The sector in discussion is child care, and the discussion focuses on what can happen if private equity firms take over a larger share of the child care market. Slaughter was speaking on a panel at a day-long event in Washington D.C. to mark the by the National Women鈥檚 Law Center and Open Markets Institute: 鈥淐hildren Before Profits: Constraining Private Equity Profiteering to Advance Child Care as a Public Good.鈥澛�

The concerns about private equity鈥檚 influence are well founded. by researchers at Harvard Business School and the University of Chicago found that private equity takeovers result in significant job losses. These firms reduce wages, benefits and staffing at firms they acquire 鈥� with devastating consequences to thousands of workers, their families and their entire communities. Private equity funds also should their tactics to maximize profits fail. And for a business like child care, primed to receive a possible influx of federal and state investment, private equity鈥檚 interest in the sector is likely to increase.

鈥淭he report isn鈥檛 anti-private equity, it鈥檚 pro-child care,鈥� said Melissa Boteach, vice president for income security and child care/early learning at the National Women鈥檚 Law Center and one of the authors of the report. Boteach and her co-author, Audrey Stienon from Open Markets Institute, advocate that child care should be understood as a public good that鈥檚 in need of sustained government investment. The report lays out a vision of how a robust child care system would provide universal access to high quality child care with appropriately compensated providers. The goal, says Boteach, is that if private equity firms, or other outside investors, are going to enter the child-care market, they should do so in a way that upholds this vision.

The timing of this report coincides with several states 鈥� including , and 鈥� instituting record levels of government investment in child care. from the First Five Years Fund also shows strong bipartisan voter support for more child care funding, with 93 percent of voters believing it鈥檚 important for working parents of young children to have access to affordable quality child care programs.

Private equity has a history of chasing after industries that receive sustained sources of federal funding. Eileen Applebaum, co-director at the Center for Economic and Policy Research and an , who also served as a panelist at the event, detailed the way in which private equity firms began investing in a substantial share of hospice care services. Much of hospice care is funded by Medicare, which pays a fixed amount to the hospice agency for each day an eligible Medicare beneficiary is enrolled, regardless of whether the patient receives actual services on a particular day.

Other tactics from the private equity 鈥減laybook鈥� as Applebaum discussed, include myriad anti-competitive behaviors, including consolidation, creating higher debt burdens, cutting labor costs and staff benefits, and enacting policies that maximize short-term profits to the private equity fund while passing on the liabilities and burdens to the individual companies they鈥檇 invested in. Applebaum points to the wide discrepancies in profits and patient care for hospice services: profit margins for a nonprofit hospice provider were around 4-5%, and for those owned by private equity firms, it was 19 percent. Nonprofits are more likely to use funds to invest in staffing and the business, debt-financed acquisitions to restructure these companies to maximize their profit margins, and try to sell them to the highest bidder within three to five years.

In the case of hospice, Applebaum that private equity hospice providers have higher rates of neglect, low staffing and are more likely to pass on the higher costs to patients and families.

Child care is in a unique position of being primarily a small business industry, with low profit margins yet with high demand because it is a necessity for many Americans to go to work and for the economy to function. 鈥淎 textbook example of a broken market鈥� is how Treasury Secretary Janet Yellin in the United States. Yet if a child care center is forced to declare bankruptcy, the private equity company may still see a high return on the investment, even though the individual businesses may have shuttered, and the communities that rely on such child care centers may no longer have a viable option.

Boteach emphasized that the presence of private equity and the private sector itself is not problematic – and that the existence of more child care options with high quality care can be a profitable industry if sufficient government funding is provided. Often the individual child care centers are owned by women, many of them Black and brown, with strong ties to the communities they serve. Making such industries profitable so that they can pay their employees a living wage is a noble goal, she said. 鈥淭he problem,鈥� Boteach explains, 鈥渋s that private equity firms have a traditional playbook, whereby the firms collect the profits and pass the risk and liabilities back to the companies they鈥檝e taken over. And with the influx of possible public funding, external investors should have guardrails in place to protect the child care industry and the families they serve.鈥�

The report is coming out at a moment in which private equity is poised to enter the child care market, but it is 鈥渘ot yet entrenched,鈥� said Audrey Stienon of Open Markets Institute, and the report鈥檚 co-author. 鈥淚t is possible to get ahead of the problem and change patterns.鈥�

Experts encouraged action to counter the threats of private equity takeover. This can be done at both the state and federal level, though guardrails surrounding government funding.聽Examples cited included to create standards and restrict profit for for-profit preschools that receive state funding. In Massachusetts, efforts are underway to limit the amount of state funding any larger company can receive. And for an industry like child care, which many families rely on for their own work, there is potential for real momentum in organizing parents to insist on such accountability measures for the involvement of outside investment groups like private equity. And as Rebecca Slaughter told the group, they need to bring such examples of poor conduct to the attention of the FTC. 鈥淚 can鈥檛 solve a problem if I don鈥檛 know about it,鈥� she said.

Child care may have a constituency that is primed to be vocal proponents. 鈥淧arents of children are a really good group of people to organize,鈥� said Eileen Applebaum.聽 鈥淵ou have to let them know that they are not alone.鈥�

The problem, according to Haspel, comes when our country begins to rely on big business to subsidize public goods 鈥� like health insurance for instance. Businesses may have a role to play, but history has shown businesses to be effectively looking out for their bottom line over employee well-being, particularly in the face of economic downtown, shareholder pressure or the 鈥渇ickle鈥� nature of the dynamic business market.

In his , co-published with the at New America (where I work as a staff writer) Haspel lays out the case for why relying on business to improve our country鈥檚 child care could be problematic. Haspel presented his report in a webinar which was followed by a panel discussion, much of which revolved around advocates who proposed a more inclusive 鈥渂oth and鈥� structure.

鈥淥n-site child care programs can be part of a broader system,鈥� Haspel said during the webinar. 鈥淪ome of the best [child cares] in the world exist as part of an on-site program.鈥� The question he asks is: who is child care for? 鈥淚f all you want to do is get parents to work, you don鈥檛 want to invest in a high-quality system. You just want a minimum system that works ok.鈥�

Haspel has already written extensively on this topic 鈥� from to cautioning the country on using . He proposes instead a business community that supports a larger publicly-financed child care system, one which has on-site care as part of the solution.

In a Q&A, Haspel explains why this 鈥渂oth-and” solution may not be the one that works 鈥� and the pitfalls of touting the unpopular opinion of the moment. But what could the way forward look like instead? A lightly edited conversation follows.

Rebecca Gale: The report is incredibly timely because the White House鈥檚 CHIPS Act includes a provision that employers who benefit from this Act should craft a program tailored to the location to provide child care for all of their workers. We are also seeing more states look to find ways to incentivize businesses to help shore up the child care industry. And much of the advocacy community has been quick to embrace these business-led solutions. What do you think we have to gain by looking toward businesses as the bedrock of such solutions, and are there other national models where this method has been successful?聽聽

Elliot Haspel: I absolutely understand the temptation to reach for employers given the dire straits the child care sector finds itself in 鈥� any port in a storm, as they say. There are two hypothetical advantages to this approach. First, I don鈥檛 think anyone can question that things like on-site child care centers can be immensely helpful to the lucky few who get to use them. We have such an expensive, supply-constrained system thanks to decades of failure to provide adequate public funding that these benefits do provide a, well, benefit. Secondly, there is an argument 鈥� and I think it has potential validity 鈥� that getting employers engaged around child care just for their employees can be an on-ramp for getting them engaged in the fight for a universal system.

But here鈥檚 the thing. There aren鈥檛 any national models I鈥檓 aware of where making businesses the primary source of child care has been successful. In what are commonly regarded as top-tier child care systems, such as in places like France and the Nordic countries, on-site child care programs exist but are part of the broader publicly-funded system. They are generally regulated the same as a community program and cost the same as a community program. An employee has options, and on- or near-site care is one option among many. In that sense, those offerings are more about physical proximity to a workplace as opposed to running child care through the employer-employee relationship.

RG: You鈥檝e said 鈥� rightly 鈥� that we don鈥檛 expect employers to provide 2nd grade. We鈥檝e managed to keep that public good to the purview of states and the federal government. What is it about the evolution of child care that makes this so drastically different that we are creating more incentives for businesses to get involved?

EH: So it鈥檚 worth doing a quick recap of the divergent histories around child care and public schools. The idea of public schooling has been around since the literal founding of America; Thomas Jefferson was an early champion. Horace Mann really kicked the movement into gear in the early-to-mid 19th century. The first compulsory schooling law was passed in Massachusetts in 1852, although scholars actually think the compulsory attendance laws lagged rather than drove widespread usage and taxpayer funding.

The arguments for public schools were varied, but largely rested on the idea that an educated populace was critical for a sustainable democracy, alongside more utilitarian arguments about a skilled workforce and forging a common American identity (or, in its more odious version, forced assimilation of immigrants and Native Americans). Even though public schools absolutely have a child-care function, that鈥檚 not how they are primarily perceived in the public eye, then or now.

Child care, on the other hand 鈥� with some exceptions 鈥� occupied a strange place because of a confluence of gender norms, economics (most early Americans lived on multigenerational family farms or ran a family business), and antiquated views of young children as either tiny adults or impulse-driven half-humans. It got almost zero public funding. Fast-forward all the way to the 1970s 鈥� I鈥檓 jumping through a lot of history! 鈥� and mothers are flooding into the labor force. There鈥檚 no child care system there to meet them. Nixon vetoes the Comprehensive Child Development Act in 1971. But there鈥檚 huge pent-up demand. So, who is there to meet them? The market. (Maxine Eichner calls this phenomenon the 鈥淔ree-Market Family鈥�). Now child care isn鈥檛 a critical piece of social infrastructure that informs the development of American democracy and safe, healthy, prosperous communities 鈥� now child care is a private service, a mere work support. It鈥檚 been kicked into a different plane, philosophically.

And both elected officials and advocates went along with it. I trace in how we鈥檝e had pushes for employer-sponsored child care benefits in every administration since Jimmy Carter. Even look at Build Back Better: 鈥減re-k鈥� was to be universal and free, 鈥渃hild care鈥� was to be acquired with a sliding fee scale. So, these mindsets are pretty deeply entrenched. If you accept child care is mere 鈥渨ork support,鈥� then sure, leaning on employers makes some sense. My argument is that child care is so, so much more than just a work enabler.

RG: The obvious analogy that has been touted 鈥� both in your report and presentation 鈥� is health care, and how and why businesses got involved as purveyors of health insurance. Yet the health insurance marketplace has proved complicated to unwind and many people 鈥� myself included 鈥� still rely on their employers to provide their families鈥� health benefits. Is this really so different from how employer-sponsored child care might look?

EH: The health insurance marketplace has proven complicated to unwind because we haven鈥檛 been able to muster the political will for a truly universal healthcare system, with respect to ObamaCare, it鈥檚 a half-measure. And in some ways, that鈥檚 exactly the point.

The more we entrench child care as a job-linked benefit, the harder it will be to transition away from that model, both politically and practically. So, if we want to replicate the employer health insurance model and get 50 percent of the country getting their child care via employers鈥攂ringing along job lock, volatility, limited options and inefficiencies, all while leaving millions out in the cold鈥攖hen I think we need to be honest with ourselves about the tradeoffs. Except, as I point out in the report, in some ways running child care through employers is even worse, because you鈥檝e also got the child to think of and there isn鈥檛 any equivalent of COBRA or the ACA marketplaces.

RG: Many experts argue that child care is in crisis: demand is high, supply is low, providers are paid poverty wages and the children are suffering when the quality of care is poor. In the panel discussion there was a lot of talk of 鈥渂oth-and,鈥� the idea that the business-sponsored child care programs could help improve quality, access and supply. Can you walk me through why you are wary of this approach, and what should be done instead?

EH: 鈥淏oth-and鈥� doesn鈥檛 work when you鈥檙e trying to squeeze the same balloon, and 鈥渂oth-and鈥� doesn鈥檛 work when there are opportunity costs. While I appreciate that some businesses are stepping up (I try to emphasize every time I talk about this that the intentions here are largely good!) and I wouldn鈥檛 tell them to stop.

What I would say is that policymakers need to stop using taxpayer money to incentivize them. Doing so comes at the cost of advancing more universal approaches or approaches that prioritize particular populations (like lower-income families), reinforces child care as a mere work support, and gives more political power to big business and investor-backed for-profit child care chains, both of which have shown themselves unaligned with the costs of an affordable, universal, pluralistic system with well-compensated early educators.

RG: The presentation and discussion included a concept in child care that I don鈥檛 think gets enough attention: the 鈥渕inimum child care viable fallacy.鈥� If all you want to do is get parents to work, you don鈥檛 want to invest in a high-quality system. You just want a minimum system that works ok. As a parent and someone who has covered child care as a reporting beat for a while, this makes absolute sense to me, but I wonder how such a comment has resonated with a wider audience, particularly decision makers who may view child care only as an economic necessity so that more parents can work?

EH: It鈥檚 interesting, I鈥檝e never had anyone challenge me on the fallacy. Again, I get why policymakers and advocates have, for about 25 years now, leaned so heavily on the economic/work arguments for child care. It brought some unexpected allies along, but one analogy I use is that it鈥檚 sort of like wedging a door open by breaking the wood. You make an opening, but it鈥檚 narrow and comes with quite a cost. Children are backgrounded in that frame. I don鈥檛 know that as a sector, we have fully reckoned with what it means to go full-bore on child care as a mere work support. This is actually the topic of the new book I鈥檓 working on, so I鈥檒l have a lot more to say in the coming months!

RG: One of my favorite discussion lines was 鈥渢oday鈥檚 stopgap measure is tomorrow鈥檚 status quo.鈥� It really speaks to the fractured nature of our public policy landscape, but I wonder how it impacts the way our country is shaping the support for the child care debate. Where do you think this leads us, and what do you think this debate looks like 5 years into the future?

EH: If we double-down on employer-sponsored child care benefits 鈥� and continue to use public funds to incentivize them 鈥� in 5 years, I fear we are going to be in a place where far more parents are dependent on their employers for child care, where big business and big corporate child care chains are politically dominant in the child care debate, and where we are further than we even are today from a universal system that works well for all involved.

We need to say this out loud: a functional child care system will take, at minimum, $100 to $150 billion a year. That鈥檚 good and proper for a human service that undergirds healthy children, healthy families and healthy communities. I fail to see how rushing headlong to foreground employers in child care puts us on a credible path to that system.

There is a difference between an incremental step on the path towards an effective system and a step that takes us down a different path. The pursuit of widespread employer-linked child care is the wrong path for America.

Rebecca Gale is a staff writer with the Better Life Lab at New America where she covers child care. The Better Life Lab hosted the event and co-published Haspel鈥檚 report 鈥� which .