Why is day care so expensive but the actual day care providers make so little?

[Recursion]

Has anybody actually figured that out? I mean, sure, there's some profit involved buy you can't tell me Big Day Care is rolling in cash. Where does all that money actually go?

[malaise]

1. Because everything is

FOR PROFIT

[Recursion]

2. Well, no, non-profit day care is crazy expensive too

Some churches offer it during the week, for instance, but it isn't particularly cheaper than the "Little Red Schoolhouse" or whatever down the street.

[Yupster]

18. My church has a day care center

It's one of the largest in the city.

It loses money every year.

The church has given up trying to make it break even. We just consider it a neighborhood mission opportunity.

The main reason it costs so much is the high numbers of workers mandated for the very young children.

[Recursion]

3. And anyways I know people who run day cares and if they're rich they hide it well (nt)

[LiberalArkie]

6. Insurance?

[Recursion]

7. Yeah I think you and moonbabygo have a good point there

The insurance for a daycare must be crazy expensive.

[Xolodno]

35. Yes. It is.

The liability insurance is enormous (depending on your state). And in fact, many companies that do take on the risk, re-insure it to limit their exposure. The profit is actually in insuring the facilities in the case of a property loss.

The Re-Insurance companies pool nationally on the liability and adjust the rate from where the risk is located. Which include variables on day-care employee to child ratio laws, day-care employee background checks, training, the venue's maximum liability payouts, etc. Basically, if you live a state that hates government regulation, the insurance rates go through the roof. If you live in a state that hits hard on regulation, insurance rates are lower, but employee costs go through the roof. Damned if you do or damned if you don't.

Bad day-care facilities may get sued (and lose their license), but the insurance company picks up the tab, for which, any person who uses day care, picks up the tab in the form of higher rates.

You could limit liability limits an insurance company can pay out....but then you have a moral hazard, what if the facilities assets are not adequate enough to cover the judgement amount above the liability limits? And it could actually cause less day care facilities to remain in business or scare off potential operators. They may not be willing to risk their capital on the negligence of a bad employee.

No easy answers.

[hunter]

36. There are easy answers, but nobody is asking the right question.

My wife and I never used childcare services, public or private. Our work hours were flexible and rarely overlapped. When they did, usually not more than an hour or two, our workplaces were kid friendly. Yep, my wife could drop our kids off with me at work, and I could drop them off with her at work.

Most people are trapped in work that does not make the world a better place. We need to get rid of those jobs. We need to work less.

A thirty hour work week paying a living wage would solve so many problems. So would a basic minimum income for anyone who is unemployed. Large workplaces ought to provide on-site childcare as an ordinary cost of doing business.

[Xolodno]

46. Going to disagree on some points.

I'm a socialist, but a "basic minimum income" flirts with communism, an ideology I don't agree with. If you say a local regional minimum wage along with not just subsidized (if not out right paid) advanced education or trade retraining....along with relocation assistance, then I'm cool with that. Many companies will come into a market offering x+y jobs. Despite the fact, a sustainable wage job is just "x". They dilute the hours in order to make the "job numbers" they promised. For example, if a Fast Food restaurant can support 10 40 hour work place jobs, the company to meet the jobs they promised to the local government...and maintain tax subsidies...hire 20 people at 20 hours....but that's another discussion.

In case of daycare, many large corporations offer day care services on-site, benefits that subsidize the costs, flexible hours, etc. But many companies are not capable of offering that. And in some industries, its just not possible.

Another solution that is in the middle, have small and middle sized companies contribute to a pool to support approved day care centers and subsidize the costs. But how you go about that, would be subject to debate....and a far more heated debate would result in small business owners rebelling in this (i.e. why should I pay into this!? All my employees are <insert lame excuse&gt .

I agree with the 30 hour work week....but until the populace of the USA agrees that life experiences out weighs the "toys" (why by shit if you don't have the time to use it?)....not going to happen. That's a cultural change....albeit one that is starting on the slow pace with companies offering either 4/10 or 9/80 work weeks.

[Bonx]

41. I'm pretty sure that's not the correct answer.

[moonbabygo]

4. insurance

I bet they pay a lot in insurance. I hope they also send someone out there to inspect the day cares and make sure they have proper baby equipment. Then there is profit

[Recursion]

5. I guess there have got to be huge capital costs too?

But like I said above some churches run daycares during the week and though they're usually a little cheaper it's not a huge difference.

[Shankapotomus]

8. Because the provider usually gives a cut to the kid

The kid's extort more money by threatening to act up and be unusually difficult. And that's how they extort more money from the providers. The parents never even realize the kids and providers are in collusion.

It's a trend now and a big racket.

[ProfessorGAC]

9. Wee Cosa Nostra?

Who would have thunk it?

[Shankapotomus]

10. You didn't believe that, right?

I hope not.

[ProfessorGAC]

19. As Someone Of Sicilian Descent. . .

. . .i never rule it out!

[Brickbat]

11. Insurance and overhead.

[thucythucy]

12. Somehow this is the same for most direct care

human service jobs.

Nursing home execs and shareholders make out pretty well, while the direct care staff--the folks who actually give the bed baths and change the diapers--are by contrast paid peanuts.

But day care does seem different. I wonder, how many of the day care centers I see are small mom & pop or church run enterprises, and how many are for-profit or chains? "Big Day Care"--this doesn't seem likely to me either.

[1939]

28. A lot of nursing homes are Mom and Pop NT

[Taitertots]

13. Really? Is this supposed to be rhetorical?

Isn't it obvious?

[Recursion]

14. If it's obvious, tell me (nt)

[leftstreet]

15. What about hotel/motel housekeeping?

Gender. Labor.

[Taitertots]

16. They are unskilled and easily replaceable

As such they have no leverage to negotiate higher wages with their employer.

Do you want me to explain why fast food workers wages (despite high corporate profits) are so low next?

[Recursion]

20. McDonalds is a multi billion dollar corporation

Day care centers are struggling at best

[Taitertots]

24. "Struggling at best" says who?

http://www.forbes.com/sites/sageworks/2014/06/15/heres-the-growth-chart-on-day-care-businesses/#7f1568306405

"Average net profit margin for child day care businesses in Sageworks’ database lagged the average for all industries in 2010 and 2011, but rebounded to around 8% in the last 12 months, which is on par with all privately held companies.

[underahedgerow]

17. Think of it like this:

1/3 for overheads, maybe more.
1/3 for taxes
Anything left over is 'profit'.

If a parent is paying 100 bucks a week, the provider 'profits' about 30 bucks of that. It's not much.

Overheads include rent/mortgage; the water, electric, insurance, transport, if used, wages and taxes of the workers. Cleaning supplies, food, diapers (if not provided by the parents), milk, formula, toys, educational games, blankets, cribs, mattresses, upkeep, repairs & maintenance.

If the provider provides any sort of transport, add in all those vehicle and insurance costs as well.
It's expensive to run your own business. It always seems like a great idea until the actual work and reality kicks in.

[EllieBC]

22. I answered before I saw your response. Sorry! Nt

[EllieBC]

21. Insurance, supplies, transportation...

The list of stuff a daycare provider needs is huge. I've known quite a few DCPs. They carry fairly large insurance policies. They supply diapers, meals, toys, activities, and sometimes transport. They need to clean everything every day (unless you are going for the norovirus/cold/flu/strep cesspool thing).

Daycare usually isn't your child just sitting on someone's couch all day doing nothing. Children need to be entertained, fed, some DCPs even do educational things. If they are caring for infants there are often multiple feeding schedules.

None of that is cheap.

[haele]

23. Insurance. Cost of maintenance. Service costs (Legal, cleaning, regulatory requirements, etc)

My grandchild goes to a Montessori pre to first grade school that also has daycare services; the kidlet spent two months as an auxiliary "class mom" until things got too difficult for her and was amazed at what was required for the licensed daycare regulations.

A licensed day care gets inspected regularly depending on the state, so everything from the play and learning equipment to the restrooms and eating infrastructure needs to be maintained and spotless. The playground at the school costs an average of $5K a year to maintain, with equipment repairs, grounds keeping, and change-out of the play area materials (sand, rubber mulch, or whatever they're using that the kids will urinate, vomit, bleed, or defecate in over the year). Not only that, a daycare needs to provide activities, which can include both in-house projects (requiring purchase of kits or raw materials for those projects) and field-trip events (with attendant transportation arrangements), which can cost another $5K for 25 - 30 children - the optimal bookkeeping "break even" size for a licensed daycare. The "not too few, not too many" paying clients that can cover costs and make enough of a small profit that the owners can make a decent living after they pay the staff and bills.

Maintaining a healthy and safe learning and entertainment environment is not cheap; even though the children are small, they are mobile petrie dishes and little grimy tornados of destruction by the end of the day. Children under eight tend to be emotionally unstable and impulsive in groups; there's never really enough teachers and helpers to handle the children even at a ratio is 1 to 6.

Parents can be nightmares to deal with; they often don't pay for coming in late unless a significant amount of pressure is imposed on them and most don't communicate beforehand with the daycare if there's going to be an issue so that the daycare can schedule staff properly ahead of time. Many treat the daycare like a nanny and bring troubled kids that they expect the daycare to focus on (and teach discipline to) at the expense of the other children, or they look at the daycare as an organization to take their frustrations out when things are not "perfect" in their lives.

Some will just park their kids there for hours on end with all sorts of "sorry, lost track of time" excuses for coming by to pick up their precious three or four year old an hour or two after the daycare is officially closed - leading to significant amounts of OT for whichever member of the staff is able and willing to stay late with the child.

Billing and bookkeeping is filled with pitfalls, so a daycare that has been in operation a long time or is part of a successful chain will front-load their billing process to cover maintenance and emergency expenses throughout the year.

Now, if you want to send your kid to an unlicensed daycare, it's probably a bit cheaper. But an unlicensed daycare is like depending on a pair of grandparents to watch your kids along with all the other kids in a five block radius; you'll be taking your chances that Grampy and Grammy (and cousin Jane who just got laid off and is helping out while going back to college and looking for permanent work) is feeling up to keeping their attention on a dozen or more active toddlers while they're maintaining their own household during the day.

Haele

[EllieBC]

25. "Grimy tornadoes of destruction"

You've seen my living room I take it.

[haele]

27. We have a corner of the living room specifically for the grandchildren.

They're supposed to bring their toys out on the 4 x 6 rug that's ringed with a child's table and chairs, a painting easel, a couple shelves, cupboards and a book-case, and two toy boxes that is in the breakfast nook that opens into the front room to make a living room. The entire area is hardwood floor, so it becomes pretty obvious when Legos or Lincoln Logs make their way past the boundary of the rugs. Cuts the mess down by half.

We're still looking pretty trashed, but at least we don't have to call FEMA twice a month just to clean as we did in the old place with a much smaller living area. Can't wait until the oldest is coordinated enough to man a broom and dustpan without dumping the contents on the cats; will make the weekends much easier on my back.
Or maybe I should save up for a Roomba.

Haele

[EllieBC]

30. Ooh I want a Roomba!

Our 6 year old is old enough to man a broom and a dustpan but the sighing and eyerolling and constant declarations of my level of meanness for making her clean aren't worth the battle some days.

Our toddler may actually be a Tasmanian devil. They assure me she's a human baby but some days I'm pretty sure they're wrong.

[hack89]

43. I would ring the rug with barbed wire. nt

[Agnosticsherbet]

26. First insurance for Daycare is very expensive.

Second, daycare is very labor intensive and they need a degree or certification or both, depending the state. (A teaching degree in early childhood development is common).
At the daycare center where I used to keep my children, all the "teachers" had bachelor or master degrees.

[JVS]

29. Your second point doesn't explain why daycare workers get paid so little.

Labor intensive + certifications should mean good pay.

[Agnosticsherbet]

33. The level of pay is low because they are not doing a form of work that is esteemed in our culture...

They make less than teachers, slightly under 20 thousand a year, more than your average waitress.

In our culture, unless you are protected by a union, and those are getting smaller every year, pay scales rise and fall depending on how the occupation is viewed. Day Care workers need to be more widely unionized so that they can work together for higher pay and better benefits.

Child Care Providers and AFSCME: Leading the way to better care and better lives

[Nye Bevan]

42. Probably because there is a large pool of people prepared to do that job at the existing wage.

Some people probably perceive it as quite an attractive job, especially those who love children.

[My Good Babushka]

31. The undervaluing of traditionally female-dominated professions?

[Small Accumulates]

34. Yes. This. n/t

[leftstreet]

37. +1

[bonzo925]

40. @Babushka - you do realize that

that might be a matter of preference and not that women are forced into this jobs?

[Nye Bevan]

44. Don't most of the jobs in the left column require extensive training and qualifications,

while most of the jobs on the right do not?

I believe that I personally would be capable of starting any of the jobs on the right column with maybe a few days training and make a reasonably good job of it (with the possible exception of sewing machine operator). For a job in the left column I would need years of training and even then I am not sure I would be capable of doing it.

[JVS]

32. These are two questions and everyone seems to be answering number one but not number two

1. Why is day care so expensive?
2. Why do daycare workers make such low wages?

"you can't tell me Big Day Care is rolling in cash"
Why can't I?

[haele]

39. Big Day Care *is* rolling in cash.

There are a couple of corporations that have gotten into the day care franchise business (I.e. Primrose Schools, Goddard Schools, Bright Horizons, Lighthouse Learning), and they're gobbling up most of the smaller daycare business as they're able to standardize their business models, which gives them advantages when they're going after private and public contracts for their franchises.
Their cookie-cutter operations makes it easier to "control costs" through the economy of scale, and maintain the infrastructure, regulations and credentialing for their locations.
Of course, the franchise owner and the workers are limited by how much they can earn because the money gets passed through the corporation. And of course, there can be no deviation from the model, so special needs students or any little extra attention cannot be provided to the customer of the product, but hey...it's fairly brainless "open the box and start your business" model.
$10K - $15K a year per student is average revenue country-wide, with 30 - 50 students. Costs are typically 1 full time credentialed caretaker and 1 part-time caretaker per 10 kids (national average) at a burdened rate, below wholesale supplies, utilities, some taxes, and the rest of the pass-through fees and leasing to the corporation. The franchise owner probably ends up with around $100K per year for his/her income. Corporation covers facilities maintenance, admin, financials, contracts/legal - everything else.

Of course, it costs half a mil just to buy a franchise...a good initial return if the corporation only dumps $100K - $200K total cost to renovate an existing building they bought cheap at a foreclosure auction for the new franchisee. And if you can get a child-care support contract with a school district, state/federal organization, or a major employer or NGO, the corporation and the franchise owner can make bucu bucks for a long period of time with little effort.

Haele

[larkrake]

38. capitalism and profit

[HuckleB]

45. As has been noted, big corporations are getting a bigger piece of the pie.

And they want a certain amount of profit.

Still, if we choose to pay workers a living wage, it's not going to be cheap. We were able to have our son in a pre-school near my wife's work, run by a Lutheran church, in a open budget nonprofit, with a reputation for paying its employees well, and, thus, keeping them around. The employees had health insurance and other benefits,band the two main teachers had been there for 3 and 8 years before we got there. The younger one, who had been there three years stayed for 3 more years after our boy started kindergarten. She got married and moved out of town. The other teacher is still there.

For that, we paid 15 percent or so above the average rate. Still, that tells me profits are sucking up a fair percentage of the money elsewhere.

Of course, the standard of care was also above average, even though it should be what every kid gets, at minimum. We're lucky we could afford it.