Author: Maggie Smith
Lack of access to affordable, high-quality child care is a barrier to labor force participation for working parents in North Carolina and affects our state’s economy. In 2024, the U.S. Chamber of Commerce Foundation, the NC Chamber Foundation, and NC Child released Untapped Potential in NC, a statewide study that estimated that child care-related work disruptions cost North Carolina’s economy $5.65 billion annually, driven by $4.29 billion in employer costs and $1.36 billion in lost tax revenues.
Using methodology developed by the University of Missouri Extension, this analysis builds on the Untapped Potential study by examining how child care shortages impact business productivity and tax revenues at the county level. By quantifying these localized costs, this study aims to help businesses and community leaders understand the economic significance of child care access. See the methodology section at the end for detailed calculations.
The Economic Cost of Inadequate Child Care
Figure 1 shows the estimated total costs from child care-related worker absenteeism and turnover across North Carolina counties. These costs include losses incurred by businesses like reduced productivity and turnover costs and state and local tax revenue losses.
Total costs are driven by the number of affected workers and local wage levels, with larger labor forces generating higher combined losses. North Carolina’s three most populous counties – Wake ($666M), Mecklenburg ($574M), and Guilford ($186M) – account for approximately $1.4 billion in economic losses.
Figure 1
The interactive map in Figure 2 shows the estimated annual cost per impacted worker due to inadequate child care across North Carolina's 100 counties. This per-worker metric enables meaningful comparison across different population sizes, illustrating the relative economic burden. Costs range from $4,898 to $9,410 per affected worker. Counties with higher median earnings – such as Wake ($74k), Orange ($70k), and Union (~$64k) –experience greater losses since productivity impacts and turnover expenses are calculated based on local wage levels.
While rural counties often face lower absolute dollar losses per worker, they may experience disproportionate workforce strain from employee absenteeism and turnover due to limited labor supply and fewer available replacement workers. This creates unique challenges for rural employers who must maintain operations with smaller, tighter labor markets.
Figure 2
Table 1 provides detailed county-level data including business costs, state and local tax losses, total economic costs, and per-worker impacts for each North Carolina county. Across counties, business costs substantially exceed tax revenue losses, as tax losses represent only the portion of lost wages that would have been collected as taxes (typically 8-10% of lost income for middle-income families), while business costs capture the full value of lost productivity and turnover expenses.
Notably, counties with the highest total losses don't always have the highest per-worker costs. While Wake County has both the highest total loss ($666M) and highest per-worker cost ($9,410), Cumberland County ranks 6th in total losses ($129M) but has one of the lowest per-worker costs ($5,515). This reflects Cumberland County's relatively large workforce of families with young children, but lower median earnings (~$44k) compared to counties like Wake (~$74k).
Table 1
Conclusion
This county-level analysis quantifies the economic costs of child care challenges. When working parents cannot access reliable, affordable child care, businesses experience costs through lost productivity, increased worker absenteeism, and employee turnover. Reduced household income from workforce disruptions also leads to lower state and local tax revenues.
These findings suggest that child care access issues extend beyond family support to include measurable economic costs. Understanding these local impacts can help policymakers, economic and workforce development leaders, employers, and community members evaluate child care access as an economic issue and assess potential strategies for addressing child care challenges. For more detailed policy implications and recommendations, look out for NC Commerce’s upcoming report in partnership with NC Child.
Methodology
This analysis follows the methodology developed by the University of Missouri Extension’s economic impact study of child care shortages, which provides a replicable framework for measuring child care-related economic impacts at the local level. The approach estimates the annual costs of child care access issues on North Carolina businesses and tax revenues at the county-level, building upon the statewide findings from the U.S. Chamber of Commerce Foundation's Untapped Potential in NC report. The study quantifies two primary cost categories: business costs resulting from employee absenteeism and turnover, and tax revenue losses due to reduced household income.
Data Sources
- U.S. Census Bureau's American Community Survey (2023): County-level data on parents in the labor force with children under age 6 (Table B23008) and median earnings by county and gender, based on full-time, year-round employment (Table B20017)
- U.S. Chamber of Commerce Foundation (Untapped Potential in NC): Survey data on North Carolina employed parents' experiences with child care-related work disruptions
- Institute on Taxation and Economic Policy (ITEP): State and local tax burden estimates for middle-income families in North Carolina
- Boushey & Glynn (2012): Research on employee turnover costs from the Center for American Progress
Business Cost Calculations
Absenteeism Costs
The absenteeism cost calculation estimates productivity losses and replacement labor costs when employees miss work due to child care issues. Drawing from the Untapped Potential in NC report finding that 67% of North Carolina parents missed work at least once in the last three months because of child care issues, with an average of 14 workdays missed per year, the calculation proceeded as follows:
- Identified the number of affected workers by applying the 67% rate to each county's parental workforce (parents in the labor force with children under six years old).
- Calculated the per-worker cost by multiplying 14 missed workdays by the county-specific median hourly wage (assuming eight hours per workday).
- Aggregated individual worker costs to derive total county absenteeism costs.
The underlying assumption is that the cost to businesses equals the wages that would have been paid during absences, whether through direct costs (overtime, temporary staffing) or lost output.
Turnover Costs
Employee turnover costs account for productivity losses, recruitment expenses, and training investments when parents leave the workforce due to child care challenges. The calculation incorporated:
- The Untapped Potential in NC report’s finding that 25% of parents experienced employment changes due to child care challenges.
Note: This diverges from the University of Missouri Extension methodology, which used Census Bureau’s Household Pulse Survey data that includes households with children up to age 18. We use the Untapped Potential survey data to focus on households with children under age six. - Research by Boushey & Glynn (2012) indicating the median turnover cost equals 21% of a worker's annual salary.
- County-specific median annual wages calculated from Census Bureau’s American Community Survey.
Multiplying the affected workers by the turnover cost rate and median wages yielded total county and statewide turnover costs.
Tax Revenue Loss Calculations
Reduced household income from missed work and workforce exits translates directly into diminished tax revenues for state and local governments. The methodology for estimating tax losses involved:
- Calculating total wage losses from absenteeism (wages for missed days) and turnover (median annual earnings for workers that experienced an employment change).
- Applying the Institute on Taxation and Economic Policy's tax burden estimates for middle-income families to determine the percentage of income lost to state and local taxes.
- Incorporating state income tax, sales taxes, and local property taxes in the calculation.
This approach yielded estimated tax revenue losses for both state and local governments across all North Carolina counties.
County-Level Analysis
To provide localized impact estimates, the statewide methodology was applied at the county level using county-specific data on parental workforce size and median wages. This approach enables:
- Calculation of total losses by county, reflecting local workforce composition and wage levels.
- Estimation of losses per impacted worker, dividing total county losses by the number of affected parents.
- Geographic analysis comparing different regions across North Carolina.
Limitations and Assumptions
Several important considerations should be noted when interpreting these estimates:
- Geographic precision: County-level estimates assume workers primarily impact their county of residence, though cross-county commuting is common.
- Worker overlap: Some parents who miss work due to child care issues may eventually leave the workforce entirely, suggesting potential overlap between absenteeism and turnover categories.
- Paid leave: The calculations assume missed work results in lost wages. Workers using paid leave would not experience income losses, potentially leading to slightly overestimated tax revenue losses, though business costs of lost productivity likely remain.
- Tax complexity: The analysis uses middle-income tax burden rates applied to all affected workers, which may not capture the full variation in individual tax situations.
- Wage assumptions: Median wage data provide reasonable central estimates but do not reflect the full distribution of earnings among affected workers.
Despite these limitations, the methodology provides a framework for understanding the magnitude and distribution of economic impacts from child care access challenges across North Carolina.