Contact: Sara Diedrich, diedrichs@missouri.edu
July 29, 2026
A University of Missouri School of Law professor is reframing the national conversation about childcare, encouraging policymakers to invest in those who make the industry possible.
In a new study, Lauren Shores Pelikan proposes directing tax benefits to childcare workers as a way to attract and retain the workforce needed to expand access to care.
“My proposal is to shift some tax incentives to the provider side — not just to childcare businesses, but directly to childcare workers themselves,” Shores Pelikan said. “The goal is to get resources into the hands of the people providing care and effectively give them a meaningful pay boost.”
The childcare market faces not only an affordability challenge, but also a supply challenge, as there are not enough providers and centers to meet growing demand.
The shortage is compounded by a growing number of private equity firms acquiring childcare businesses and seeking profits through cost-cutting measures, tuition increases, fees and debt financing. The result has been higher costs for families, increased childcare worker turnover, resulting in lower quality childcare and, in some cases, center closures.
A central challenge in the childcare market is the limit on what families can afford to pay. Because providers cannot raise tuition continuously, many operate on thin margins and keep labor costs low to stay afloat. The result is chronically low wages for childcare workers, who often leave for higher-paying jobs in other industries, further exacerbating staffing shortages and limiting the availability of care.
Shores Pelikan, who is also a CPA and spent nearly a decade working as a tax attorney before becoming a law professor, said the federal government provides some direct spending on childcare, but most of it is targeted toward children living in poverty. She said changing the tax code to cut taxes for childcare workers would have a wider impact on the industry and could encourage more people to work in childcare or continue working in childcare.
“Workers may be willing to accept slightly lower wages if they are keeping more of their compensation after taxes,” she said. “If that happens, childcare providers' labor costs would decrease. Because many childcare businesses operate on very thin profit margins, even a modest reduction in labor costs could improve profitability.”
Additionally, when an industry becomes more profitable, Shores Pelikan said economic theory predicts that additional providers could enter the market.
“In other words, a tax benefit aimed at childcare workers could indirectly encourage more private individuals to open childcare centers by making the business itself somewhat more financially attractive,” she said.
The study, “Toddlers, Investors, and Tax Policy,” was published in the Southern California Law Review.
