The real reason companies like Target are offering paid parental leave and child-care



Retailers’ increasing embrace of family-friendly benefits is a step in the right direction, experts say – but it’s large-scale investment and systemic change that will have the biggest impact on workers’ access to quality child care and paid leave.

Target announced this week it would expand its 20-day backup care benefit to include all hourly and salaried employees at stores and distribution centers, rather than just employees at company headquarters, beginning this fall. It will also offer paid family leave for hourly and salaried workers effective June 30 – including for those who work part-time – and recently upped its reimbursement amounts for employees’ adoption and surrogacy fees.

Just two months earlier, the retail giant had announced it would raise its minimum hourly wage to $13, aiming for a $15-an-hour wage (already in place by competitors Amazon and Costco ) by the close of 2020.

“We’ve taken a strong position on minimum starting wages, but that’s just one facet of our team member experience,” Target chief human resources officer Melissa Kremer said in a statement Monday.

The rising cost of child care in the U.S. varies widely by state, region and other variables, making it difficult to calculate a meaningful national average. But married couples making the national median income of $87,757 might spend an estimated 10.6% of their household income on child care for one child, according to a 2018 analysis by Child Care Aware of America, while single parents could shell out 37%.

That’s far higher than the Department of Health and Human Services’ 2016 recommendation that families spend no more than 7% of their income on child care. “Low-income families are going to continue to struggle as costs continue to increase,” added Jessica Tercha, Child Care Aware’s director of research. “Costs are already pretty unaffordable.”

Meanwhile, the U.S. is the only industrialized nation without federally mandated paid family leave. Just 15% of private industry, state and local government employees have paid family leave. Though the Family Medical Leave Act (FMLA) lets eligible workers take up to 12 weeks off, their employers don’t necessarily have to pay them.

Corporations are ‘battling it out’ for talented workers

So some employers, including Target and its big-box competitors, have tried to fill the void as they compete for talent amid record-low 3.6% unemployment.

For example, Walmart offers 10 weeks of paid leave to birth mothers and six weeks for all parents who are full-time hourly workers and have worked there for at least one year, as well as adoption reimbursement. Best Buy offers up to four weeks’ paid caregiver leave within a 12-month period and adoption-assistance benefits. Amazon offers its full-time working birth parents up to 20 weeks of paid leave and non-birth parents up to six, while Home Depot’s corporate headquarters and Patagonia both offer on-site child care.

“As the economy is in a bit of an uptick right now, clearly they’re battling it out to keep and retain their workforce – and providing really meaningful benefits like child care and backup child care and paid family leave is really what employees are looking for,” Tercha said.

These policies help attract prospective employees as well, said Meredith Bodgas, the editor-in-chief of Working Mother magazine. “These announcements are a much bigger deal than they ever were, because companies know that these are a recruiting tool now,” she told MarketWatch.

Plus, large national companies may have employees who are subject to different paid-leave policies at the state and local levels, said Lori Mihalich-Levin, a law partner at Dentons’ Health Care practice and founder of the new-parent support organization Mindful Return. “Companies with employees in different locations are being driven in part to standardize things because of the patchy state and local laws that are moving in favor of parental leave,” she said.

Family-friendly policies can even impact a company’s bottom line. Access to backup child care – which just 4% of employers provide, according to a 2018 Society for Human Resource Management survey – can help reduce absenteeism, Bodgas said, a particular pain point for retail companies. U.S. companies lose around $4.4 billion a year because of absenteeism stemming from child-care breakdowns, according to Child Care Aware.

Some 72% of parents in a survey said their work day had been affected by child-care plans falling through, for example. Two in three people used a sick day as a result, 56% showed up late to work, 39% used up a vacation day and more than a quarter fell behind on work. “When a child is sick, that retail worker can’t be there on the floor,” Bodgas said. “Offering backup child care gets that retail worker back on the floor.”

Workers will come to expect these benefits – plus more

Heightened awareness of workplace-equality issues and benefits – Bodgas gives some credit to #MeToo and Time’s Up – means workers at every level will increasingly come to expect such family-friendly benefits from their employers, she said. “It’s becoming more and more expected that there’s going to be some sort of paid-leave offering,” Mihalich-Levin added, “especially among a millennial generation that cares a lot more about this than prior generations.”

And the more these workers learn about what benefits other employers offer, Bodgas said, the more they’re going to want those policies for themselves. They won’t just seek out paid parental leave, but also egg-freezing benefits and surrogacy financial assistance, she said.

But while it’s “awesome” when companies step in to help working parents, Tercha said, “the problem is so much bigger than that.” “It’s really going to take a combination of public and private investments into the child-care system to really make meaningful change for families everywhere,” she said. Child Care Aware’s report points out that the current child-care system’s heavy reliance on parent fees “is not sustainable.”

Corporations alone can’t solve working parents’ woes

The federal Child Care Development Block Grant program, which in part provides child-care subsidies, remains underfunded, Tercha said. It actually reaches only one in six families eligible for child-care assistance, Child Care Aware estimates.

“The more employers that want to offer child-care options, the better,” agreed Melissa Boteach, vice president of income security and child care/early learning at the National Women’s Law Center. “But in the meantime, it’s really important that that not lead us to believe that corporations alone are going to solve this problem.”

That problem includes more than just the high cost: There are huge child-care supply shortages in many areas of the country, Tercha said, and many U.S. child-care workers make poverty wages. The provider workforce is disproportionately women of color, Boteach added, which “exacerbates racial disparities in ways that are bad for our democracy and bad for our economy.”

“You need to be improving quality, improving access and strengthening the [provider] workforce in order for the system to be reaching its full potential for parents and kids,” Boteach said.

And on the legislative front, for example, there’s the FAMILY Act, which would give 12 weeks of paid leave to new parents and caregivers. The Child Care for Working Families Act would expand investments in child care and ensure that low-income families aren’t putting more than 7% of their annual income toward it.

“We need to look at the system as a whole and comprehensively, and make large-scale investments in order to truly tackle the problem,” Boteach said. “That’s not to say that in the meantime, Target and Walmart and other large-scale employers can’t move the needle in the right direction.”

Shares of Target are up 33.4% year-to-date, compared to an 11.5% increase for the Dow Jones Industrial Average and a 14.9% increase for the S&P 500 over the same period.