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Child Care Reaps Benefits for Employers

February 3, 2005
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Making the case that providing benefits pays off for employers isn’t easy, and measuring the payoff of an onsite day-care center is particularly tough. A new study offers a way to value day-care benefits, and finds that employers who offer the benefit are well rewarded.

Bowdoin College professors Rachel Connelly and Deborah DeGraff co-authored the study with University of North Carolina professor Rachel Willis. They surveyed 925 employees at three light manufacturing firms—two that offer on-site child care and one that does not. The report was partially funded by a grant from the W.E. Upjohn Institute for Employment Research, and was written up in Industrial Relations.

The researchers studied the cost-benefit of the on-site day-care centers mainly by measuring how much it’s worth to employees; in other words, how much employers would have to pay employees in wages had the centers not existed. They arrived at this number by asking employees how much they’d be willing to have deducted from their paychecks in order to keep their child care center open. In the case of the company that didn’t have child care, employees were asked what they’d pay to have it.

The upshot: firms offering the benefit save between approximately one-half and twice the cost of what the companies are paying to have their child-care centers open, including subsidies to employees and other costs. This does not include the expected cost savings arising from reduced turnover, higher productivity, goodwill in the community, a reputation as a place where potential employees want to work or lower absenteeism.

The report does say, however, that "we know from other studies that the breakdown of child-care arrangements is a source of stress for many parents and leads to a number of lost work days per year."

Connelly adds that a key finding of the survey was that newly hired employees were willing to pay more than long-time employees for child care. "You want to convince certain new workers to work for you," she says. "If they ascribe more value to the child-care, then your strategy is working. And that’s what we found."

Interestingly, Connelly and her team found that while some employees without children view a child-care center as worthless to them, others would be willing to pay to keep it running. One 17-year-old male employee surveyed, for example, says he supports the benefit because, he says, "I don’t want my coworkers to lose day care."

The professors hope the report offers employers some help in valuing child-care and possibly other benefits programs. According to the authors’ description of their findings in Industrial Relations, "measuring the benefits of employer-sponsored child care programs for employers is challenging given the complex interaction among working conditions, productivity, compensation and the makeup of one’s labor force. As a result, even companies with employer-sponsored child-care programs have found it difficult to quantify the value of the child care benefit they are offering. Many other firms may be contemplating offering an employer-sponsored child care programs but do not follow through because of the same difficulty in calculating the benefit versus the cost."

One of the companies surveyed, Action Industries, opened a child care center in 1979, partially to retain his human resources officer. It was a decision he admits was based more on impulse than on detailed study.

For more information, also see "A Case for Child Care."

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