Another Poorly Conceived Child Care Proposal from C.D. Howe

I believe we need a child care system across Canada that is as dependable, beneficial for children and accessible as the public school system and nearly as affordable.  I think that is what the Finance Minister promised in the Fall Economic Statement when she said that “Quebec can show us the way on child care.”

Ken Boessenkool and Jennifer Robson offer a different perspective on how to build a child care system in a C.D. Howe Commentary entitled “Aggressive Incrementalism: Strengthening the Foundations of Canada’s Approach to Childcare”. They argue for an incremental approach – “building on what exists”.   This contrasts with what they call the “big bang approach” of universal childcare services at low or no cost to parents, fuelled by substantial federal financial contributions and leadership. 

What they offer is a strange mixture of refundable tax credits, increased operating and capital grants to licensed providers, and a permanent federal transfer of funds to the provinces and territories.   They don’t like principles-based child care funding agreements with provinces, but they, perplexingly, want this new permanent federal funding to be conditional on provincial efforts to expand licensed child care.

Unfortunately, in my opinion, this is a poorly thought-out, poorly informed set of recommendations for addressing the current child care crisis that families face. 

First of all, their proposals do not really build on what exists.  They want to dramatically transform the Child Care Expense Deduction into a refundable tax credit, which breaks with what has existed since the early 1970s.  And they want to break with bilateral agreements, which was the federal funding approach under Paul Martin and now under the Trudeau government.  

A “big bang” approach would, instead, keep the bilateral approach for funneling child care assistance to provinces and territories.  Those agreements would probably direct increased funds towards operating and wage enhancement grants that already exist (perhaps with new conditions).  And quite possibly, the existing Child Care Expense Deduction would be maintained.  So, Boessenkool and Robson’s proposals break from existing funding arrangements more than building on what exists, and possibly more than the “big bang” approach would do.

The biggest problem with the Boessenkool and Robson piece is that they scarcely seem to recognize the centrality of the affordability problem.  As they write, “Our focus here is … on incremental and structural reforms to increase the quantity and quality of childcare in Canada.” (p. 3).  They emphasize over and over the need for more spaces, but affordability gets a very light touch.  The problem is that without very dramatic moves to improve child care affordability, the majority of new spaces will stay empty.  Affordability and availability of child care are not separate problems; they have to be solved together. 

Boessenkool and Robson’s main instrument to improve affordability is a refundable tax credit for child care expenses.  This would replace the existing Child Care Expense Deduction.  They believe the Child Care Expense Deduction is regressive and patriarchal and should be replaced with this tax credit.  The truth is that they do not understand the Child Care Expense Deduction (CCED) at all.  It is not a child care funding mechanism; never was, never will be.  The CCED is part of the definition of income in the tax system.  For our tax system to be fair (horizontally equitable), we allow the lower earner in the family to deduct his or her (but mostly her) necessary costs of employment from the income she earns, before we apply tax rates to determine how much tax she should pay.  If we don’t do this, this lower earner in the family will face punitive tax treatment when she seeks employment.  Getting rid of the Child Care Expense Deduction would do more to reinforce the patriarchy than to smash it.

Boessenkool and Robson think that the tax credit will solve the affordability problem.  How much money will the refundable tax credit give you?   Well, to judge from Doug Ford’s child care tax credit in Ontario, it won’t give you much. 

Conservative politicians selling tax credits in the 2018 Ontario election announced that tax credits would cover up to 75% of a family’s child care costs.   In the cold light of day after the election, the Financial Accountability Office of Ontario (FAO) studied what the likely impact of the tax credit would be in Ontario.  The FAO estimated that only 300 families across Ontario, or one-tenth of one percent of all families claiming the tax credit, would be eligible for the maximum benefit – the 75% assistance promised.  And, although there was much talk during the election of $6,000 or $7,000 of financial assistance to Ontario families, the FAO estimated that the average family receiving a tax credit would get $1,300 worth of help.  So much for the wonder of tax credits to deal with the child care affordability problem, let alone issues of accessibility, quality, special needs, etc.   Of course, Quebec has experienced the other negative effects of using tax credits: dramatic expansion of for-profit child care of considerably lower average quality.

If you do the math, you will find that most Canadian families would be only a few hundred dollars per year better off with this tax credit, and many mothers would face higher tax rates.  What Boessenkool and Robson don’t get is that it will take a “big bang” to dramatically improve child care affordability.  And improving child care affordability is the key to solving the child care crisis that families face.

I am pleased that Boessenkool and Robson recognize the importance of providing direct operating grants and capital grants to child care providers.  However, they don’t seem to realize that operating grants are already a major funding mechanism in provinces and territories.  And, they seem to believe that, having solved the affordability problem with their tax credit, the purpose of these more generous grants to providers is to expand the number of child care spaces.  In fact, operating grants have two primary effects: first, to lower parent fees, and second, to increase staff compensation.  And therefore, these grants primarily impact affordability and quality of services.  The grants do not directly fund the expansion of spaces, although increased affordability means that the economics of space expansion will work out better.

Having misunderstood the purpose of these operating grants, Boessenkool and Robson then develop odd suggestions for the distribution of these grants – they should be based on the birthrate in a neighbourhood, or based on the existence of child care deserts, or they should be allocated by parents to their favoured child care provider.   Some of Boessenkool and Robson’s suggestions could be interpreted as a belief that there should be more planning in the child care system – that facilities should be grown most in the neighbourhoods that need them most.  Others, like the suggestion that these grants should take the form of a child care voucher, head in the opposite direction.  It is a confusing mish-mash.

Boessenkool and Robson suggest that the federal government should transfer child care funding to the provinces and territories in the form of a permanent block grant rather than through bilateral agreements with conditions for the expenditure of funds.  This seems unrealistic and undesirable at this stage.  It is unrealistic because solving affordability, accessibility and quality issues in child care will take Billions of dollars of annual funding.  The federal government will need reasonable assurance that this money is being spent to deliver affordability, accessibility and quality, rather than, for instance, to enrich private corporate interests in different jurisdictions.  Once a good and effective child care system is established across different jurisdictions, block grants could be a viable funding mechanism.

To state it succinctly, I think the primary federal government objective is that there comes to be, in each jurisdiction, a planned, coherent and diverse system of community-based high-quality early learning and child care services that are affordable and accessible to families.  The federal government needs to be respectful of provincial/territorial jurisdiction (which has important benefits).  But the federal government also needs to ensure that funding goes towards achieving this multi-faceted objective.

Gordon Cleveland

March 31, 2021

The new Angus Reid poll on child care

Great News for Supporters of a National Child Care System

Cardus must really be kicking themselves.  Cardus is a Christian research and advocacy organization that spent a lot of money on that recent Angus Reid poll on attitudes to a national child care program.  I’m sure they expected to hear a lot of support for their view that governments should just give money to parents with children.  Cardus opposes building a child care system that is universally available to families.  And they believe that Canadian families support their point of view.

Imagine their surprise then when Angus Reid found that support for major new investments in child care and for a national child care system is overwhelming amongst families with young children.  The survey found that 84% of families with a child under 6 agreed with the statement that “we need a much bigger public investment in affordable quality child care options.”   That included over 80% of families with a parent at home, as well as those currently using child care.

Of families with a child under 6, a total of 83% of families with a child under 6 supported “the idea of moving towards a national child care system in Canada”.  Only 16% of these families moderately or strongly opposed this statement.

  • 88% of all these families agreed that “finding quality child care is a way bigger hassle than in should be for parents today”
  • 82% agreed that “child care workers are underpaid for the important work they do”
  • 96% agreed that “mothers have every right to work hard and pursue a fulfilling career”.

Of course, families with a child under 6 are split on the best financing and delivery mechanisms for a new national child care system.  In this survey, 85% supported “publicly subsidiz[ing] eligible child care centres and regulated home day cares as in Quebec where parents pay roughly $10 per child per day and the government funds the rest of the costs.”

But 85% also supported the “creat[ion] of a refundable federal tax credit that allows lower income families to claim as much as 75% of their child care expenses.”

And 84% supported “increase[ing] the Canada Child Benefit payment up to an additional $125 a month per child.  And 84% supported “creat[ing] a guaranteed paid family leave program that provides income during the first year of a child’s life for those who don’t qualify for parental leave under Employment Insurance.”

But only 64% supported “creat[ing] a $300 a month per child subsidy for non-parental, in-home care (such as a nanny or paid relative).

These families with a child younger than six years were also asked “of the various proposed child care policies we just looked at…which…would you choose as the top priorities to proceed with?”   The largest proportion by far (52%) answered “subsidized child care facilities where parents pay $10 a day.”   A tax credit for child care expenses was chosen by 23%.  An increase in the Canada Child Benefit was chosen by 39%.  Paid family leave outside EI was chosen by 22%.  (Obviously families were allowed to choose more than one top priority, because these numbers add up to more than 100%).

It is probably worth noting that the Canada Child Benefit has already recently been increased.  This means that for the 2020–21 benefit year, the maximum benefit will be $6,765 per child under age 6 and $5,708 per child age 6 through 17.  The Canada Child Benefit is of particular benefit to families in which a parent is at home and to lone parent families, because incomes in these families tend to be lower.

The Liberal party promised at the last election to look closely at maternity/parental benefits for families not currently eligible for benefits through EI.  This remains to be done.

The overall conclusion from the Angus Reid/Cardus poll seems to be that there is very substantial public support by parents for major investments in child care, and particularly for    direct subsidization of child care facilities to make child care widely accessible and affordable.

Cardus must have gotten some joy out of the answer to one of their more speculative questions – if you could afford to, would you rather stay home full-time with your children until they go to grade school?  Two-thirds of respondents said yes to this highly hypothetical question. 

Of course, nearly all families COULD NOT actually afford to have a parent stay at home full-time.  And society couldn’t afford it either.  When society makes low-fee child care available for families, this supports activities that increase employment, production, incomes, tax revenues and well-being of many people in society.  That’s not what would happen if society gave parents with children enough money to allow them to stay at home for years while their children grow up. 

However, nearly all the reponses to this very extensive survey should make Cardus change its tune on child care.  Consider these results from the part of the survey that went to a general sample of the Canadian population (not exclusively to families with young children).

  • 72% of all Canadians, and a majority in EVERY PROVINCE (including 59% in Alberta) favour moving towards a national child care system
  • 89% of women 18-34 years of age support moving towards a national child care system (and over 60% of women and men in every age category also support this).
  • 90% of Canadians who voted NDP in the last election support moving towards a national child care system
  • 85% of Canadians who voted for the Liberals in the last election support moving towards a national child care system
  • Amazingly, even 49% of Canadians who voted for the Conservative Party in the last election support moving towards a national child care system

Not good news for Cardus, but good news for the rest of us.  The large majority of Canadians, and overwhelming numbers of families with young children are on board with moving towards a national child care system with a very substantial federal investment of dollars.  And there is very strong support for direct funding of child care services to provide affordable and accessible child care for $10 a day.

What Lessons can the Rest of Canada Learn from Quebec Child Care?

children's artwork
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What is “the Quebec model” of early learning and child care?

There are several different lessons to learn about the Quebec model.  Generally, the decisions to rely on direct funding, on building good quality not for profit child care, on building a system that includes enhanced maternity parental benefits/leaves as well as schoolaged child care have been very positive.  But, we also need to learn from the problems Quebec has had.  They only had sufficient supply for 15% of the child population (0-4) at the time that they announced low-cost universal child care, and they’ve been behind the curve ever since.  That really is what has forced them into too much expansion of family child care and of for-profit child care.  And, it is now clear that both of those are of substantially lower quality than non-profit centre care.  And, so also they have ended up with many lower-income families in lower-quality care, and they have ended up with very long waiting lists for the good quality services (although there is now enough total supply of all kinds to meet total demand).

In short, there are a lot of useful lessons to be drawn by us in the rest of Canada.  We need to figure out how to expand affordability quickly enough to make a big difference for families and yet slowly enough that we don’t suffer all of these problems.  It won’t be easy, particularly since the federal government is more a funder than a manager of child care’s development.