When Kamala Harris launched her US presidential campaign, one of her first economic policy pledges was to triple the child tax credit. She’s also made affordable childcare a top-10 priority according to her campaign website. 

To the casual observer, these proposals have little bearing on foreign direct investment (FDI). They certainly seem negligible compared to the ambitious industrial policies of her predecessor and the grandiose tax and tariff schemes of her opponent Donald Trump.

But by prioritising economic issues that, rightly or wrongly, disproportionately burden women, Ms Harris is tackling a root cause of one of the US’s biggest barriers to FDI attraction. The country needs more workers. And policies that make it easier for half the population to pursue a career, retrain or simply hold down a job are a good place to start. 

A no-brainer

From my many conversations with foreign investors in the US this year, the top-cited bottleneck to investing in the country is the workforce shortage. Even though last year’s extremely tight labour market has started to ease, foreign firms still struggle to find the right — and enough — employees. 

Immigration is part of the short-term solution. But with the world’s third-biggest population, investors tell me that the long-term solution is maximising the capabilities of those already inside the country, including women. Female participation in the US workforce hovers around 76%. That makes it the worst performer among the world’s 15 biggest, developed economies (measured by gross domestic product per capita), according to OECD statistics.  

Beatrix Praeceptor, CEO of Austria-headquartered Greiner Packaging which has operations in Pennsylvania, tells me that getting more women into the US workforce is a no-brainer. “When you have a labour shortage, you can’t simply ignore 50% of the population. Let’s assume that skilled people are equally spread among the entire population,” she says. “The bigger you open the pot, the more talented people you will get.” 

Childcare challenge

A national survey last year of working-age women not part of the workforce found the primary reason is caring for children. This is consistent with other recent polls showing more than one in 10 young families had a parent quit or not take a job because of childcare.

The federal and some state governments are rightly pushing the link between this problem, the economy and investment. The US labour department estimates that by improving the country’s penny-pinching paid-leave and childcare spending policies to align more closely to the likes of Germany and Canada, it could add five million women to the workforce and boost national economic activity by $775bn per year. 

At the SelectUSA Investment Summit in June, Illinois governor JB Pritzker admitted to the 2500 global investors in attendance that childcare shortcomings “means our workforce is hobbled” which “particularly affects women”. 

Those shortcomings relate to both cost and availability. Putting two small children in full-time childcare is 40% more expensive than the same family’s average rent across the country’s 100 biggest metro areas, research shows. Even the US surgeon general has recommended expanding childcare subsidies to mitigate work–family conflict. 

Regarding availability, the Center for American Progress found that before the pandemic, more than half of Americans lived in ‘childcare deserts’, where there were three children for every spot at a licensed facility. Daycare closures since then have worsened the situation, with the number of US childcare workers now 9% below its pre-pandemic level. 

Related articles on US manufacturing and labor trends:

• Opinion | From Boomers to Gen Z: US manufacturing’s evolving workforce
• Hyundai lawsuit tip of US child labor iceberg
• Biden's FDI success not an exact recipe for more jobs

Women’s work

Better childcare is certainly not a silver bullet in expanding the US labour pool for foreign investors. The US must also improve its gender pay-gap, which last year widened to 17%. Even the country’s tightest ever pay-gap on record of 16% is worse than today’s rate in the UK (7.7%), Australia (11.5%) and Canada (13%). 

Industry-focused efforts in manufacturing, where women comprise just 29% of the workforce, also need to accelerate. fDi Markets data shows manufacturing is the US’s biggest attractor of inbound FDI capital expenditure over the past decade, and it’s been hit particularly hard by labour challenges. Speaking at the SelectUSA Summit, commerce department official Marisa Lago proffered that part of the solution is moving the industry’s image away from traditional conceptions and towards the smart manufacturing redefining its future. 

Cultural shifts are part of the childcare challenge, too, ensuring responsibilities don’t fall disproportionately on mothers. Ms Praeceptor also calls for greater societal acceptance of women returning to work sooner rather than later. 

Nonetheless, the US childcare system is widely regarded as broken, and fixing it can only boost women’s workforce participation. Ms Harris’s presidential campaign has been criticised as light on economic policy. But subsidising childcare — not just megaprojects — could be more powerful than many realise.

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