Saturday, July 5

Daycare is Expensive, Google finds

I thought this was a particularly telling story, because it illustrates some of the delusions we have about the proper cost of things like education.

Google opens a world-class daycare facility for its employees' children. It has highly trained educators. It has good-tasting, healthy wood. It has well-kept facilities and well-made toys. It also costs $37,000 per child per year.

As a college professor, I also find it amazing to read how citizen X is outraged that his son's college education might cost more than $5000 a year at State School Y. Or the general feeling that colleges are charging FAR more than they need to, unnecessarily gouging parents.

It all depends on what you want.

Google's daycare sounds pretty ideal. Frankly, it's still a deal compared with the costs of homeschooling. I have a friend who homeschools his two daughters. This is a highly educated man who spends literally all day, every day, completely devoted to the education of these two girls. That family is spending the equivalent of $74,000 a year, easy. For some families, it might make sense.

But my point is, things are expensive. My college education cost well north of $60,000 a year for the school. Crazy things like that happen when you have crazy expectations - like paying your faculty and staff a decent wage, and giving them decent health care, having a decent library, keeping the buildings and grounds clean and safe, and totally irrational stuff like that.

When state schools - whether daycare, k-12, or college - are paying 1/5 the cost of private alternatives, don't kid yourself - you're getting a lot less. Or you're praying that a lot of people working on the other end are a lot more altruistic than they should have to be.

We're entering a period - I don't see it going away in the foreseeable future - in which prices are going to blow up for products and services in the first world across the board. Globalization has brought competition, and rising labor costs have increased prices and demand for relatively inelastic commodities, like energy. No one has any easy answers, because the changes to our society and way of life might very well be fundamental.

Very soon, we're going to have to decide on our level of commitment to social justice and inequality. Because right now, there's nowhere near enough money to provide universal health care at a high level. There's nowhere near enough money to provide universal education at a high level. There's nowhere near enough money to provide decent housing for everyone.

There's going to be a lot more talk of rationing, even in the upper-middle class. But even so, we're going to have to have some pretty fearsome debates about just what levels of inequality we're prepared, as a society, to accept, and what kinds of structural transformations are necessary to ensure even a minimal level of health care, education, and housing are universally available.


PS. In the interest of possibly generating an intelligent forum for discussion, I've decided to open this to comments, and try to respond to them in the nature of a dialogue. Please refrain from the kind of aggressive, anti-intellectual prattle typical of comments on sites like the New York Times.

July 5, 2008
Talking Business

On Day Care, Google Makes a Rare Fumble

Two months ago, Google held a series of secret focus groups with employees who have children in Google’s day care facilities. The purpose was to gauge their reaction to the company’s plan to raise the amount it charged for in-house day care by 75 percent.

Parents who had been paying $1,425 a month for infant care would see their costs rise to nearly $2,500 — well above the market rate. For parents with toddlers and preschoolers, who were charged less, the price increases were equally eye-popping. Under the new plan, parents with two kids in Google day care would most likely see their annual day care bill grow to more than $57,000 from around $33,000.

At the first of the three focus groups, parents wept openly. As word leaked out about the company’s plan, the Google parents began to fight back. They came up with ideas to save money, used the company’s T.G.I.F. sessions — a weekly meeting for anyone who wanted to ask questions of Google’s top executives — to plead their case, and conducted surveys showing that most parents with children in Google day care would have to leave Google’s facilities and find less expensive child care.

Do you think you know how this story ends? You’re probably guessing that because it involves “do no evil” Google, Fortune magazine’s “Best Company to Work For” the past two years, this is a heart-warming tale of a good company reversing a dumb decision.

If only. Although Google is rolling back its price increase slightly and is phasing in the higher price over five quarters, the outline of the original decision remains largely unchanged. At a T.G.I.F. in June, the Google co-founder Sergey Brin said he had no sympathy for the parents, and that he was tired of “Googlers” who felt entitled to perks like “bottled water and M&Ms,” according to several people in the meeting. (A Google spokesman denies that Mr. Brin made that comment.) On Monday, Google began the first phase of its new day care plan, letting go of the outside day care firm it had been using.

In recent months, Google has hit the first rough patch in its short, magical life as a public company. From November to April, Google’s once high-flying stock dropped 44 percent, to $412 from $744. (It has since gained some of that back, closing on Thursday at $537.) It may be a stretch to equate the day care fiasco with the fall in Google’s stock. But maybe not.

When a stock was rising as fast as Google’s once was, it was easy to buy the view that there was something truly special about Google. But when the stock is falling, overlooked problems start to loom large. Having discovered that Google is not, in fact, the promised land, a number of Googlers have left recently to join start-ups, hotter companies like Facebook — and even Microsoft.

“There are many things about Google that are not great, and merit improvement,” blogged Sergey Solyanik, who recently returned to Microsoft after a stint at Google. “There are plenty of silly politics, underperformance, inefficiencies and ineffectiveness, and things that are plain stupid.” Starting, it would appear, with day care.

Google first began offering day care three and a half years ago, and perhaps it is only coincidence that this occurred not long after a woman named Susan Wojcicki returned to the company from maternity leave. Ms. Wojcicki is a figure of significant stature at Google; hers was the garage that Mr. Brin and Google’s other founder, Larry Page, rented while starting up Google. Today she is the company’s vice president for product measurement, though as I discovered in talking to unhappy Google parents this week, not many Googlers seem to know what her exact duties entail. Everybody, however, knows that she’s Mr. Brin’s sister-in-law.

From the start, Ms. Wojcicki has been a passionate advocate for Google’s day care efforts, though there is some dispute about how much decision-making authority she has. Parents who know her point out that the company’s day care approach is very much aligned with her views; for its part, a Google spokesman insists that “these decisions were not made by her; they were made by the executive management team.”

Google’s first facility, called the Kinderplex, was run by the Childrens’ Creative Learning Centers, or C.C.L.C., which, according to its Web site, offers “learning in a play-based, developmentally appropriate environment that incorporates a variety of activities and multicultural aspects in a thematic style.” That sounds perfect for Silicon Valley, doesn’t it? One of C.C.L.C.’s longtime Silicon Valley clients, Electronic Arts, sent me an e-mail statement telling me how happy it has been with C.C.L.C.’s services.

According to Google, there were numerous complains about C.C.L.C., but the Google parents I spoke to disagree. They say that at the Kinderplex, teacher-child ratios were low, teachers were first-rate, the facility was clean and upbeat, and the food — organic, naturally — was terrific.

But at least one parent wasn’t happy: Ms. Wojcicki. She is a proponent of a preschool philosophy called Reggio Emilia, the hot kiddie philosophy of the moment, which stresses even small children’s ability to chart their own learning paths.

A year after the Kinderplex opened, Google opened its second day care center, called the Woods, which Google ran itself. The Woods was an expensive undertaking; in terms of the square footage per child, the aesthetics of its toys, and the college degrees of its teachers, it put the Kinderplex to shame. It also used the Reggio Emilia philosophy.

With the Woods open, Google decided to upgrade the Kinderplex to match the salaries and the teacher-student ratios of the Woods. Google now had 200 day care spots — and such wonderful day care at that! — and was promoting this new perk as a recruiting tool. The company was growing like crazy — its work force now numbers 19,000 — its young employees were starting to have babies, and well, you can just picture what happened next. The wait list ballooned insanely, finally reaching over 700 people. New employees who arrived at Google thinking they were getting in-house day care were stunned to discover that it could take up to two years to land a coveted spot.

Meanwhile, someone at Google woke up one day and realized that the company was subsidizing each child to the tune of $37,000 a year — which nobody had noticed up until then — compared with the $12,000-a-year average subsidy of other big Silicon Valley companies like Cisco Systems and Oracle. Faced with this dilemma, Google decided that the way to solve the dual problems of a too-long wait list and a too-large subsidy was — are you sitting down for this? — to get rid of C.C.L.C. and make the Kinderplex more like the Woods! (Google says it was always planning to replace C.C.L.C.) Given that decision, the only possible way to reduce the subsidy was to raise prices through the roof.

If you are shaking your head at this point, that’s because you lack the proper understanding of Google’s culture. Having conquered the Internet, Google’s executives tend to believe that they can do pretty much everything better than everybody else — even day care. When I spoke to Laszlo Bock, the company’s vice president for “people operations” (a k a human relations), he told me that “what is really driving the cost is eliminating the two-year wait list while focusing on providing really high quality.”

Google can’t just have low teacher-child ratios — it has to have the lowest of anybody. Its teachers have to be the best. Its toys have to be the most advanced. If it costs a lot of money to provide the Greatest Day Care on Earth, well, that’s life.

Plus, the high price of Google day care solves the waiting list problem. Indeed, getting the waiting list down was a huge priority for Google; the spokesman told me that forcing people to wait two years for day care was “inequitable.” And maybe it is.

But parents who talked to me said that several times during the six-week-long day care brouhaha, Mr. Brin made comments indicating that he viewed the whole thing as a giant economics experiment. “This is a supply-and-demand issue,” he told one group of parents — adding that Google needed to charge what the market would bear. (Through a Google spokesman, Mr. Brin denies making such a statement.) Given that Google has lots of pre-I.P.O. millionaires, it can clearly charge a lot.

Indeed, at one meeting, Ms. Wojcicki, a multimillionaire herself, told the parents that she planned to keep her own children in Google day care, despite the higher cost. “I’ve had firsthand experience with the great care provided by these centers and I want as many other parents as possible to have access to it,” Ms. Wojcicki noted in an e-mail message.

Google has also started charging people several hundred dollars to stay on the waiting list; as a result the list has dropped to around 300 parents. By next fall, Google plans to open new facilities with another 300 places. See? No more waiting list.

Google, I should note, believes that it has handled the day care issue in a “Googly” way and object strongly to the criticism by the parents. The company points out that the prices are somewhat lower than originally planned, that it is expanding its day care operation, that its facilities will be state of the art and that it will be giving scholarships to parents who can’t afford to keep their children in Google day care. (Although yet to release the details of the scholarship plan, the company says that employees will have to show proof of household income to qualify.)

But here’s the real problem: providing day care isn’t an economics experiment, nor should it be just another Google perk, alongside organic food and free M&Ms. Day care matters to people’s lives in a way that few other perks do. There are many people in this country — including, I’ll bet, many Googlers — who believe that employer-provided day care, at affordable prices, ought to be like health insurance, a benefit that every company provides as a matter of course. Yet as the technology blog Valleywag noted recently, Google doesn’t even advertise day care as a benefit for its employees anymore. That’s the real shame.

Google may be providing the greatest day care ever, but so what? It doesn’t matter how good the day care is if only its wealthiest employees can afford to use it. If Google had really wanted to do something path-breaking about its day care crisis, it would have spent less time creating elitist day care centers and more time figuring out how to “scale” day care for everybody no matter what their salaries.

Instead, Google has shown that it thinks about day care the same way every other company does — as a luxury, not a benefit. Judging by what’s transpired, that’s what Google is fast becoming: just another company.