The COVID-19 pandemic exposed the business-criticality of childcare benefits, which are now key to the attraction, productivity, and retention of diverse talent.
One thing that we’ve been thinking a lot about both from an investment and ESG standpoint is the impact of the pandemic on the childcare industry.
The research has been pretty clear that female representation could take a significant step backwards in the workforce as a result of the pandemic, given that increased demands at home (mainly childcare) have disproportionally fallen on women and caused a not insignificant number of women to consider downshifting or even leaving the workforce completely.
On the demand side, the pandemic has exposed the business-criticality of childcare benefits, especially as it relates to employee productivity and the attraction and retention of diverse talent.
During COVID, back-up care went from a nice-to-have to an issue of business continuity. We expect continued adoption of this benefit as employer and employee awareness of its value proposition has increased over the past year.
At the same time the pandemic has potentially permanently impaired supply, as the industry, which was already grappling with razor-thin margins, dealt with declining enrollment, increasing costs (namely in terms of cleaning supplies, PPE, and labor), and issues with retaining staff.
There was already a scarcity with supply in terms of high-quality childcare pre-pandemic, and COVID exacerbated this issue, with some industry organizations expecting that we could lose as much as 25% of supply as a result of the pandemic.
As in the case of other industries, we expect the strong to get stronger and see continued consolidation in the space over the coming year.
In terms of employer-sponsored care, we also think the new normal in terms of hybrid work-from-home arrangements should favor those with scale, as players with a broader network of centers, strong employer relationships, and the ability to offer both full-service and back-up care benefits are better equipped to preserve continuity of care for families and cater to the flexible needs of employer partners going forward.