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 necessary hours 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 not yet earning an income but 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.
- COVID-19 caused parents to reduce their working hours, take a leave from work, or work from home as day cares, camps, and schools closed. The percentage of parents in the workforce dropped about 5% for both mothers and fathers from September 2019 to September 2020.
- Women-owned businesses are hit hardest by lack of child care. Forty-seven percent of women rated the health of their business as “good” in July 2020, down from 60% before the COVID-19 pandemic. For men, this rating only dropped from 67% to 62%.
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. In fact, nearly two in five mothers who are very interested in starting a business but ultimately have not report that family and caregiving responsibilities are a primary reason. This has been exacerbated by the COVID-19 pandemic, which has disproportionately impacted mothers. Mothers age 24 to 39 were nearly three times more likely than fathers of the same age to report being unable to work during COVID-19 because of a school or child care closure.