About the authors: Maria Flynn is CEO of Jobs for the Future, a jobs-focused nonprofit. She previously served as a senior official in the U.S. Department of Labor. Jane Swift served as governor of Massachusetts and is president of Education at Work, a national nonprofit that connect employers with college students.
President Biden recently asked Congress for $16 billion in childcare funding—and for good reason. The U.S. is missing nearly 2 million workers. More than a quarter of workers who lost their jobs during the Covid-19 pandemic and still had not returned to work last year said caregiving responsibilities kept them from re-entering the workforce.
Federal funding is essential. But the magnitude and urgency of the challenge necessitates exploring other, less-obvious solutions as well. While conventional wisdom might suggest that solving such a massive problem would require a similarly large solution, the answer may lie not only in thinking big—but also in thinking small.
Coined a decade ago by author and investor Hemant Taneja, “economies of unscale” describes how we can stitch together tiny, local suppliers of goods or services to meet the needs of a vast, global economy. Emerging technologies are enabling the shift by flipping the script on the relationship between costs and output that long made economies of scale a go-to strategy. Platforms like Etsy, for example, have allowed people with the skill and creative vision to produce goods for buyers worldwide.
Airbnb
has created a marketplace rivaling established hotel chains by allowing homeowners to rent their spare bedrooms and other properties easily.
The concept is finding a home in industries as varied as transportation and clean energy. Now, a growing number of states are tapping into economies of unscale for the more unconventional purpose of addressing our nationwide childcare shortage.
It’s a surprisingly good fit. The challenges in childcare persist, in part, because we cannot seem to recruit, train, and pay enough educators to make the traditional model work. Childcare centers require a tremendous upfront investment. Once established, the fixed costs of running a program are extraordinarily high. These costs are passed on to parents. While childcare costs can vary widely from state to state and city to city, families pay, on average, $10,000 annually per child. The high operating costs also impact educators, with childcare ranking among the most underpaid of any profession.
But while the model of center-based childcare struggles, a well of talent and space is going untapped. From grandmothers to gig workers, people have always provided childcare services in their houses, apartments, or church basements. Some early-learning advocates, meanwhile, have long viewed homes as promising vehicles for increasing access to quality, culturally relevant, and geographically accessible childcare.
The costs of running at-home programs are far less than running a center, making childcare more affordable for parents and more lucrative for providers. Launching a home-based program takes far less time than it does to build a new site or be approved for a commercial space. Without the need to fill up a center to make a space financially viable, home-based programs can thrive with as few as five or six children. They can also be more conveniently located for parents.
Tapping the collective potential of this “tiny” industry has always faced challenges. The BUILD Initiative estimates that one million providers currently provide care to more than three million children in their homes. The current system, however, is an inconsistent patchwork of registered and regulated providers but also family, friends, and neighbors. Existing at-home centers have primarily had to rely only on word of mouth and relationships with friends and family to drive their business. For aspiring providers, it can be daunting to navigate the many steps it takes to launch and license a program and access the professional development and curricular resources they need to ensure their programs are of high quality. Meanwhile, parents struggle to find the information they need to make better, more informed childcare decisions.
A growing number of states have embraced at-home childcare as a way to provide more care for families. They are finding new ways to ensure that all services are safe, developmentally sound, and meet high-quality standards no matter where a program is housed. These efforts are enabled by the same sorts of technology that power popular consumer apps, as well as the advent of new digitized curricula and assessments that have already helped school districts raise the quality and consistency of early childhood instruction at scale.
In Nevada, for instance, state leaders have turned to at-home providers to help fill the childcare gap created by the pandemic, which saw the number of centers in the Silver State plummet from 477 to 285. Through new technology and old-fashioned in-person service centers offering information, professional networking opportunities, and technical support, Nevada established 100 new home-based providers over two years. Other states like New Mexico and Mississippi are following suit, launching initiatives to help create new programs and allow families to find providers that best fit their needs.
These states are demonstrating what economies of unscale look like in action. They are taking critical steps to ensure communities have the resources necessary to address their most pressing local needs themselves without sacrificing quality. And they are proving that by thinking small, we can help widen access to childcare, boost economic growth, and provide millions of children with the strong foundation they deserve.
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