Compensation: What Systems Leaders Can Learn from Child Care Businesses
Across the country, state and local leaders agree on the challenge: child care jobs are among the lowest-paid in the economy, workforce shortages are profound, and program sustainability is fragile. Increasing compensation is essential—but how those investments are designed and implemented can determine whether they truly strengthen the workforce or introduce new risks.
In Compensation Investment in Practice: How Child Care Business Owners Experience State Workforce Investments—and What Systems Leaders Can Learn, First Children’s Finance set out to understand what compensation initiatives look like from the ground up. Drawing on interviews with 50 child care business owners and nonprofit administrators across Vermont, Illinois, Massachusetts, and Minnesota, the report centers child care businesses not just as recipients of funding, but as critical partners in workforce strategy.
Owners Want to Invest in Their Workforce—and Often Do
Across all four states, business owners expressed deep appreciation for recent workforce investments and pride in how those dollars supported their staff. Many described reduced turnover, stronger recruitment, improved morale, and greater financial stability for educators. In Vermont and Massachusetts, where compensation increases were not initially mandated, most owners still chose to significantly raise pay.
These experiences reinforce a consistent finding: child care business owners want workforce investments to be effective, fair, and transparent. Many welcome clear expectations that ensure public dollars are reaching educators and improving job quality across the sector.
New Risks Without Stability
At the same time, owners were clear-eyed about the risks of relying on public dollars for payroll. Compensation is a large, recurring expense, and once wages increase, they are difficult to roll back. Even infrequent payment delays or fluctuating award amounts created stress and uncertainty. Concerns about the long-term continuity of public funding also shape owner decision making, influencing whether they raise base wages, rely on bonuses, or invest cautiously.
Vermont stood out. Owners there consistently expressed confidence that funding was permanent, and that sense of permanence made it easier for owners to commit to long-term compensation changes and make business decisions with greater confidence.
Design Details Matter
One of the strongest themes across interviews was the importance of flexibility—paired with clear accountability to ensure public dollars are reaching the workforce. Owners emphasized the need to tailor investments to their specific recruitment and retention challenges. In more flexible systems, they invested not only in wages but also in lower ratios, additional staff, paid time off, shorter shifts, and more sustainable schedules.
Many owners supported guardrails such as minimum workforce investments, reporting requirements, or compensation benchmarks, noting that flexibility does not require an absence of oversight. At the same time, they cautioned that overly complex or shifting compliance rules can create significant administrative burden, disproportionately impacting family child care providers as well as small businesses and nonprofit.
The report also highlights how program requirements can unintentionally disadvantage certain providers or business models. Requirements sometimes clashed with the realities of family child care, infant care, rural programs, or care for children with disabilities. Owners want systems that reflect the diversity of child care businesses and recognize administrative burden itself as an equity consideration. Counterintuitively, highly targeted and complex funding programs could speed the corporatization of child care, limiting family choice and requiring new guardrails against profit-seeking in the sector.
Looking Ahead
Increasing worker compensation is imperative but is challenging to address effectively in isolation. The child care sector faces many interconnected challenges, including rising operating costs and crumbling infrastructure, family affordability and access barriers, and a workforce stretched thin with high rates of burnout. Investment source, timing, predictability, flexibility, technical assistance, user experience, and accountability all shape whether compensation funding achieves its intended impact or creates unintended consequences.
First Children’s Finance brings deep experience working at the intersection of child care businesses, communities, and systems. If your state, tribe, or community is exploring workforce compensation investments—or refining existing ones—we welcome the opportunity to partner with you to design and implement strategies that are effective, equitable, and sustainable.
Reach out to First Children’s Finance to learn how we can support thoughtful workforce investment design grounded in the real-world experiences of child care business owners.
Email us at infonational@firstchildrensfinance.org.
