For decades, the child care sector has been known for its low margins and precarious conditions. But a wave of government investment—fueled by pandemic relief, state subsidies, and emerging universal programs—is fundamentally altering the industry’s economics. From New Mexico to Massachusetts, increased public funding is not just stabilizing care centers; it’s creating opportunities for expansion, higher wages, and even profits. The shift is attracting business interest, including private equity firms and EdTech companies, raising questions about quality, sustainability, and whether profit-seeking aligns with the core mission of child care.
The New Economics of Child Care
Crystal Romero, owner of Early Learning Academy in Albuquerque, exemplifies this transformation. After 25 years in the field, she’s seen a dramatic change. Where once she relied on thrift stores and DIY repairs, her four centers now offer competitive salaries (with a recent $5/hour raise for all staff), full benefits, and even perks like leather recliners in staff lounges. This is possible because New Mexico’s increased subsidies and universal child care program allow Romero to maximize enrollment while adhering to teacher-to-child ratios. By tracking attendance, she can fill spots even when children attend only part-time, turning a once-struggling industry into a viable business.
This isn’t unique to New Mexico. Vermont, Massachusetts, and Connecticut have also made substantial investments, driving up subsidy rates and attracting new players. As Elliot Haspel, a senior fellow at Capita, notes, “As more public money becomes available in child care, that is going to be what attracts different players.”
The Rise of Private Investment
The influx of funding has drawn attention from private equity groups, who now control 10–12% of the licensed child care market. These firms seek to maximize profits, sometimes at the expense of quality. Some have been accused of dismantling centers, selling land back to operators at a profit while cutting staff and student spots. Investor-backed chains also lobby to protect their financial interests, as demonstrated by their skepticism toward broader subsidy programs that could limit profits.
EdTech companies are also entering the space, offering everything from bookkeeping software to educational curricula. Venture capital firms recognize the potential in a newly flush market, seeking opportunities to streamline operations and connect parents with available care. Elizabeth Leiwant of Neighborhood Villages points out that these firms paid little attention to child care before substantial government funding created a viable market.
Balancing Profit and Quality
While profit-seeking isn’t inherently bad—it can drive expansion and higher wages—advocates are pushing for guardrails. Massachusetts has implemented rules capping grant funding for large for-profit firms, requiring a minimum percentage of funds to be spent on staff salaries and benefits, and mandating that all programs accept subsidized children. These rules apply to providers with 10 or more locations, regardless of whether they are investor-backed.
The goal is to ensure that providers can thrive financially without compromising quality. As Romero puts it, “Staff come first before our families, because if they are happy and treated right… that is going to be received with our children and families.”
Ultimately, the future of child care hinges on finding a balance between financial sustainability and the well-being of both educators and children. The current wave of funding presents an opportunity to reshape the industry, but only if policymakers and operators prioritize quality over pure profit.
