New realities in the corporate workplace: child care in the nineties.

Introduction

United States businesses lose $3 billion annually from child care-related absences, according to the Child Care Action Campaign (Employee Benefit Plan Review 1991a). IBM is probably typical of many large companies: nearly 60% of its employee population is dual income, 30%

are women, and 30% have an elder care need. Companies such as IBM and GE Aerospace feel they have an edge in attracting and retaining high-quality employees with such benefits as flexible scheduling, leaves of absence, temporary part-time work arrangements, assistance in obtaining appropriate child care, and work-at-home arrangements. Such companies see these kinds of benefits and work-life programs greatly enhancing motivation, productivity, and employee loyalty (Employee Benefit Plan Review 1991a, 1991b). However, relatively few companies have this enlightened perspective.

During the 1990s, two out of every three workers will be women. By the year 2000, experts project that 80% of women from ages 25 to 54 will be employed, composing nearly half of the paid labor force (Yalow 1990). Another survey indicates that in the 1990s an estimated 12 million children under age six will have both parents or their only parent working (Colgate 1990). As a result of these demographics, child care in the 1990s will become a critical concern for any corporation intent on remaining competitive in the marketplace.

Child care affects the workplace because problems with child care can contribute to absenteeism and low productivity. A survey of employee-supported child care in the U.S. shows that corporations that address the child care issue have seen lower absenteeism, higher employee retention, various recruitment advantages, higher employee morale, and a better corporate image (Monthly Labor Review 1988, Bischoff 1990, and Thomas and Thomas 1990). In spite of these benefits, only 3,000 of 6,000,000 businesses (0.05%) in the U.S., predominantly large corporations and public agencies, offer employees any type of child-care assistance (Levine, 1989).

There appears to be a consensus that as more women enter the workforce, child care will become more important to a corporation's ability to compete. According to Ewing (1990), corporate and government policies have not kept up with changes in society. Creative answers are needed. Funding for such activities must come from parents, based on their ability to pay, and from government and businesses. Also, information and referral sources will need to be expanded.

The purpose of this paper is to explore the issue of child care in the work place and to discuss and evaluate the extent and impact of the corporate response to this problem.

Problems Affecting the Child Care System

Many problems impinge on working parents' ability to be both productive employees and sensitive, responsible parents. In today's environment, parents all over the U.S. are experiencing more child-care problems than in the past. The demand for affordable care for children generally exceeds the supply. The agencies providing child care are either filled to capacity or charge more than parents can afford. The average rate charged by family day-care homes is between $2.25 and $2.50 per hour per child (Connelly 1992). Many low-income parents cannot afford such fees without assistance.

Another problem which has a great effect on the field of child care is the increasing cost of liability insurance. Rates have increased substantially due to fears about claims involving child abuse and neglect. As a result, many providers have seen their rates increase by as much as 1,500% or had their policies canceled (Button 1990).

The need for effective coordination of existing services is evident and would seem to be the only solution. Employers needed to step forward and become more involved in the child-care arrangements of their employees. The different alternatives available to employers in this area are discussed in the following section.

Child Care Alternatives

Companies that want to incorporate child care as a sponsor benefit must identify employee needs and package and deliver the benefit to meet those needs while maintaining the dual goals of a positive-benefit cost ratio and equity for all employees. These companies should treat the search for the most appropriate package just like any other program that affects the employee and employer (Collins, Krause, and Machida 1990). The child-care options widely offered by employers today include:

1. Flexible Benefits and Spending Accounts: Under this arrangement, the employer does not actually become involved in the child-care service, but provides money for workers with child-care needs (Thomas and Thomas 1990). Employees who do not need child-care services receive extra money to be spent on other benefits, as needed. Flexible benefits and spending account arrangements are growing rapidly. In 1985, 950 organizations offered this program; today, it is the most popular child-care assistance benefit and is offered by 47% of the companies providing child care (Shalowitz 1990).

For employers with at least 100 employees, dependent care flexible spending accounts (FSA) under IRS Code Section 125 are the most prevalent. With an FSA, salary deductions up to $5,000 a year of pretax dollars are allowed to pay for dependent care expenses (Scott 1990).

2. Referral Services: Another option a growing number of companies are turning to is a referral system (Soule 1990). Under this arrangement, employers contract with a firm that maintains up-to-date information on available child-care facilities in the area. The employer also hires a child-care administrator, full- or part-time, from the referral center who provides employees with information and advice pertaining to child-care questions and problems.

The referral system at Steelcase Inc. is a good example. Management and employees view the system as more efficient than an on-site center. The company has two full-time child-care consultants to help employees find quality day care for their children based on their individual needs. The consultants work closely with care-givers in the area, providing workshops and newsletters. They also lend books, films, cribs, and educational materials when needed (Soule, 1986).

Marriott Corporation, which has workforce needs similar to those of the health care industry, took a marketing approach to its employees. In 1990, Marriott entered into an equity partnership with Corporate Child Care Inc. to provide its employees with a quality child care option. Through such an arrangement, Marriott provides on-going child-care information and referral services to all its employees (Alibrio 1990).

3. Consortiums of Firms: An innovative approach to providing services and support to employees is the child-care consortium (O'Neill and Tocco 1990). The basic structure for the child-care consortium is for several companies to join forces and open an offsite child-care center that matches the scheduling and location needs for all employees. A consortium usually has its own board of directors, composed of people who work for consortium member companies, to manage and set policy for the child-care center (Smith 1989). These consortia may be for-profit franchised child-care operations or small, nonprofit organizations (Thaler-Carter 1990). Economics and flexibility are the key benefits of this approach.

Recently, the First National Bank of Atlanta joined with four other organizations to build a child-care center in the downtown business district. One organization donated space and all five paid the construction cost for the facility, which accommodates 120 children (Thomas and Thomas 1990).

4. Private-Public Partnership Programs: In many states, the public sector has taken steps by itself to further child-care services. State or local governments provide child care for employees who work either in the building, or they contribute to a city fund that will be used to increase the supply of affordable child care for low-income and moderate-income workers. The City of Philadelphia addressed the problem of child care by providing limited tax credits to employers that subsidize child-care services. By using a supply-side approach, the city was able to leverage new investments in child-care services without the burden of providing some of the services directly (Longstreth 1990). At the federal level, several bills requiting employers to provide child-care assistance are under consideration. Today, the four main competing proposals are the Bush Plan, the Senate Plan, the House Education and Committee Labor Plan, and the House Ways and Means Committee Plan (Watts and Levine 1989, Schroeder 1990). These proposals, currently being ironed out in preparation for congressional debate, mirror the ongoing differences between liberals and conservatives about the extent of federal participation in child care.

5. On-Site Programs: Health care facilities are the largest providers of employee child-care services in the United States, and on-site or nearby child-care centers are the predominant form of child care they offer (Scott 1990).

On-Site facilities have obvious advantages for employees. They are usually not expensive for them, although they are extremely expensive for employers. Apart from the initial cost of starting an on-site facility, the operating expenses are extremely high (Bischoff 1990). These costs vary with the number of children enrolled and the percentage of the center's cost which is subsidized by the employees.

To determine the feasibility of an on-site child facility, the company should consider: 1) employee need and commitment; 2) specific parental needs and preferences; 3) the type of program and range of services to be offered; and 4) the cost of the program (O'Neill and Tocco 1990).

SAS Institute Inc., a software company, was one of the first U.S. corporations to provide on-site services when it opened a child-care center in 1981 (Cusack 1990). Employees pay for the children's lunches and snacks, while SAS absorbs all other operating costs. The company has constructed a 24,000 square foot facility with 10 rooms for infants and 13 for toddlers. SAS also sponsors an on-site preschool for children between the ages of 3 and 5. With more than 150 children currently enrolled, the program helps 16% of the company's workforce take advantage of this particular employee opportunity (Cusack 1990).

Other companies that are successfully providing a high-quality, on-site facility for the exclusive use of employee children include Stride Rite, Campbell Soup, Honeywell, IBM, and Wang Laboratories (Campbell and Campbell 1988, Ritter 1990 and Schachner 1990). The child-care options available, their features, and their extent of use are summarized in Figure 1.

Figure 1: Summary of child care options available, features and
extent of use

Alternative         Infrastructure   Firms that Use

Flexible Benefits   Minimum          Most popular. 47%
and Spending                         of companies that
                                     provide child care
                                     use such programs.

Referral Services   Moderate         Steelcase, Marriott

Consortium          High             First National Bank
of Firms                             of Atlanta

Private/Public      Minimum          City of Philadelphia
Partnership

On-site Programs    Very High        IBM, Honeywell

Potential Child Care Benefits for Employers

As the skilled workforce shrinks and more women with families enter the job market, many employers will be compelled to offer a wider variety of benefits to attract and retain a qualified workforce (Smith 1990). A Hewitt Associates' survey indicated that employers increasingly are offering benefits tailored to meet employees' work and family needs, with child care being among the most popular (Shalowitz 1990). According to Gilbert (1990), the 10 best companies offering child-care benefits are Apple Computer, Beth Israel Hospital, Du Pont, Fel-Pro, HBO, IBM, Merck, Morrison & Foerster, Procter & Gamble, and SAS Institute. By providing flexibility in their child-care policies toward working mothers, these companies have experienced 1) more mothers coming to work after giving birth, 2) increased loyalty, and 3) more dedicated employees.

According to a survey conducted by the National Employer Supported Child Care Project, 95% of the companies reported that the benefits of child-care assistance far outweighed the costs; 90% reported increased employee morale; 85% reported increased recruitment and retainment capabilities; 65% reported decreased turnover; and 53% reported lowered rates of absenteeism (Chambers 1992). Several studies, including one by the U.S. Chamber of Commerce, confirm that child-care benefits can make companies more productive by attracting the best female professionals (Leibson 1990, Shell 1990, Thomas and Thomas 1990, Louv 1992). Model organizations such as Polaroid, Stride Rite, and Johnson & Johnson have found that such benefits improve the "bottom line"in every sense of the phrase (Barton 1992).

Potential Child-Care Benefits for Employees

The benefits that employees may gain through child-care programs are financial assistance, counseling and information services, flexible work practices, and miscellaneous benefits. A brief description of each is given next.

1. Financial Assistance. A survey conducted by the Bureau of Labor Statistics in 1987 revealed that about 3% of the 1,200 employers providing child care offered some financial assistance with child-care expenses (Employee Benefit Plan Review, 1990). Besides special discounts for employees at worksite centers, financial assistance included child-care vouchers, employer-negotiated discounts at local day centers, or subsidies. Employees can also receive a tax savings through a dependent care voucher program. Most voucher programs work through employee payroll deductions, as an IRS Code Section 125 flexible account for dependent care (Shalowitz 1990).

2. Counseling and Information Services. Information pertaining to potential child-care centers, selection of a facility, individual counseling, and so forth are provided to employees either through on-site child-care centers or by the child-care administrator of the referral services. As mentioned earlier, the Steelcase Corporation opted to expand the use of a referral system rather than provide a central facility. The referral system includes a family day care network, parent seminars, and flexible benefits. Such a system keeps employees up to date on child care providers and services (Soule 1986).

3. Alternative Work Schedules. Flex time, compressed work schedules, job sharing, working at home and flexible leave arrangements are the most common forms of work schedule/leave policies cited by employers as aids to workers with child-care problems (Jennings 1990 and Shalowitz 1990). A survey of 141 companies conducted by the San Jose Chamber of Commerce in 1987 indicated that approximately 60% of the companies offered flexible scheduling, 71% offered part-time work, 24% offered job sharing, and 71% offered leave to care for a sick child (Campbell and Campbell 1988).

Concerning other benefits, Colgate-Palmolive employees in the New York City area can obtain professional emergency child care at their homes. The child-care program is designed to provide at-home care when: 1) the child is mildly ill or convalescing; 2) a regular care provider is ill; or 3) the employee has an unexpected work change. The company has also established a program allowing unpaid leaves, which include continued benefits and job protection guarantees, for up to three months to care for children or family members (Schachner 1990). Honeywell employees in the Minneapolis area can also take advantage of a child-care program called Tender Care for Kids, which provides at-home care for mildly ill children. Honeywell picks up 80% of the cost (Ritter 1990).

4. Miscellaneous Benefits. Apart from the benefits mentioned, employees can save $250 to $500 annually on child-care expenses with these discounts. In many companies, the employer arranges a 10% discount and picks up 10% of all fees associated with day-care needs (Personnel Journal 1986).

This category also includes benefits as payment for extra child-care expenses incurred because of overtime or illness of the child or bringing the child to work in the absence of a day-care provider (Friedman 1986). Figure 2 provides an integrated look at child care in the 1990s.

Conclusions

With the growing number of single-parent families and dual-income families the need for child care in the 1990s will grow. Even though several employers have provided some form of assistance, the immediate and major problem in the future is for employers to inform themselves of the range of available options and to make realistic, substantive efforts to select and implement a feasible course of action. This paper provides an overview of the problems, options, and potential benefits associated with child care and can be a framework for making an informed decision about the right type of child-care assistance to provide.

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Dr. Harper, chairman of the Management Department at Grand Valley State, has written numerous articles in the area of strategic management, environmental scanning, and cultural diversity, and consults in the same areas. Dr. Densmore consults in the areas of corporate and marketing strategy and planning and business logistics, and has published numerous papers. Dr. Motwani's publications reflect his interest in competitive strategies, advanced manufacturing technologies, and quality assurance.