For entrepreneurs and those thinking about starting a business, the responsibility of caring for a child or other family member can be a serious hindrance to launching a business and putting in the hours necessary to make it a success. This has been exacerbated by the COVID-19 pandemic, which has forced parents and other caregivers to juggle working from home and caregiving simultaneously. When it comes to affordable child care, existing federal tax credits are designed to help working families, and thus their requirements are based on earned income. This limits the ability of entrepreneurs – many of whom forgo income in the startup phase – to claim these credits. To reduce these barriers, policymakers should:
- Allow entrepreneurs who are not yet earning an income but who are actively working to start or grow a new business to be eligible for the Child and Dependent Care Tax Credit by substituting earned business revenue for the required earned personal income.
- Expand child care programs in the most underserved communities through increased funding for the Child Care and Development Block Grant and Head Start programs.
- Form a commission to recommend a national caregiving policy that ensures affordable and equitable access to caregiving support, recognizing that many caregivers are entrepreneurs themselves, operating in-home day care or other small businesses. A national caregiving policy should work for both consumers and providers.
- Of those who have considered starting a business but did not, or “pre-entrepreneurship leavers,” 22% report family considerations such as child care or aging parent care as a reason for not starting a business. This was especially pronounced among married “leavers” (25%), those with children under age 18 (34%), and mothers (37%).
- Sixty-two percent of former entrepreneurs said their business suffered because of additional child care responsibilities they had to take on after the onset of the COVID-19 pandemic.
- According to a 2017 Small Business Majority poll, child care was a barrier for starting a business for 36% of entrepreneurs.
- Women-owned businesses are hit hardest by lack of child care. In fact, nearly half of mothers who are very interested in starting a business but ultimately have not report that family and caregiving responsibilities are a primary reason.
The Kauffman Foundation report “Economic Engagement of Mothers: Entrepreneurship, Employment, and the Motherhood Wage Penalty” highlights the financial barriers mothers, especially mothers of color, face as entrepreneurs. Child care expenses can be crippling to a new business: The cost for two children in care exceeds mortgage costs among homeowners in 40 states and Washington, D.C. This has been exacerbated by the COVID-19 pandemic, which has disproportionately impacted mothers. Mothers ages 24 to 39 were nearly three times more likely than fathers of the same age to report being unable to work during the COVID-19 pandemic because of a school or child care closure.