized children, which may skews it to the lower price end of the market, it is important to recognize that price will have a real effect on which families can afford to be clients of Care Share and how widely adopted it becomes.

Some of the unique value propositions of Care Share that will help mitigate these threats include:

  • Multi-stakeholder union cooperative model: the family sustaining wages and
    ownership culture that come from open-book management and a co-op’s
    democratic structure, will allow the business to tap into demonstrated competitive advantages in productivity and profitability. Staff longevity, coupled with training, will result in high quality, consistent care that other child care businesses often lack.
  • High quality training: Due to our union partners, CFT and AFSCME, Care
    Share will supply highly qualified staff with low to no cost training.
  • Mass movement: P4EC provides an aspirational story of teachers and parents
    coming together in a multi-stakeholder co-op to create the best outcomes for
    kids. This movement can also help Care Share tap into thousands of parents.

CHANNELS

Some of the ways in which we will reach our customers include:

  • Social media, such as pinterest (baby room ideas), Facebook (parenting groups, targeted interests), Instagram (hashtags like babygram?)
  • Birthing classes and instructors
  • Referrals from doulas, midwives, etc.

Financial Analysis

Our financial model is based on start-up costs for software, and operational costs associated with the service, CareShare. Each Share is projected to consist of 3-4 children, with an average price per child per hour of $7.25. Starting with three shares in the first month and reaching ten shares by month twelve, operating break even point is reached at month eleven.

Overall break even point is reached in the second year of operations; for example, assuming growth of shares remains steady at ten, break even is reached at month nine of year two. This is a conservative estimate, as we expect growth in the number of shares, and the rate of growth itself is also expected to increase over time.

Endnotes from CUCI Child Care cooperative businesses: Preliminary Report on CareShare

Sources for industry analysis: IBISWorld reports 62441(Day Care in the US Industry Report) and 81411 (Maids, Nannies & Gardeners in the US Industry Report)

  1. Sources for industry analysis: IBISWorld reports 62441(Day Care in the US Industry Report) and 81411 (Maids, Nannies & Gardeners in the US Industry Report)
  2. Cincinnati Preschool Promise: Enrollment and Cost Estimates for Universal Program. Policy Matters Ohio. 15 August 2016.
  3. Sparling, Hannah. Cincinnati Preschool Promise turned 1 year old on Election Day. Here’s how it’s going. Enquirer. Nov. 14, 2017
  4. 2016 Ohio Child Care Market Rate Survey Analysis Ohio Department of Job and Family Services. The Ohio State University Statistical Consulting Service
  5. Ohio Department of Job and Family Services, 2017. CHILD CARE LICENSING REPORT.
  6. Master Agreement for Preschool Expansion Services.
  7. Interview conducted by Ellen Vera with Vanessa Freytag, Paige Runion, and Annetta Rutland from 4C For Children. 26 April 2018.
  8. Karoly, Lynn, Auger, Anamarie, Kase Courtney et. all. Options for Investing in Access to High-Quality Preschool in Cincinnati. Rand Corporation. 2016.
  9. https://www.hapu.com.au/
  10. Preschool Promise Wage Survey Findings. University of Cincinnati Research and Economics Center. April 2018.
  11. Interview by Ellen Vera with Traci Poellnitz, AFCSME Local 4033 President. 4 May 2018.
  12. Early Learning Challenge Technical Assistance (ELC TA), 2016, “Shared Services as a Strategy to Support Child Care Providers.”