My Recent Presentation on Child Care Affordability

The Institute for Gender and the Economy recently sponsored a workshop on Care Work in the Recovery Economy. I did a short presentation with slides looking at Alberta’s new child care policies – following on the funding agreement with the federal government. Do the new policies get us to $10 a day? Are low-income families still disadvantaged with the burden of child care costs? I thought you might like to see the slides and draw conclusions.

And how about this neat graphic provided to me after the workshop by the workshop organizers!! It summarizes some of my main themes.

ARMINE IS WRONG ABOUT DOUG FORD

I like Armine Yalnizyan.  Usually, I agree with her.  But I don’t appreciate her recent sympathy for Doug Ford (https://www.thestar.com/business/opinion/2022/01/25/doug-ford-is-the-only-premier-who-has-yet-to-sign-ottawas-10-a-day-child-care-deal-hes-right-to-push-back.html ).  She sympathizes with Doug Ford’s reluctance to sign an agreement with the federal government to get billions of dollars per year to make licensed child care more affordable and more accessible for Ontario families.  She agrees with Doug Ford that there is not enough money in the pot to lower fees on existing child care spaces AND expand child care capacity.

But she’s wrong.  There is enough money on the table to take giant steps towards making child care both affordable and accessible in the next five years.  After all, right now Ontario only spends about $2 billion per year on licensed child care.  By 2025-26, the federal government will be providing over $3 billion of additional funds for Ontario to spend on child care.  That more than doubles Ontario’s child care spending.  Come on, Ontario!  Sharpen your pencils!  Can’t you figure an intelligent way to spend an extra $3 billion per year making child care more accessible and affordable for Ontario families?

Yes, it will be tough.  Child care is expensive in Ontario, so cutting fees in half and then getting them down to $10 a day will be expensive.  I estimate that it will cost just over $1 billion per year to cut current fees by half for existing child care spaces.  And I estimate that the net cost of lowering fees on existing spaces to $10 a day will be just over $1.5 Billion.  I’ve shared these calculations with Armine.  That’s a lot of money, but over the next five years, offering existing child care spaces at $10 a day will eat up only about one-half of the cumulative total of $10.2 Billion that Ontario will get from the federal government over that time.  That leaves half of the federal money to devote to expansion and to lowering the fees on new spaces down to $10 a day.  And to increasing staff compensation so that new qualified staff can be recruited and existing staff will stay in the sector. And to all of the other aspects of building an affordable, accessible, high-quality system of child care in Ontario. 

I calculate that the operating funding to lower fees to $10 a day for 100,000 new child care spaces would be about $1.2 Billion annually.  That would bring Ontario’s coverage rate up to 47% – there would be capacity for 47% of all Ontario children 0-5.   That’s not the 59% coverage that some other provinces – but not all – have promised.  But 47% in Ontario means a lot more children have access to early childhood education than 47% would mean in other jurisdictions.  Fortunately, we have very good full-day kindergarten for 4- and 5-year-olds.  This was the same full-day kindergarten that Doug Ford wanted to dramatically downgrade back in 2019-2020. (https://members.etfo.ca/AboutETFO/Publications/PositionPapers/PositionPapersDocuments/Dr%20Gordon%20Cleveland%20Kindergarten%20Research%20Report%20Executive%20Summary.pdf ).

In fact, Doug Ford has a pretty poor record when it comes to supporting good-quality affordable early learning and child care.  When he came into office back in 2018, he immediately cancelled Kathleen Wynne’s decision to proceed with providing free child care to preschool-age children.  That would have cost about $1.6 Billion of provincial money.  In its place, he devised the Ontario Child Care Tax Credit to provide a sprinkling of expenditure relief for the use of any type of child care.  That provided very little support for families and did nothing to build a child care system.  And then Ford and his ministers made plans to weaken full-day kindergarten but backed off at the last minute when they read the polls about how popular full-day kindergarten is.   So, I don’t trust Doug Ford’s motives in delaying signing a child care agreement – he is not my child care knight in shining armour.

The federal government is offering provincial/territorial and Indigenous governments enough money to go a long way towards building an affordable, accessible Canada-wide child care system.  Families need it; children need it – it’s time for Doug Ford to stop playing games and sign up for child care.

$10 a Day Child Care Will Dramatically Reduce Employment Barriers for Parents

A major new study (https://childcarepolicy.net/wp-content/uploads/2021/12/Ten_a_day-paper-web.pdf ) addresses the question of whether the $10 a day program will truly improve child care affordability and reduce barriers to employment for families.  It was written by economists Gordon Cleveland and Michael Krashinsky from the Department of Management at University of Toronto Scarborough.

Their study focuses on the situation facing couple families with one infant child and one preschooler in each of the three provinces at different possible levels of income.  The authors’ main conclusion is that the $10 a day program can and should dramatically change child care affordability and make employment a worthwhile option for many caregiving parents.  However, even if provinces and territories adopt a flat fee of $10 a day, they will need to have some kind of sliding scale to ensure that low-income families are not disadvantaged.

On the basis of this work, Dr. Gordon Cleveland says

  • “Ontario should sign a funding deal soon with the federal government; if they don’t reach an agreement by early next year, Ontario will lose about $1 Billion in child care funding.”  
  • “Our work shows that child care costs are a very large barrier to employment for many two-parent families, and that $10 a day child care will dramatically reduce those barriers.” 
  • “To reach an agreement, Ontario needs to develop a child care Action Plan.  That plan needs to include support for dramatic expansion of non-profit child care – at least 150,000 spaces over 5 years.   It needs a plan to phase-in more affordable child care, so that supply and demand increase together.  And it needs plans to pay early childhood educators more so we can recruit more trained staff now.”

Finance Minister Chrystia Freeland’s April Budget is spending $30 Billion over 5 years to make child care affordable enough to eliminate this major barrier to the employment of mothers of young children across Canada. As of December 2021, nine provinces and territories have signed on to the $10 a day early learning and child care program, with Ontario being a notable holdout.  This timely study seeks to determine whether the $10 a day policy gamble is likely to work, and what kind of funding reforms will make the effects more equitable.

Specific conclusions of the study include:

  • Under current policies, if a couple family with two children cannot access subsidies in Ontario (and most cannot) licensed child care at any income level is remarkably unaffordable. 
  • If Ontario offered licensed child care at a flat fee of $10 a day per child along with the existing tax credit, a couple family with two children would pay less than 15% of the caregiving parent’s income contribution in child care fees, no matter what their income level.  The child care cost barrier to employment would be dramatically reduced.
  • Alberta’s new funding policies agreed to with the federal government will improve affordability, particularly for families at higher levels of income.  Alberta plans to offer substantial operating grants to child care centres and homes to allow them to lower parent fees.  And Alberta is extending its subsidy system to cover families with partial subsidies out to $180,000 of family income.
  • The combination of grants and subsidies will still leave Calgary couple families with two children giving up more than 30% of net extra employment income if the caregiving parent earns less than $44,000 (family income of $110,000).   In other words, child care will be unaffordable for these families even when Alberta’s new child care policies are fully implemented. 
  • Edmonton families will be better off than Calgary families because median fees start off at a lower level before the new funding programs.  Only families where the caregiving parent earns less than about $18,000 (family income of $45,000) will find child care unaffordable (30% or more of the net income contribution of the second earner).
  • Manitoba pioneered flat fees for child care, and operational funding to lower fees.  However, its positive reputation is not supported by measures of current child care affordability. 
  • A flat fee of $10 a day per child (with no subsidy system) would improve affordability for nearly all couple families with two children in Manitoba except when the caregiving parent’s income is $14,000 or below.    However, a flat fee will mean that affordability is always worse for families the lower their income. 

Lies, Damned Lies, and Conservative Politicians

What a lot of whoppers!  If Erin O’Toole were Pinocchio, his nose would be 10 feet long by now.  Erin O’Toole, leader of the Conservative Party of Canada, has now come out with a full platform of policies, including policies on early learning and child care.  In it, he promises  (1) “to provide increased support for working families by providing increased funding for child care” (2) that “nobody should be prevented from getting back to work because they can’t afford child care” (3) that the Conservative policy will be “covering up to 75% of the cost of child care for lower income families” and (4) that “this will massively increase the support that lower income families receive and provide more assistance to almost all families”.  All of these promises are on page 47 of “Canada’s Recovery Plan” published by the Conservative Party of Canada. 

I live in Ontario, so I am going to look at this from an Ontario perspective.   Ontario ALREADY HAS a refundable tax credit for child care.  It already pays some money back to you in compensation for child care expenditures that are related to parental work or study.  The O’Toole policy is a bit more generous, especially for higher-income families, but has the same eligibility rules.  Since you can’t get paid twice for the same expenditures, the best the federal program can do is to REPLACE THE ALREADY EXISTING PROVINCIAL TAX CREDIT. At the same time, O’Toole is going to get rid of the federal Child Care Expense Deduction.

What does this mean for families in Ontario?  If you currently earn $30,000, your new tax credit will give you $640 more than the old one, but you will lose up to $1,200 of Child Care Expense Deduction.  You will be worse off.

If you currently earn $120,000, your new tax credit will give you $3,360 more than the old one, but you will lose up to $2,080 of Child Care Expense Deduction.  You will be better off to the tune of $1,280 per child per year.  Many other families’ situations will lie between these two examples.

Conclusions?

In Ontario, low income families will be worse off with the O’Toole plan.  Higher income families will be better off, but only by a couple of thousand dollars.   The chief beneficiary will be the Doug Ford government that will save about $400 million per year when it’s current child care tax credit program is superseded.

Should we be surprised?  The median cost of licensed child care in Ontario in 2020 was just over $17,000 for infants, just over $14,000 for toddlers, and just over $12,000 for preschoolers (2½ – 5 years).   For most families that can’t afford these fees now, a tax credit that gives you a couple of thousand dollars at best and limits the maximum subsidizable fee to $8,000 probably won’t change things much.

Should we be surprised?  Since we already have a refundable child care tax credit in Ontario and we have had it since 2019, we know whether this program will solve the child care affordability problem.  It doesn’t. 

Should we be surprised?  The Financial Accountability Office of Ontario analyzed what the effects of the Doug Ford tax credit would be back in 2019.  They concluded that: “Families that receive the CARE tax credit will receive an average benefit of approximately $1,300.”  Not $6,000 or $4,000, but $1,300.  They knew this program would not do much.  And the Financial Accountability Office also knew that low-income families were NOT going to benefit much.  As they concluded: “fewer than 300 families, or 0.1 per cent of all CARE tax credit recipients, will receive the maximum benefit entitlement per child” (p.3).  In other words, fewer than 300 families across Ontario would receive back 75% of their child care expenses.

Should we be surprised?  We know the approximate cost of the Erin O’Toole tax credit.  A very similar proposal was analyzed in 2017 by the C.D. Howe Institute.  The net cost was $1.2 Billion per year.  The ongoing amount of federal spending announced in the recent federal budget was $9.2 Billion per year.  Does Erin O’Toole really think that a program that is less than 1/7th the size of the proposed federal program will have a bigger impact on child care affordability?  I don’t think so.

Should we be surprised?  Reducing the child care affordability barrier to women’s full participation in employment is a big problem, not a small problem.  In a 2018 report to the Government of Ontario, I calculated that in 45% of Ontario families, the cost of licensed child care would eat up over 60% of the mother’s earnings contribution to household income.  For another 33% of families, the costs would eat up between 30% and 60% of the mother’s earnings contribution.  The Ford tax credit for child care expenses has not changed this situation by much, and neither would the O’Toole tax credit.  It will cost a lot of money to change this major employment barrier and O’Toole is not willing to spend it. 

WHAT SHOULD THE ONTARIO CHILD CARE PLAN INCLUDE?

In order to access the child care money announced in the 2021 Federal Budget, Ontario has to devise a credible, implementable 5-year plan to make licensed child care affordable, accessible and of high-quality.  It’s a lot of money.  I estimate that Ontario could receive about $1.16 Billion of new federal child care money in 2021-22.  And more money on top for Indigenous child care.  That would mean an increase of 50% in the amount of spending by the Ontario Government on early years and child care (which is now about $2.3 Billion).

The federal child care money for Ontario would rise to $1.74 Billion, $2.12 Billion and $2.51 Billion over the next three fiscal years.  In 2025-26 and thereafter, Ontario should be receiving $2.97 Billion per year. 

I believe the fundamental objective of the federal government is the creation in each province and territory of a system of community-based child care services that is affordable for parents, serves a wide range of child and parent needs, is accessible to families, inclusive of children with additional needs, and is of high-quality (i.e., with a high proportion of trained early childhood educators, with substantial continuing professional development). Community-based services are predominantly not-for-profit or public services such that the needs of communities, parents and children are the basis of all decisions rather than the commercial interests of the owners and shareholders of child care businesses.  This is the direction mandated by the eight provincial and territorial agreements signed so far.

If Ontario comes up with a 5-year plan consistent with these objectives, the federal government will sign on the dotted line and we will get the child care funding.  And this funding is permanent.

Good news? Yes.  But Doug Ford is apparently unwilling to come up with an Ontario Action Plan that meets the federal requirements. 

Of course, it won’t be easy.  Ontario has the most expensive child care in the country.  Real estate is more expensive here, labour is more expensive here, and child-staff ratios and regulations are better here than in some other provinces.  Chrystia Freeland has called for a cut of 50% in parent fees by the end of 2022, but I don’t think the Ontario plan can be as simple as that.   It would cost over $1 Billion just to reduce fees by 50% on existing Ontario spaces, without dealing with expansion or raising wages.  We need a plan that simultaneously builds capacity, lowers fees, improves equity in access to services, increases compensation of ECEs and avoids long waiting lists for not-yet-existing services.  


The trick is to design policies so that the transition towards affordable child care is equitable and well-managed.  We need to work together on the five-year plan.  The City of Toronto has already proposed that municipalities should be at the Ontario table because they will have major responsibility for delivering and managing the expansion of services.  This is a good idea.

What principles and policies should be in Ontario’s 5-year child care plan?

  1. Low-, middle- and high-income families should all benefit from the reduction in child care fees.  This may imply adoption of a sliding scale of parent fees along with gradual reduction of fixed maximum fees for child care.
  2. Rapid capacity expansion of not-for-profit and public services should be a top priority.  Municipalities and school boards will be key to planning and implementation. 
  3. There must be a 5-year and a 10-year plan for capital expansion and for the expansion of home child care.  New capacity developments should be planned to produce an equitable geographic and income distribution of services.  New capacity should take account of services for children needing additional supports, for families needing non-standard hours care, for special rural needs, and other needs for diverse services. There needs to be money for planning, development and capital. 
  4. Fee reductions should be phased-in so that demand for services expands at about the same rate as capacity grows.
  5. All existing for-profit, not-for-profit and public services should be invited to provide lower-fee services for Ontario families.  These fee reductions will be funded by substantially increased operating grants.  In return for this substantial public funding, services will need to accept that they are providing what is essentially a public service with required financial transparency, controlled fees, increased compensation moving towards wage standards, enhanced reporting requirements, quality-improvement initiatives, increased professional development, and so on.  Services that do not wish to accept these conditions can continue to operate with existing supports and regulations (e.g., current rather than increased levels of operating grants). 
  6. Increased operating grants for these publicly-managed services should support increased compensation of ECEs as well as lower fees for parents. 
  7. Research and widespread consultations should be conducted to lead towards agreement on the future structure and level of wages necessary to ensure continuing recruitment of adequate numbers of trained ECEs and to incentivize making early childhood education a viable career choice. A province-wide compensation grid with variations by region and by qualifications should be negotiated and operators should be expected to meet or exceed these levels.
  8. The Ontario government should sponsor collaborative research, in which municipalities will be involved, on the costs, quality, fees and demand for licensed child care.  An important output of this research will be the identification of key factors affecting child care costs (and/or quality) that should be legitimately subsidized through operating funding.

These ideas are intended to begin an important conversation about the best growth strategy for licensed, community-based, publicly-managed child care services in Ontario.  Federal initiatives have opened up immense possibilities; we need to determine the best path forward and pressure the provincial government to take it.