The $648B care economy represents one of the largest annual consumer spending items as a percentage of the U.S. GDP.  One of the more interesting aspects underneath this significant number is who is doing the spending. Families aren’t the only ones contributing to this annual spending - other payors, such as employers, insurers, businesses, and the government, are key players in the market. 

With the recognition that caregiving responsibilities have a direct correlation to productivity and employee retention, employers are increasingly prioritizing care benefits as a key offering that matters to top talent. As a result, the Future of Benefits 2022 report by care.com indicates that 57% of surveyed companies are placing greater emphasis on child care, while 51% are prioritizing senior care more in 2022 than they did in 2021.¹ It is evident that care benefits are here to stay, and their prominence and importance will only continue to grow in the years to come.

American employers are facing the reality that a lack of access to affordable child care could be blocking potential employment. Industries such as the airline industry have started offering financial support for child care or have plans to expand their on-site child care facilities to keep up with travel demands. And they’re not the only ones looking for solutions for families. Increasingly, economists are pointing to universal child care as a necessity for a prospective long-term labor shortage.¹ 

Government policy is attempting to solve for this with actions like the Commerce Department announcing that any semiconductor manufacturer looking a slice of the $40B in federal subsidies will need to guarantee affordable, high-quality child care for the dependents of workers who build or operate a plant. Additionally, innovative state government programs like Michigan’s Tri-Share, equally splits the cost of an employee’s child care between the employer, employee and the state of Michigan.

Hourly workers have historically been neglected when it comes to benefits, however, the tide seems to be turning. Competitive dynamics for hourly workers have spurred  a growing recognition amongst employers of the importance of care benefits, resulting in several major employers offering backup care benefits to an overlooked population. For example, Target announced access to backup care and paid family leave, Best Buy offers backup care and Caregiving Pay to employees, JC Penny partnered with WeeCare to extend their child care benefits across their workforce, Walmart and Starbucks provide six weeks of paid family leave to their hourly workers. 

COVID-19 has further pushed employers to view their hourly workers as a key part of their workforce, and to continue to invest in their needs. This is a start to a journey that would ideally provide more equity in the workforce in terms of benefits.

While backup care has expanded to some major retailers in the U.S. (i.e., Target, Walmart), we have yet to see progress on full-time child care benefits for hourly workers - the demographic that needs child care support the most. The majority of employers report that they can’t make the business case of paying for care for their employees without burdening the consumer with a higher price point or taking the cost out of profit margins. The math simply doesn’t add up.

The Return on Investment (ROI) has traditionally been a crucial factor in evaluating the purchase of all benefits. Hard financial numbers on cost savings and spend are often used to justify the addition of new benefits to an employer's repertoire. However, determining an ROI for care benefits can be more complex than for other types of benefits. 

Solutions need to consider intangible benefits such as productivity increases, retention, and improvements in overall wellness, which may be challenging to quantify. While the wellness benefits market provides the best proxy for the care benefits market–in terms of positioning and calculating ROI–more work is needed to demonstrate to employers the financial benefits that care can bring.

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The proliferation of point solutions in the care market has led to friction for employer payers. There’s one solution for child care, one for backup child care, one for a care concierge, and the list goes on. Entering the market with a single point solution is understandably more feasible for startups and companies testing the waters in the space, but real value is created more efficiently for both the employee and the employer through a holistic solution. 

Employers are increasingly looking for an aggregator of benefits through which they can manage all of their benefits. Startups like Cleo and Wellthy have reported that they’ve been hearing this from some of their biggest customers who are asking them to become a one-stop shop for care benefits, rather than providing just a couple of pieces of the puzzle. The investment to scale beyond a point solution is considerable for these start-ups and few in the industry have been able to raise the capital that would be necessary.

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Due to uncertain macroeconomic conditions, growth in employers purchasing care benefits hasn’t grown as rapidly as it did during COVID. The pandemic pushed employers to purchase essential benefits that their employees were asking for. However, in a world where we are regressing to an eventual “return to normal,” employers do not have the same level of pressure as they did during the pandemic to make this decision.

Employee demand is still high for care benefits, as demonstrated in care.com’s Future of Benefits 2022 survey, but the jury is out in terms of the new normal for employers and their relationship to care benefits.