Child care workers are vanishing and it's hurting the entire economy

San Francisco(CNN Business) Since losing one-third of its workforce at the outset of the pandemic, the child care industry has seen a jobs recovery that's been slow and incomplete.

And now it's starting to backslide.

After shedding 4,500 jobs from September through November, preliminary estimates from the US Bureau of Labor Statistics show that the child day care services industry lost another 3,700 jobs in December.

The workforce reductions -- coupled with ongoing challenges of low pay and spotty benefits for workers -- have economists and policy experts sounding the alarm: If this industry falters further, it could spell trouble for the entire labor market as working parents scramble to find care for their kids.

"Now that we're seeing a decrease [in employment], that should be worrying for many folks who are relying on these services," said Caitlin McLean, director of multi-state and international programs at the University of California Berkeley's Center for the Study of Child Care Employment.

"This is absolutely a contributor to the wider worker shortage that we're seeing," she added.

Every time a classroom goes virtual, a child care center caps out on enrollment or a day care center closes, parents — typically mothers — can't go to work, she explained.

The child care industry was "barely getting by before the pandemic," she said. "And now it's really at a breaking point."

Child care workers in short supply

The situation has only been exacerbated by the pandemic.

"It's a tough job in the best of times," Sarah House, a Wells Fargo senior economist said, adding that "here we are in a pandemic."

Increased health risks, ever-changing regulations and inflationary pressures have heightened concerns for child care providers.

"It's definitely different now than it was two, three years ago, from a provider's perspective," said Lisa Keller, who runs a home-based child care center in Horace, North Dakota. "You have your challenging and stressful days, but now you hear a kid cough [and you wonder if] this kid has a cold, and it's no big deal, or we could be shutting down for 20 days."

A new academic working paper published earlier this month found that disruptions to school and child care services resulted in a reduction in parents' hours worked. Child care closures also disproportionately affected lower-income families, according to the research from Kairon Shayne D. Garcia and Benjamin W. Cowan at Washington State University.

Disturbances to child care operations can have long-lasting consequences on the labor supply and working parents' careers, House said.

"We're nearly two years in, and I think the longer this goes on, and you don't have that option [to return to work], it becomes more than just a temporary exit or a temporary break from the labor force," she said.

Raising worker wages presents a Catch-22

One of the biggest challenges that existed for Keller before the pandemic remains true today: It's hard to find help when needed.

"You put it out there, 'Looking for part-time help,' and most of the time nobody will even respond," she said. "I don't know if it has to do with [Covid] exposure or with pay. I'm not even sure what the biggest problem is with it."

Child care workers have long been underpaid and given fewer benefits like health insurance, according to a November 2021 report from the Economic Policy Institute.

On average, child care workers in the US are paid $13.51 per hour, according to the EPI analysis. That's nearly half of what the average US worker makes, at $27.31 an hour.

This often means that child care workers can't afford to support themselves or their families, resulting in higher rates of job turnover, decreased quality of care, and a greater risk for towns and cities to become child care deserts, the EPI found.

Better pay would improve workers' financial security, increase employee retention, and, ultimately, lead to a stronger economy, according to the analysis. The EPI suggests a minimum hourly wage between $21.11 and $25.95 an hour.

However, raising wages creates a potential Catch-22: It could push child care costs higher, and those expenses are already one of the largest for families in the US.

"I know a lot of people think daycare is expensive, and it is for parents, [but] then we're also not making a ton of money," said Keller. "So to hire somebody, you have to have more kids, so you can pay them, and it gets tricky that way -- making sure you can find the kids so you can afford the help, but needing the help because you can have only so many kids. It's a balancing act."

The solution, said Elise Gould, a senior economist with the EPI and one of the authors of the November 2021 analysis, is more government involvement. This could include universal pre-K, financial support for providers as well as subsidies to families, "with provisions that guarantee higher wages and better working conditions for the workers," Gould said.

"That could happen at the federal level, but there's no reason why state and localities can't take up those efforts," she added.

The US contributes "woefully little" in early childhood education and care as compared to other developed nations, the US Treasury Department noted in a September 2021 report on the economics of child care supply. As a result, parents are having to shoulder the bulk of those expenses, according to the report.

In its Build Back Better plan, the Biden administration has proposed increasing child care funding -- notably through subsidies to ensure low- and middle-income families don't pay more than 7% of their income on child care and through universal preschool. However, those efforts are far from certain, with Build Back Better hanging in the balance.

Some state governments are getting innovative. In North Dakota, the state's Department of Human Services' Early Childhood Services Division used federal pandemic relief funding and issued $50 million in emergency operating grants in 2020 for child care providers. Last year, it promised nearly $30 million to help child care providers with operational expenses during the pandemic and a period of high inflation.

This year, the state plans to launch a new child care career pathway program to support aspects like training, certification, recruitment and retention. This is in addition to ongoing efforts such as providing startup grants for child care businesses and offering child care assistance for job hunting parents.

"I think [support for child care] is super-critical," said Kay Larson, director of the Early Childhood Services Division. "It's difficult when working parents don't have some place that they trust for their children to have a quality early childhood experience and makes them productive members of the workforce."