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Absence of Retirement Benefits in Early Education & Care Affects Generations of Workers

Friday, November 10, 2023

Early childcare educators and professionals shape the lives of our children and provide peace of mind so families can work. 

Their compensation is perpetually inadequate, but another economic issue looms - many lack access to retirement benefits.

The reality is that without retirement benefits, workers can’t stay, and childcare becomes a short-term job, not a professional career. Without long-term educators keeping their expertise in the classroom, the quality of childcare suffers.

Lack of resources presents problem for current and aspiring educators

Local FCC provider Dione Santos’ personal experience is a heartbreaking reality for many educators, “I do not have a retirement plan, and there is a lot of concern about being old and having some dignity. It is the minimum that a human being deserves after a life dedicated to educating children.”

Not only are educators routinely paid less than other professions, they often lack the funding for adequate supplies and supplement with funds that could otherwise be used for retirement purposes. Coupled with inadequate retirement benefits, this creates a dire situation where many educators feel they cannot stay in the field long term not knowing if their future is secure once they reach retirement age.

“Family childcare entrepreneurs, primarily women of color and immigrants, are an integral part of the Massachusetts economy. They provide culturally relevant education and care in neighborhood settings, allowing parents to return to work and neighborhood economies to thrive,” stated Melinda Weber, Vice President of the Shared Services group of United Way of Mass Bay . “Yet, despite their indispensable roles, these women lack the business support that other types of entrepreneurs receive such as budgeting, rate setting and marketing to maximize income and facilitate savings.”

The lack of retirement benefits for childcare professionals poses a dilemma for generations of workers:

  • Older, more experienced educators can’t retire because they don’t have the savings and benefits to do so.
  • Middle-aged workers are battling an increasingly high cost of living, paying other bills such as rent, groceries, and for childcare services of their own. This leaves them without extra money to put toward their own benefits.
  • Potential young workers are wary of entering the field because there are no benefits waiting for them.

A 2023 brief written by Kimberly D. Lucas, PhD, details the negative implications a lack of retirement benefits has on the workforce. In MA, 31% of childcare workers surveyed by MAAEYC were considering leaving the childcare field due to the lack of benefits and resources. 36% of workers said they would consider staying in the field if those benefits became available to them.

Possible solutions include funding and legislative action

What can we do to change things?

In her brief, “Retirement for early educators: Challenges and possibilities”, Dr. Lucas highlights possible solutions to the retirement benefits problem, most of which involve state mandated legislation, retirement inclusion, and community support.

The first two suggested solutions would take more time and sustained advocacy:

  • State mandated retirement legislation: Legislative action on a state level is a key matter that could move things in the right direction for childcare workers and business owners. Oftentimes family childcare providers are considered contractors with the Commonwealth and not employees, meaning they are currently not entitled to include retirement benefits in their collective bargaining. However, potential legislation could create an exception. Then they could take part in state programs and gain financial footing through collective bargaining for retirement benefits provided through legislation.
  • Retirement initiatives inclusion: An example of this would be that any pending legislature on a state or federal scale that would require employers to supply retirement benefits would have to also include childcare workers in any new laws.

The third suggestion is more immediately promising:

  • Third-party support: Mentorship or contracting with third-party support organizations with expertise in retirement and financial planning is an invaluable resource to people who run childcare and early education centers. If these business owners and administrators can form partnerships to either outsource some of these tasks or learn to complete them more efficiently themselves, they can focus on the things that they are passionate about and devote their time to the children who need their attention.

       The Shared Services group at the United Way of Massachusetts Bay currently offers support in the form of          educational workshops on retirement planning. Two workshops (hosted in English and Spanish)                            garnered almost 200 family childcare providers, proving there is strong interest in these resources.

       Weber added, “Our business coursework focuses specifically on the unique family childcare business                   model and how to maximize income despite the business model challenges. This serves as a baseline of             knowledge that they can then build upon to explore other wealth building opportunities such as                         retirement.”

        The Shared Services group currently offers additional programs and workshops for workforce                                 development, well as business and marketing training.

teacher coloring with student clock

Retirement offerings for educators in the community

Larger organizations tend to be in a better position to offer retirement benefits. The Guild of St. Agnes, a childcare center that serves over 2.000 children across eight centers and 135 childcare providers, prioritizes retirement benefits even in the leanest of years.

“Knowing that teachers, especially early education and care teachers, are not paid what they truly deserve, we are committed to ensuring their retirement savings are fully integrated into their compensation,” shared Sharon McDonald, President and CEO of The Guild of St. Agnes.

Their offering includes a 401K with an additional 100% match up to 4% of employee contributions. Recently, thanks to additional state funding through the Commonwealth Cares for Children grants, they are now able to match 250%, meaning that if an employee contributes 4% to their 401(k), The Guild will contribute 10% of their salary as well. They also provide their employees with access to financial consulting so that they have assistance to plan ahead for their own futures and retirement.

In contrast, small providers struggle with both the cost and knowledge of how to save for retirement.

Liz Sheehan Castro, a family Director of the MA Childcare Training Fund, shared valuable insight about the struggles that family childcare providers face, “FCC (Family Childcare) providers have to figure out how to do this mostly on their own, which is daunting, confusing, overwhelming, and sometimes out of reach financially because any ‘profit’ over the cost is going to support their household or to fund improvements in their program (materials, supplies, upgrades).”

Castro added, “I would like to see them have the ability to opt into a plan that is hosted somewhere, and ideally with a match.”

Dione Santos agreed, “More accessibility with information and help to support us to have a retirement plan.”

The United Way of Mass Bay may have a promising solution, “[We] are currently seeking funding for an innovative incentive program piloting the use of matched savings to spark sound investing for retirement by family childcare educators/entrepreneurs in Boston,” said Weber. “A matched savings program focused on the fundamentals of investing for retirement will provide opportunities to learn, build and invest through a comprehensive program that provides knowledge that is safe and sound, access to low-cost products and the financial resources to start the process.”

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