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How Child Care Became the Most Broken Business in America

Child care doesn’t work like a normal business. Looking after young children comes with a litany of regulations to ensure the programs are safe. There are square footage requirements, zoning restrictions, earthquake preparedness plans, fire safety codes, CPR certifications, nutritional guidelines, rules about parking and outdoor space, liability insurance.

Child care in the U.S. is the rare example of an almost entirely private market in which the service offered is too expensive for both consumers and the businesses that provide it. This reality is reflected in two alarming facts: In most states, putting a baby in a licensed child-care facility costs more than in-state college tuition, yet the people who provide that care make an average of about $24,000 a year, less than a fast-food worker or janitor, even though 87% of them have some form of higher education. Every year a quarter of the industry’s workers leave. All this adds up to an exceptionally precarious business model; according to a recent study by the U.S. Department of the Treasury, the typical child-care center’s profit margin is only 1%.