Why Investing in Infant and Toddler Care is Critical for a Strong Economy
By Theresa Hawley, Ph.D.
Across the country, working families are struggling to afford quality early education and care that meets their family’s needs. As access gaps widen, more parents — especially mothers—are being pushed to leave or reduce participation in the workforce, with measurable effects on employment and productivity.
A 2023 analysis by ReadyNation estimates that insufficient child care costs the U.S. economy up to $122 billion annually in lost earnings, productivity, and tax revenue. Parents lose income due to reduced work hours or missed shifts; employers face absenteeism and turnover costs, and governments lose tax revenue as parents are pushed out of the labor force. Similarly, the Bipartisan Policy Center projects that child care gaps could cost the U.S. economy $329 billion over the next decade if left unaddressed.
Public Preschool Expansion: Benefits and Unintended Consequences
In response to growing demand, several states have initiated or expanded preschool programs in public schools. For many families, public preschool is a welcome option that can help sustain workforce participation. U.S. Department of Labor data from 2024 show that workforce participation for mothers whose youngest child is 3–5 years old (preschool-aged) is 72.3%, compared with 66.6% for mothers whose youngest child is under 3. Similarly, a report from the Center for American Progress found that Washington, D.C.’s universal preschool program increased maternal labor force participation by roughly 10 percentage points, enabling many mothers of young children—particularly single and low-income women—to enter or re-enter the workforce.
While expanded public preschool supports greater workforce participation and prepares children for success in school, it can also shift enrollment away from child care centers, creating unintended ripple effects on their business models and the families they serve.
Financial Pressures on Child Care Centers
In most child care center business models, providers offset the high costs of infant and toddler care by serving preschool-aged children. Care for infants and toddlers is expensive because it requires low child-teacher ratios, and providers can’t charge their full costs as tuition without becoming unaffordable for the majority of families.
In contrast, preschool classrooms can enroll more children per teacher, allowing providers to generate the revenue needed to cover costs and even make a profit in many cases. So, while the expansion of school-based pre-school is a benefit for many families, the shift of 3-5 year olds away from child care centers has the unintended consequence of undermining traditional center business models. One teacher in Maine described the challenge this way:
"The shift in pre-k programs is hurting us immensely… we make the majority of our income from the higher ratios in our preschool room, and with [just] younger [0-3] kids, our bills are the same with less income."
These pressures often force providers into impossible decisions: raise tuition, reduce hours or services, or, in some cases, close entirely. As a result, families with the youngest children—or those who need care outside school hours—face even fewer affordable options, which in turn affects young parents’ workforce participation.
Why Increasing Classroom Ratios Isn’t a Solution
One commonly suggested solution to this business model dilemma is to increase the number of infants and toddlers that providers can enroll in each classroom. This may sound good in theory, but in practice, it’s unlikely to solve the problem. Families know that fewer children per teacher improves their child’s experience, and teachers tell us that increasing the child-to-teacher ratio is simply not an option that works for them or for children in care. And even if providers did loosen their child-to-teacher ratios, adding a few more infants and toddlers would likely still leave these classrooms operating at a loss.
We Need System-Wide Solutions
Addressing the child care challenge requires solutions that consider the needs of children, families, and providers while avoiding unintended consequences. Fortunately, states have been implementing innovative solutions aimed at preserving infant-toddler care as preschool access expands:
1. Supporting Preschool Programs Within Child Care Centers
Investing public funds in preschool programs in child care centers helps maintain financial stability for providers while expanding access for families. When community-based providers also provide preschool, working families have more options to access full-day or non-traditional care hours. Importantly, these programs need to be funded at levels that allow providers to make a profit on the preschool classrooms so they can continue to offset the losses they incur in their infant-toddler classrooms.
For example, in Illinois community-based providers can apply directly to the State Board of Education for Preschool for All (PFA) funding, rather than going through a local education agency. The state requires the same standards for community-based prek as happens in schools while also encouraging community providers to raise salaries for early childhood educators, helping ensure skilled educators are competitively compensated. Funding is awarded on a competitive basis to public schools, private childcare, Head Start, faith-based centers, higher education institutions, and regional offices of education. While providers can’t make a profit directly from PFA grants, they can layer the PFA funds with child care subsidy and/or parent-paid tuition.
2. Direct Investment in Infant and Toddler Care
States and municipalities can strategically invest in infant and toddler care to incent and support providers to expand access and lighten the financial burden on both families and providers.
City Seats in New Orleans provides a $12,000 scholarships per eligible child ages 6 weeks-3 years in Orleans Parish. City Seats is funded through a municipal Early Childhood Millage (property tax) and is eligible for a 1:1 state match from the Early Childhood Education Fund (ECEF). According to a 2024–2025 evaluation by Child Trends, more than 9 in 10 families reported that access to free care through City Seats helped them seek or maintain employment.
Ensuring families have access to affordable, high-quality early education and care is essential for children’s development, families’ financial stability, workforce participation, and the broader economy. The early education and care system should be approached as a public good, with system-wide solutions that benefit everyone.
At CELFE, we’re committed to supporting and elevating funding strategies that strengthen and sustain early childhood education — improving outcomes for children, families, and the broader economy.