A New Child Care Mandate

Millions of Americans work less than they used to, or not at all, because they can’t find someone to take care of their children. The lack of adequate child care not only keeps parents from trying to earn a paycheck but damages the economy overall. It’s one of the biggest reasons that American companies are struggling to find workers.

President Biden, who has pushed for more affordable child care, unveiled an unusual way to tackle that problem this week. The Department of Commerce announced that it would require computer chip manufacturers to make child care available to their workers when they apply for new federal funding.

The money, which totals $40 billion, comes from a law that Congress passed last year to boost U.S. production of semiconductor chips. It is an attempt to compete with China and make the American economy more self-reliant. Before the announcement, it had nothing to do with child care.

The Biden administration’s maneuver is a creative solution to a difficult problem. Congress never passed Biden’s child care proposals, limiting his administration’s options for directly addressing the issue. So it’s leveraging one of the few tools it does have — a large amount of federal funding — to make some headway.

But the approach has sparked a debate between people who defend it as an innovative way to address a large hole in the nation’s safety net and critics who call it a costly attempt at social engineering that could undermine semiconductor production. Today’s newsletter will look at how the policy could help U.S. chip manufacturers — or make the already difficult task of revitalizing American manufacturing even harder.

The case for the policy

A lack of affordable child care is a real problem in the U.S., experts agree. Across the country, there are simply too few child care providers for every family who needs them, the Bipartisan Policy Center found.

The lack of child care is keeping up to millions of people out of the work force, experts said. The chief executive of one chip manufacturer told CNBC that affordable child care has been a significant barrier to finding workers.

As part of its new requirement, the Biden administration will let companies spend some of the federal money on setting up child care, either on site at chip plants or through local providers.

Without a plan to offer child care, companies might not be able to attract enough workers for the 24/7 operations that are standard at chip factories, Biden administration officials argue. In that sense, the child care requirement could stop taxpayer dollars from going to projects that will fail. “I am kind of requiring them to pay attention to this because I know this is what they need to be successful,” Commerce Secretary Gina Raimondo told my colleagues Ana Swanson and Jim Tankersley.

The requirement could also ensure that a more diverse work force benefits from the federal funding. Women and people of color are more likely to have their jobs and lives disrupted by a lack of access to child care, Taryn Morrissey, a family policy expert at American University, said.

There is a point of historical comparison. During World War II, President Roosevelt — under pressure from civil rights activists — required factories to hire both white and Black workers. Like Biden, Roosevelt was using one policy (wartime production) to solve a problem (segregation) that on the surface seemed quite different. And like Biden, Roosevelt could argue that his policy would bring broader benefits, by expanding the number of available workers.

The case against

Making chips in the U.S. costs 44 percent more than it does in Taiwan, which has the world’s biggest maker of advanced computer chips, a Goldman Sachs analysis found. The higher cost is one reason that chip manufacturers left the U.S. in the first place.

Why is it so expensive to manufacture chips in the U.S.? Regulations and litigation can make it difficult to build just about anything in America, imposing costly standards on projects and slowing them down. Companies also pay workers more in the U.S. than in most other countries, increasing labor costs.

For its part, the Biden administration has established a team to help chip companies work through regulatory requirements quickly.

But the child care mandate could increase costs further. Those higher costs could force U.S. manufacturers to charge higher prices or accept lower profits than foreign competitors. That would work against the semiconductor law’s main goal: to make American chip producers more competitive globally.

“Everyone agrees the task is extraordinarily difficult,” said Adam Ozimek, the chief economist for the Economic Innovation Group, a think tank. “We should be doing everything we can to make it easier and nothing to make it harder.”

In short: There is little disagreement that affordable child care is a problem in the U.S., but there is a lot of debate over whether funding for chip manufacturing is the right avenue to try to fill the gaps. Only comprehensive, stand-alone legislation investing in child care nationwide can solve the problem, experts said.

The bottom line

Decades from now, we could look back at the chips law as a success that revitalized the U.S. semiconductor industry, while leading to a new federal model for providing child care. Or the administration’s child care requirement could end up being one of the reasons the law failed.

For more: The administration is also limiting chip companies’ stock paybacks and forcing them to share some profits with the government.

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