US attaches childcare strings to chip-maker subsidies

Nursery care for toddlers can cost more than a third of the median family income in some parts of the US, the Labor Department says

The White House has been frustrated in its efforts to expand national support for childcare. Now it is trying again - although on a smaller scale.

Companies seeking to tap a new $40bn (£33bn) pool of government subsidies for the semiconductor industry will be required to submit plans for how they will provide workers with childcare.

The condition marks an unusual use of the federal government's powers.

Officials said the rule was intended to address a worker shortage.

The move comes as the US starts soliciting applications from firms for the first of the billions in subsidies for the chips industry that Congress approved last year to help the US compete with China.

"Here's the truth: CHIPS won't be successful unless we expand the labor force. We can't do that without affordable child care," Commerce Department Secretary Gina Raimondo wrote on Twitter. "That's why we're requiring companies that receive funding to tell us how they plan to provide affordable child care for workers."

The number of people citing childcare problems as a reason for not working has surged since the pandemic hit in 2020, worsening shortages of a service that was already scarce and expensive.

But the White House has not been able to muster support in Congress for boosting federal funds for the sector to increase pay for workers and expand pre-kindergarten programmes.

The government typically requires that firms awarded contracts adhere to certain standards above and beyond the rules facing the private sector. Such moves are seen as influential, given the scale of the government's presence as an employer.

For example, federal contractors must pay a minimum hourly wage of $16.20, though that is above the minimum in some states.

But the national government has not taken up the issue of childcare seriously in the past, said Danielle Ewen, a longtime education consultant.

"It is a new avenue for the federal government to require employers in a particular industry to provide childcare," she said.

The requirement stipulates that applicants seeking more than $150m in grants or other direct funding for chips manufacturing factories submit plans to provide workers at the plant and construction workers with access to "affordable, accessible, reliable and high-quality childcare".

The agency did not specify how it would determine if companies meet that bar.

Subsidising the cost of care risks straining existing resources, if more parents seek spots for their children but the supply remains the same.

Analysts said more details would be necessary to understand the impact of the move, which stirred objections in some quarters.

"Affordable childcare is an admirable goal - but it has nothing to do with semiconductors," investor Steven Rattner, who worked on the Obama administration's rescue of the auto industry, wrote on Twitter.

"If we want the CHIPS act to work, it can't be used as a pack mule for unrelated policy priorities."

Still, the move was cheered by others, such as Democratic Senator Jeanne Shaheen.

"Investing in our economy means investing in the workers who make it run," she said.

The Semiconductor Association, which represents chips manufacturers, did not respond to a request for comment.

The US has long looked to the private sector to supply benefits - such as health insurance - seen as the responsibility of governments in some other countries.

About 28% of firms with more than 500 staff now offer some childcare benefits, according to an annual survey conducted by the Bureau of Labor Statistics.

Money awarded via the semiconductor initiative can be put towards the cost, according to the New York Times, which first reported the requirement.

Angie Garling is vice president for Early Care and Education at Low Income Investment Fund (LIIF), which has worked with the city of San Francisco on its decades-old childcare initiative, which requires property developers to set aside space for childcare facilities or pay into a city fund in an effort to boost supply.

"The way to make this type of program successful is to ensure companies are putting the diverse child care needs of their employees front and center," she said. "Employers must be part of the solution."