Post-COVID Childcare Shortage: Provider Closures, Staff Turnover, and Rising Costs

The Spring 2020 Collapse

On March 13, 2020, the federal government declared a national emergency. Within two weeks, roughly 60% of licensed childcare providers had closed — some by state mandate, most voluntarily because enrollment collapsed as parents shifted to remote work and kept children home.

This wasn't a controlled shutdown. Childcare providers operate on thin margins — typically 3–5% operating margin even in good years — and the economics of staying open at 20% enrollment with full fixed costs were impossible. Providers that could access CARES Act Emergency Childcare funds (distributed in April 2020) stayed open to serve essential workers. Most could not access these funds quickly enough.

The workforce impact was immediate. Childcare workers who had previously earned $11–14/hour were now simultaneously: asked to care for children whose parents were essential workers (higher exposure risk), facing the possibility of center closure (job insecurity), and watching Amazon and Walmart advertise $15–18/hour warehouse jobs with no COVID exposure. The calculus was not complicated.

Permanent Closures: The Supply Destruction

Not all the closures were temporary. The NDCP's 2021 "Rising Child Care Prices" report estimated that between 9,000 and 11,000 licensed childcare programs — primarily family home providers and small center operators — closed permanently between March 2020 and December 2021. This represents roughly 7–9% of the total licensed supply that existed before the pandemic.

The closures were not evenly distributed. Rural areas, which depend more heavily on family home providers (often a single caregiver operating from their home), saw disproportionate losses. A rural county with three family home providers that loses one has lost 33% of its supply — a much more severe impact than a suburb that loses one center among thirty.

Urban markets saw a different type of supply loss: the permanent closure of small center operators who had been running on one-month cash reserves. These were often minority-owned centers in lower-income neighborhoods — the providers most likely to serve CCDF subsidy recipients. Their closure didn't just reduce supply; it removed the providers most accessible to low-income families.

Why Some Providers Never Reopened

The economics of reopening a childcare center after 12–18 months of closure are significantly harder than keeping one running. A closed center needs:

• License reactivation (which may require facility reinspection, updated paperwork, often 2–4 months of regulatory process)
• New staff hiring and training (the former staff are gone, working elsewhere, with no reason to return at the same wage)
• Re-enrollment of families (who have already found alternative arrangements)
• Working capital to cover operating costs before enrollment revenue catches up (3–6 months of operating costs before breaking even)

For a small center operator in their 50s or 60s — facing these obstacles with no guarantee of recouping the re-opening investment — the decision to permanently close was rational. The industry lost institutional knowledge and community infrastructure that cannot be easily replaced.

The Turnover Crisis and Its Cost Implications

Annual childcare worker turnover had run 25–30% pre-pandemic — already high by any industry standard. During 2021, that figure reached 35–40% in many markets (Child Care Aware of America, "The US and the High Price of Child Care," 2022).

High turnover has direct cost implications for centers beyond the obvious recruitment and training expenses:

1. Enrollment impact. Parents choose childcare providers partly based on relationship with consistent teachers. When a center turns over 40% of its staff in 12 months, families leave. A center at 70% enrollment because of staff disruption still pays nearly full fixed costs. The per-child cost goes up — and so do fees.
2. Wage escalation. To stem turnover, centers raised wages. The average hourly wage for childcare workers rose from approximately $12.24/hour in 2020 to $14.78/hour in 2023 — a 20.7% increase (BLS OES). This was the right thing to do for workers, but it directly drove fee increases, since staffing is 65–80% of operating costs.
3. Temporary staffing costs. Centers unable to maintain permanent staff turned to temp agencies and substitute networks at premium rates — often $18–22/hour for unaffiliated subs — to maintain compliance ratios. This premium is invisible in average wage data but real in operating budgets.

The ARPA Lifeline and What Happened When It Ended

The American Rescue Plan Act (March 2021) allocated $24B in childcare stabilization grants — the largest single federal childcare investment in history. These funds were distributed through states and reached approximately 220,000 childcare providers between 2021 and September 2023.

ARPA grants covered operating expenses, wage increases, rent, and facility improvements. They were specifically designed to prevent closures and stabilize the workforce. The NDCP estimated that without ARPA stabilization funds, an additional 3.2 million childcare slots could have been lost as providers closed or reduced enrollment.

The critical limitation: ARPA grants were explicitly temporary. When the funding window closed in September 2023, providers that had used grants to hold fees flat while absorbing cost increases faced an immediate repricing decision. The NDCP surveyed providers in late 2023 and found:

• 34% of providers planned fee increases of 5–10% within 6 months of grant expiration
• 18% planned increases of 10–20%
• 12% were considering reducing enrollment or closing

This grant cliff is part of why 2024 childcare cost data shows sustained increases even as general inflation began moderating. The stabilization was real while it lasted — and its expiration was a genuine cost event for families.

Recovery Status in 2026: Incomplete and Uneven

As of early 2026, the childcare workforce remains 5–8% below 2019 levels (BLS Monthly Employment Situation). New provider openings have partially offset pandemic closures in high-demand urban markets, but rural areas and lower-income urban neighborhoods remain underserved.

The workforce characteristics have also shifted. The average age of childcare workers has declined slightly — younger workers have entered the field — but average tenure has declined sharply. The institutional knowledge that experienced workers carry about child development, regulatory compliance, and center operations takes years to build. A workforce with higher turnover and shorter tenure is less effective and more expensive to maintain, even at the same wage levels.

Subsidy reforms in several states — Colorado's Universal Preschool, California's expanded subsidies — have improved access for some families. But these programs concentrate on preschool-age children (3–5 years), where the political constituency is larger. Infant and toddler care (0–2 years), where the cost and shortage problems are most severe, has received less targeted policy attention.

What Families Should Know

The post-COVID childcare shortage has several practical implications for families planning now:

1. Waitlists are real and long. In major metros, waitlists for infant care at quality centers run 12–18 months. Families who plan to need care in 2027 should be adding themselves to waitlists now. This is not anecdote — it's a structural consequence of supply that hasn't caught up with demand.
2. Provider closures can still happen. Centers that survived on ARPA grants but didn't adjust their operational cost structure are more fragile than they appear. A center with rising costs and a fee structure that hasn't kept up is at closure risk. Ask prospective providers about their enrollment trends, director tenure, and whether they've recently had to reduce capacity.
3. Rural options may be more limited than they appear on maps. Provider databases and Google searches show licensed providers that may have subsequently closed or reduced capacity. Always call before assuming a provider is active.
4. Subsidies have real wait times. CCDF subsidy waitlists in high-demand states can run 6–18 months. Apply immediately upon need — do not wait until care is imminent.

The Long-Term Picture

The COVID disruption exposed structural weaknesses in childcare that predated the pandemic: thin margins, high turnover, inadequate wages, and dependence on parent fees in a market where parents cannot afford to pay the full cost of quality care. The pandemic didn't create these problems — it concentrated and accelerated them.

A sustainable childcare system would require either significantly higher parent fees (moving full-time infant care toward $25,000/year nationally — the D.C. model), significantly higher public subsidy (comparable to K-12 education funding), or some combination. Neither of these political paths is currently available at the federal level. What exists is a patchwork of state programs, expiring federal grants, and parent fees that have already risen past affordability for much of the population.

For practical guidance on what's available in your state — subsidies, sliding-scale providers, Head Start programs — use our tools below.

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