Studies raise warnings about Michigan child care access, cost

• The child care crisis costs Michigan $2.9 billion annually in turnover, absences and lost taxes 
• Michigan invests more than $1.1 billion a year to early childhood education
• A new study suggests state wage supplements for child care workers 

Michigan’s child care system is in crisis, with families struggling to pay for services and workers fleeing the field because of low wages.

That’s the conclusion of a flurry of recent reports examining a long-term problem that is hobbling the state’s workforce and straining family budgets.

And while the state has increased efforts to improve access and affordability of child care, the industry remains woefully understaffed to meet the needs of working families, says Kevin Stotts, president of Talent First, which works to grow the workforce in west Michigan, and co-director of a study released in March.

“We still have this child care crisis,” Stotts told Bridge Michigan, “and it’s because of the lack of capacity in the system.”

A Michigan State University study concluded 44% of Michigan residents live in “child care deserts,” where there are three or more children for every available spot in child care centers and licensed in-home care facilities.

Beyond access, unaffordability of care keeps some from seeking work and forces others to devote almost as much as the cost of college tuition for care. 

It’s a business issue, too. A Michigan Chamber of Commerce study concluded that the child care crisis costs the state an estimated $2.9 billion annually in employee turnover, absenteeism and taxes. In recent years, the Detroit Regional Chamber and the Grand Rapids Chamber have issued reports warning of the intractable bottleneck hobbling businesses.

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“It’s a broken business model,” Alicia Guevara, CEO of the Early Childhood Investment Corporation (ECIC), a statewide group that works to increase public and private investment in early education, told Bridge Michigan recently. “We’re paying child care providers so little, it’s extremely difficult to attract people into the industry and retain them (when) they can go up the road and work at Speedway with less stress.”

The current average wage of child care workers in Michigan  is $13.41 an hour, according to ZipRecruiter. That same employment site lists the average wage of Michigan fast food workers as $17 an hour.

A 2024 child care workforce analysis by the state’s Center for Data and Analytics found that child care workers in Michigan earned just 61% of the state’s average, while preschool teachers earned 78%.

Small paychecks make it difficult to attract and retain workers. Employment for child care workers declined by more than 5% between 2013 and 2023.

Stott said his study found that wages have gone up in almost all industries in Michigan in recent years, except for child care workers.

Child care centers can’t significantly increase prices because families can’t afford it. And reimbursement rates for care for children who qualify for state aid have not kept up with costs.

Michigan currently spends more than $1.1 billion on early childhood education. More than half of that figure ($607 million) goes for the Great Start Readiness Program, the state’s education program for 4-year-olds. The rest goes primarily for services for children ages 0-3.

It’s workers who care for that younger age group who earn the least money and are in short supply, studies show.

Increase wages, but who pays?

The solution may be simple but hard to swallow for Michigan taxpayers: state wage subsidies to help stabilize the child care workforce, Stott said.

In a 2024 pilot program in one child care center in Detroit and another in Charlevoix, higher wages helped with recruitment, retention and job satisfaction of employees. Some workers signed up for additional training, knowing that, under the pilot program, additional child care education would boost their pay.

Kenosha Witherspoon, owner of Someplace Else Learning Factory in Detroit, which participated in the pilot, said her employees were thrilled with the program.

“I saw fewer absences,” Witherspoon said. “Employees were able to put money in savings.”

The pay subsidies were significant --- many workers saw their paychecks double. As operator of the center, Witherspoon saw her own pay rise from $15 an hour to $35 an hour during the nine months of the pilot program.

“Retention was 80-90%, when the normal is less than 50%,” Stotts said.

Taking that program statewide, though, would cost taxpayers $3.5 billion, an investment that Stotts acknowledged is a huge ask in Lansing. A second pilot to “focus on testing a more scalable approach to support long-term impact” is expected to be introduced later this year, said Laura Hall, spokesperson for the Michigan Department of Lifelong Education, Advancement, and Potential.

Stotts said that the new pilot will likely include state-funded wage subsidies of between $4 and $6 an hour. If eventually taken statewide, the subsidy would cost the state about $200 million annually.

“The investment (Michigan) has made (to lessen the child care crisis) is not quite landing because of this wage issue,” Stotts said. “This is the missing link to the investments that are necessary to stabilize and provide adequate care across the state for parents who need to work.”

Another pilot program that shows promise is called MI Tri-Share, which splits the cost of child care between the state, employers and employees.   There are more than 200 companies participating in the program so far, with about 600 families currently using it. The program had saved workers about $7 million in child care costs through November 2024, at a cost of $3.4 million to the state in the current budget.

Michigan isn’t the only state scrambling to find answers to the national child care shortage.

Minnesota, for example, has implemented legislation to invest $1.3 billion over four years to lower child care prices for families. Maine has a modest wage subsidy of between $240 and $540 a month.

“It’s going to take time to explain this (issue) to lawmakers, and the direct benefit to businesses and individuals,” Stotts said.