As regional manager for EOS Hospitality at the Delaware shore, Benjamin Gray’s biggest challenge is not the budget he oversees for three properties, the scheduling of 180 employees, or the impact COVID-19 has had on travel and the hospitality sector.

It’s child care.

“I can tell you that [child care] is absolutely the number one challenge that we face every single day for our hotels,” Gray said. The issue? “Roughly 10 to 20 percent of [employees] do not show up for work every single day because of lack of child care,” he said.

It’s easy to see why. In Delaware, center-based child care costs about $13,000, or 20 percent of the state’s median household’s income, each year — and that’s for just one child.

Cost is not the only barrier: There is also a dearth of providers. The total licensed capacity is 35,481, but there are 54,261 children under the age of five in the state.1

Gray recounted how a manager he recently hired from out of state experienced the issue firsthand, relocating only to find no facility could take her children until 2024. “She looked at me and she said, ‘Ben, what am I supposed to do for the next two years? I uprooted my family and I moved to Delaware, and I don't have a place for my kids to go,’” Gray recalled.

Affecting Labor Force Participation and the Regional Economy

Gray discussed his challenges during a May 3 webinar hosted by the Delaware State Chamber of Commerce. The event was part of a larger effort to improve the accessibility, supply, and quality of early care and education in Delaware. The Philadelphia Fed, through our Economic Growth & Mobility Project (EGMP)’s Research in Action Labs, is working with a group in the state to address child-care challenges. The labs convene stakeholders — local business, community, and government leaders — around an economic issue they want to solve and help them develop an action plan. Lab partners include the Delaware State Chamber of Commerce, Rodel, and the Office of Early Learning at the Delaware Department of Education. The goal is to elevate the economic importance of the early care and education sector to workers and the local economy and increase the quality and supply of child care in the state.

Ashley Putnam, director of the EGMP, cited research that connects early care and education to better economic outcomes for children and working parents, which has wider implications for the economic health of a region. “Early care is vital to a strong regional economy,” she said. Putnam also noted the connection between child-care availability and workforce participation. “And our economy is only as strong as the number of people who are participating,” she said.

According to Putnam, addressing child care is critical for Delaware as it recovers from the COVID-19 pandemic. During the webinar, Putnam noted that nearly 2.3 million women in the U.S. have left the workforce since February 2020. In Delaware, the female labor force still has not returned to pre-pandemic levels,2  and families are leaving the state at a higher-than-average rate when compared with other states in the nation.

So, we're not just talking about something that is good for working families, or childcare providers, or small businesses. The issue we're discussing is about the regional economy — how to make it more resilient, more inclusive, and how to be sure everybody has an opportunity to participate.

Ashley Putnam 
Ashley Putnam
Director, Economic Growth & Mobility Project

“So, we're not just talking about something that is good for working families, or childcare providers, or small businesses,” Putnam said. “The issue we're discussing is about the regional economy — how to make it more resilient, more inclusive, and how to be sure everybody has an opportunity to participate.”

A Dearth of Options

The COVID-19 pandemic has only deepened child-care shortages. In fact, 96 percent of Delaware’s child-care centers are experiencing staffing issues and half say they have had to turn away families because of staffing shortages and underinvestment.

Karen Hartz, director of early childhood services for the Latin American Community Center in Wilmington, shared her experience during the event. “Like many employers right now, we're finding it difficult to hire staff to expand to serve more families. However, unlike most other employers, this is the challenge that we've been facing for years and years. It's just become more pronounced with a pandemic.”

Serving close to 120 families annually, the center is constructing a new building that could bring in an additional 100 children or so — nearly the entire waitlist. But Hartz said she worries about the ability to staff those classrooms.

Hospitality manager Gray shared that the prospective candidates he interviews are no longer primarily focused on 401Ks, paid time off, or even salaries. “All those things are so important, but one of the top interview questions from candidates is, ‘Do you provide child care?’” said Gray. “In my entire 10-year career in hospitality, I've never had that question asked.”

High Costs and the Benefits Cliff

Delaware offers a benefit called purchase of care to offset the cost of early care and education. To qualify, a family’s income must be at most 185 percent of the federal poverty level. However, even if families are eligible, “that doesn't necessarily mean that they’re going to get a space,” noted Hartz. Additionally, for families who can take advantage of the purchase of care benefit, finding a provider who accepts it and has availability is an additional challenge.

Hartz referenced another challenge: The benefits cliff, when a rise in income affects eligibility, explaining, “What we've been seeing recently is that families who may have qualified in the past are no longer qualifying because wages in Delaware have been going up” for a variety of reasons. She noted that sometimes a parent will drop out of the workforce entirely because the private rate is out of reach. Others may refuse a raise, as Gray recounted. “I couldn't believe that they came to me, and they said, ‘Actually, Ben, I'll take the promotion. Thank you for the new title, but can you keep my salary the same? Because it’ll benefit my family more,’” he said.

The benefits cliff doesn’t only affect parents. Most child-care professionals are in low-wage positions, so they are also vulnerable to the sudden cutoff in eligibility if their wages rise.

And although wages are rising, they have not kept up with inflation, Philadelphia Fed President Patrick T. Harker noted in a recent speech. Inflation also presents other issues: Rising housing prices mean workers can’t afford to live near jobs, which also impacts the health of the labor market.

A Market Versus a Public Good

One major factor is that free public education in Delaware doesn’t start until a child is five years old. Before that, families must rely on child-care businesses. This affects the policy options available, noted Caitlin Gleason, associate secretary, early childhood support at the Delaware Department of Education, during the webinar.

In addition to conversations around expanding state funding for preschool, Gleason shared that the state is exploring partnerships, such as one with Delaware State University, to rethink credentialing for early care and education professionals and other innovative recruitment strategies. Gleason also urged webinar attendees to ask their state legislators to support a bill that would explore ways to make the early childhood profession more sustainable.

The May 3 webinar was a chance to share ideas and encourage business owners, local nonprofits, and others to act. The lab partners recently published a report that includes ways stakeholders can get involved to support solutions.

“The Fed is concerned with access to opportunity and the labor market to support a healthy economy,” said Sloane Kaiser, Philadelphia Fed community engagement associate. “Our role is to provide research, facilitate, and let the community lead the way.”

  1. The views expressed here are solely those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
  2. Licensed capacity is only in child care and family child care; children are also served in public and private schools that are not yet licensed. Licensed capacity is merely a square footage estimate of children that could be served; it is not a reflection of the number of available spots for children, particularly for larger centers.
  3. Calculated by Sloane Kaiser, Federal Reserve Bank of Philadelphia, using CPS basic monthly samples (January 2019–December 2021) retrieved from IPUMS-CPS, University of Minnesota,