Canada has a crisis on its hands – a child care workforce crisis. Already, child care operators across the country are unable to find staff; rooms are closing and centres are closing because of the inability to attract and retain early childhood educators. That’s BEFORE the estimated need for 60,000 new early childhood educators as we move to $10 a day child care.
Australia is not the first country that springs to mind when looking for child care policies to emulate. For instance, Australia funds child care with vouchers that encourage the growth of the for-profit sector and lead to ever more expensive child care services. This kind of funding has made the buying and selling of child care real estate into big business.
However, Australia does have a wage grid and a strategy for workforce development, which jurisdictions in Canada do not have. We can learn from their example.
Australia has something called a Fair Work Commission whose job it is to design the wage grid and set the minimum wages and minimum conditions of employment in different sectors. Children’s Services is one of those sectors, and the award made by the Fair Work Commission is a legal document that child care employers have to follow. Employees can bargain for more than the minimum, but employers cannot pay less than the minimum award rate.
Here’s a link to the Fair Work Commission award for Children’s Services workers updated in November 2022. There’s a detailed classification structure of qualifications and responsibilities that forms the basis of the wage grid. The wage grid lays out the minimum hourly and weekly rates that can be paid for different classification levels in children’s services occupations. The two most frequent qualification levels are for staff with a Certificate III in Children’s Services (typically a 6-month course) and a Diploma in Children’s Services (typically an 18-month course). The current award sets the starting hourly rate for less qualified staff (Certificate III) at $24.76 per hour and for qualified educators with a Diploma at $29.17 per hour. Wages rise above these starting rates with increased experience. Minimum hourly rates for a Director of a child care centre (called long day care) range from about $35 to $40 depending on the size of the centre and experience.
The Children’s Services Award covers many but not all ECEC employees – most others are covered by the Educational Services (Teachers) Award. That award sets out the wage grid for Early Childhood Teachers (ECTs) who have a Bachelor degree qualification (typically a 4-year course) or higher. All ECEC services in Australia must engage or have access to an ECT for a particular amount of time per week, determined by the number of children in attendance. Entry-level pay for an ECT is $32.20 per hour and increases with experience.
Since late 2019, Education Ministers across Australia have led a process involving extensive consultation to develop a ten-year strategy to build up and support the children’s education and care workforce. It lists 21 actions – short, medium and long term – to be implemented over the ten-year period. There is an implementation and evaluation plan to shape and ensure progress of this workforce strategy.
On top of all that, Australia is collecting detailed data about its workforce from all service providers (response rate of 99%). There is a National Workforce Census, which is a population survey of early childhood education and care service providers across Australia. It collects data on service usage, children with additional needs, access to programs and staffing. On the workforce specifically, the census collects information about hours of work, qualifications, exemptions from qualification requirements, experience and tenure, professional development, gender, age, and Indigenous status of staff members. The survey also collects data about whether these staff members earn the award-level wage (as determined by the Fair Work Commission) or a higher wage, and if higher by how much. So, for instance, in the 2021 Workforce Census report we find that 57% of contact staff in child care centres earned the award rate, 34% earned above the award rate and for 9% of staff the wage rate was unknown.
None of this is perfect, of course. Early childhood educators in Australia still receive low wages relative to many other workers and there is a movement for an immediate wage rise to keep educators in the sector. However, many of the elements necessary to know about and improve wages and working conditions are in place in Australia. I wish I could say the same about Canada.
The Ministry of Education in Ontario is beginning to understand that they really can’t satisfy for-profit child care providers with anything less than the full cake and eat it too. The Ontario government has bent over backwards to accommodate the for-profit child care operators; they want them to opt into the Canada-wide Early Learning and Child Care (CWELCC) system. What has the Ministry done so far for the for-profit operators?
It changed the regulations so that municipalities (mandated to be Service System Managers) no longer have the discretion to sign purchase-of-service agreements only with not-for-profit providers (16 of the 47 had this type of provision);
It changed regulations so that measurement of quality in a centre could not be used as a criterion for eligiblity for CWELCC sign-up;
It completely gutted the new Management and Funding Guidelines for 2022 which the Ministry itself had established back in April. The April version of the guidelines affirmed that municipalities should judge whether the funds given to operators in 2022 were based on actual costs. In other words, the municipalities should judge whether operators had ineligible expenditures or excesssive profit claims. The August Guidelines eliminated these provisions.
It ordered municipalities to collect very little financial data from operators. The April version of the Guidelines said that “CMSMs/DSSABs are required to collect sufficient and detailed financial information from Licensees…. CMSMs/DSSABs will review all financial components including cost and expense line items for reasonability and eligibility, while ensuring CWELCC System objectives will be achieved….” The August version of the Guidelines said “Information collected from Licensees to support implementation should be kept to the minimum amount necessary to meet the reporting requirements outlined in the CWELCC Guidelines….”
As of October 18th, the Ministry of Education has announced that the August 2022 Guidelines will continue for 2023; there will be few controls over how child care operators spend the revenues they receive from the CWELCC program. Information collection will be kept to a minimum. All of this despite the fact that, with a 50% cut in fees at the end of 2022, more than twice as much government money will be going to operators.
Ontario’s Action Plan (part of the CWELCC Agreement with the federal government) said there would be a revised allocation methodology in 2023. That didn’t happen. Now, the new costs-based funding system will be in place for 2024.
But that’s not enough concessions as far as the for-profit operators are concerned. They want more. Sharon Siriboe, the director of the Ontario Association of Independent Childcare Centres wants guaranteed funding rules before for-profit operators will join the system. “How can any small business remain viable and be asked to make such significant changes with only 14 months of clarity?”
What is the problem here?
Ontario signed an agreement with the federal government back in late March of 2022 – the Ontario-Canada Canada-wide Early Learning and Child Care Agreement. In it, Ontario committed itself to the vision of building a largely not-for-profit system of accessible, affordable, inclusive child care services of high quality with federal money – $10 Billion of it over 4 years.
In Section 4.1 of that agreement, it states that “Ontario intends to maintain and build upon its existing robust accountability framework by introducing a further control mechanism. Ontario proposes to implement a cost control framework following the signing of the agreement that will be in place for all providers that opt into the Canada-wide ELCC system. The Parties are interested in approaches to ensure the sound and reasonable use of public funds, ensuring that costs and earnings of child care licensees that opt-in to the Canada-wide ELCC system are reasonable and that surplus earnings beyond reasonable earnings are directed towards improving child care services.”
I don’t really like calling it a “cost control framework”. It would be better to call it a “wise spending of public dollars” framework. The objective is not to have costs that are as low as possible; the objective is to spend public dollars sensibly to achieve the objectives of affordability, accessibility and quality. Ontario has agreed with the federal government that there will be a mechanism that ensures that all providers spend public funds wisely and that both the costs claimed by these providers and the earnings (profit) claimed by these providers are reasonable in achieving the objectives of this new child care system.
What is this new cost control/wise spending of public dollars framework? Ontario tries to claim they have one already, but they don’t. They have what we could call a fee control framework. In other words, base fees for every operator are frozen at whatever their value was on March 27, 2022. Each operator will get revenue from government equal to 25% of this base fee if they join CWELCC in 2022. The operator will use these funds to backdate a 25% fee reduction to parents. There will be another cut to fees at the end of December. This will take fees down by 50% compared to the level they had in 2020. And, in 2023, operators will get revenues from government to cover these fee reductions for parents. These rules control the fees charged by operators, but they in no way validate the costs and earnings that are covered by the new government revenues. There is effectively no reporting on what these costs and earnings are. There is no way to calculate the amount of surplus taken by operators, or to see how it is used.
That’s the way the for-profit operators like it. No requirement for reporting on how the public funds they receive are spent until well into 2024. Even then, only a requirement for an annual audit. No need to justify the salaries paid to management. No need to justify the profits they claim each year, which are built into the fees they charge. We know from the CCPA fees survey that for-profit operators in cities across Ontario charge higher fees than not-for-profits. Their median fees are between 8% and 40% higher than the not-for-profits, depending on the municipality. Why? Are these fee (and revenue) differentials justified? The for-profit sector would prefer not to tell. They don’t want detailed accountability for the public funds they receive.
I have recently argued that the Ministry of Education should be requiring all operators in 2023 to submit detailed budgets of planned expenditures. These would be reconciled against actual spending (and profit) at the end of the year. This, along with related operating data, could provide the detailed costs and spending information the Ministry of Education would need to design a new costs-based funding system. But the Ministry doesn’t want to do that. Instead they are giving the for-profit child care operators a free pass for another year. The Ministry plans to develop a new costs-based funding system for 2024 with virtually no costs data upon which to build it. And, the for-profit operators are even objecting to this. They apparently want the free pass to continue for ever.
Why, you might wonder? From an economic point of view, the position of the for-profit operators is quite rational. They have a licence to provide child care services in Ontario and many of them make good money providing these services. From now on, having a licence to provide child care services to children 0-5 in Ontario is going to mean receiving hundreds of thousands of dollars a year in guaranteed government funding; by September 2025, government-provided revenues will cover over 80% of the per-child costs of most centres. Access to this kind of government funding is scarce; not everyone can get a licence In a similar situation in Quebec, some fixed-fee centres have been able to sell their licences to new operators for over a million dollars. That’s not selling equipment or real estate; that’s just the price of buying the licence. In Ontario, the fewer the reporting requirements, the fewer the controls over how operators spend their money, the fewer the controls on profit, the higher will be the price when you come to sell your licence. Large big-box for-profit child care chains may be willing to pay top dollar for existing licences of small for-profit operators if there are very few controls on the reasonableness of costs and earnings. So, the demands of the for-profit operators are rational; they’re just not very good for Ontario children, families and for the building of a financially accountable child care system.
What’s the position of the federal government on for-profit child care? The fall economic statement and the federal budget made things pretty clear. The Quebec model based on not-for-profit Early Childhood Centres (CPEs) is the model to follow.
The 2021 Budget provides $30 Billion over 5 years for the building of a “Canada-wide, community-based system of quality child care.” (p. 101). A community-based system means publicly-planned and publicly-regulated not-for-profit and public services.
The budget compares this to public health care and the public school system: “Just as public school provides children with quality education in their neighbourhoods, the government’s goal is to ensure that all families have access to high-quality, affordable and flexible early learning and child care no matter where they live.” (p. 101).
In case those statements were not clear enough, the budget states that over the next five years, the federal government will work with provinces and territories “to support primarily not-for-profit sector child care providers to grow quality spaces across the country while ensuring that families in all licensed spaces benefit from more affordable child care.” (p. 103)
The position is not ideological; it is practical. Child care systems dominated by not-for-profit and public providers operate differently than those dominated by commercial providers. Just compare co-ordinated child care systems in Norway, Sweden, Finland, Denmark and New Zealand to wild-west markets for child care in England, Australia and the United States. Or look at the recent experience during COVID in for-profit long-term care homes in Ontario. In child care systems dominated by not-for-profit and public provision, low-income families are better served, the quality of services is higher and more reliable and the costs are lower.
Notice that the federal position does not say that for-profit child care will be abolished. Only that it will not be supported to grow. Many families have their children in for-profit services that will continue to get government funding. However, going forward, the federal government insists that the growth will be not-for-profit or public and that new federal money will not support the expansion of private, for-profit centre-based services. For-profit operators, and especially multinational corporate chains of child care services, will be vocal in their desire and willingness to build new services quickly. If the Government is mesmerized by this siren song and relies on for-profit child care operators for expansion, it will largely lose control over the evolution of and quality of the early learning and child care system.
What is needed are producers of child care whose primary objective is the provision of quality experiences for children, producers who are willing to make constant quality improvement their watchword. These producers need to be financially transparent and open (because government will need to monitor costs and account for expenditures). These producers need to pay staff well according to established salary grids to ensure stability and quality of services. Working conditions should include planning time and professional development. These producers need to have as a key objective making early learning and child care into a public service at good quality and affordable for all.
If existing for-profit providers are willing to accept these types of conditions on their operation, they should be welcomed to continue operation, with operational funding. However, new for-profit and corporate child care cannot be part of a new community-based system. THE KEY PROVISION THAT ALL BILATERAL AGREEMENTS MUST HAVE IS THAT NO OPERATIONAL FUNDING SHOULD BE AVAILABLE TO NEW OR EXPANDED FOR-PROFIT PROVIDERS.
Remember, there will be substantial downward pressures on quality as the child care sector expands rapidly, even if it is dominated by not-for-profit and public providers. There will be many new staff with little experience, there will be shortages of trained staff, and there will be inadequate numbers of experienced educators to properly mentor new staff. In this circumstance, to rely on providers whose fundamental objectives do not align well with quality promotion would be a serious mistake.
What’s wrong with for-profit child care?
In some other industries, the profit motive is a beautiful thing, IMHO. Most of the goods and services we consume day-to-day are sold to us by private businesses, competing with each other to attract consumer dollars, each business striving to succeed in producing the most attractive useful product at the best price. Some of these businesses may get out of hand with false advertising or delivery of shoddy goods, but government regulation may be able to control these negative behaviours and leave us with mostly positive results.
However, early learning and child care is a service where minor regulation of private profit-seeking businesses is not enough to deliver good results. Early learning and child care is a sector that has much in common with education. In general, education is much better when providers are public or not-for-profit. Primary and secondary education are delivered in public schools for free. Tertiary education is delivered by not-for-profit community colleges and universities for fees that are subsidized with public dollars.
We think that a primary and secondary education system that is delivered by public institutions (schools) behaves differently than it would if it were dominated by private profit-seeking businesses competing for the consumer dollar. We think that tertiary education delivered by profit-seeking businesses would be different and worse than when delivered by not-for-profit community colleges and universities. There are issues of quality, there are issues of trust in the behaviour of the provider, there are issues of equity of delivery and access. All of these make us prefer not-for-profit and public delivery of educational services.
The fundamental objective of for-profit institutions is to make profit for owners and shareholders. In child care, high profits come from hiring less qualified staff, paying low staff compensation, and raising fees. In economic theory, markets are supposed to control this behaviour. The “control” mechanism is supposed to be competition for consumers’ dollars, enforced by the willingness of parents to leave a low-quality high-fee child care facility and move their child to another one with better quality and lower fees. But it is difficult for parents to accurately perceive and measure the quality that their children receive, so it is difficult for consumers to hold producers to account using market mechanisms. And most parents are hesitant to move their children away from known friends and caregivers into a new arrangement, unless things are really bad.
Further, fees will soon be more or less the same everywhere at $10 a day, so the cost to parents will not be a big factor in parental decisions. There is overwhelming evidence from many countries that market mechanisms are completely inadequate to foster and promote good quality early learning and child care services.
Isn’t the preference for not-for-profit child care just ideological?
No, not really. In fact, it is more true that the preference for for-profit child care is ideological. What do I mean? Well, the argument for for-profit child care is based on what we all learned in Economics 101; that the profit motive leads businesses to serve the public interest because they have to compete for consumer dollars. But it is a fiction that consumers voting with their dollars will be controlling the price, quality and accessibility of child care going forward. When parent fees drop to an average of $10 a day by 2025-26, over 80% of the funds for children of these ages will come from government. Parents will be paying less than 20% of the full costs of providing care.
No matter how you deliver the government assistance, that means that the parent is no longer the main consumer, controlling child care providers by voting with their dollars for better quality, more services or lower fees. The main consumer, the main driver of what happens in the child care “market” will be the government, as it is in all levels of education. So, it is, more or less, a purely ideological statement to say that competitive markets will make for-profit providers be more efficient, that they will serve parent needs better, that they will provide better quality care, that they will be more responsive to what parents and children need and want.
Doesn’t for-profit child care provide more “choice” for parents?
Not really. The “choice” that parents want and need is choice of services that are more convenient for parents in terms of location and hours and better for children in terms of availability of special needs programming, variety in programming (such as outdoor-oriented programs), support for particular cultural and language learning etc. Most of these programs are more expensive to offer than standard child care. For-profit operators are less, rather than more, likely to offer them when fees are controlled.
It is a charade to suggest that “for-profit” is a type of choice that parents need. Parents have diverse needs. As we develop the early learning and child care system going forward, we all need to plan for the provision of a variety of services that serves the tapestry of parent and child needs. The federal government has made clear its willingness to fund “flexible” and inclusive forms of child care. This should be specified in the bilateral agreements that provinces/territories sign.
Is there any evidence that the quality of for-profit child care is worse?
Sure. There is good academic evidence that for-profit provision tends to be of lower quality. And noted Canadian economist Professor Pierre Fortin has summarized the quality results from two Quebec studies very nicely in this chart.
This evidence is based on lengthy and detailed on-site quality evaluations using accepted scales for the measurement of the factors important to children’s development. As the chart shows us, children in not-for-profit CPEs in Quebec have
been receiving good or excellent quality child care. Many children in for-profit full-fee child care centres have been receiving child care of inadequate quality.
But isn’t it true that public and not-for-profit enterprises are inefficient and for-profit providers can produce services at lower costs?
So far, there is little evidence of this. The Canadian Centre for Policy Alternatives recently made over 9,000 phone calls to child care facilities across Canada, inquiring about the fees they charge to parents. Their conclusion: “We found that for-profit centres generally charge more for preschool spaces than not-for-profit centres do. In 19 of the 25 cities for which we had data (76%) for-profit centres charged at least 10% more than not-for-profit centres. In the more extreme cases (Calgary, Richmond, Richmond Hill and Edmonton), for-profit centres’ preschool-age fees were 50% to 60% higher than their not-for-profit counterparts.” (pp. 20-21). The chart below from that publication shows that, in 15 of the 25 cities, for-profits charge on average over 20% higher parent fees.
It is worth noting that in Australia, with child care provision dominated by for-profit operators, the average cost of full-time care is over $27,000 a year for all ages of children.
But isn’t it true that for-profits can build spaces faster? We do need lots more spaces. When it comes to growth, for-profit child care providers have structural advantages over not-for-profits. Not-for-profits are frequently unwilling to go into debt, so unless there is a program of capital grants to pay for the costs of building new facilities or repurposing existing buildings, it is hard for not-for-profits to expand. And the mission of not-for-profits is to provide good quality care that children and families need, rather than to expand.
The mission of for-profit businesses is to make a profit, so expansion is a natural fit, particularly when the government is paying over 80% of the operating costs and providing a guaranteed demand for services. Shareholders or banks are always willing to ante up when the government is willing to provide guaranteed funding for profit-making businesses.
But there are ways around these structural barriers faced by not-for-profits. Not-for-profits need two main things if they are to build new capacity quickly. First, is access to capital. Some of this should come in the form of capital grants to not-for-profits or municipalities or school boards who are willing to move quickly. Some of this can be in the form of low-interest loans. Not-for-profits are allowed to borrow money, but most banks are unwilling to lend because of perceived high risk of default. But governments can guarantee the loans, and, in general, there will be ample operating funding for child care centres to pay back the loans over time.
The second thing that not-for-profits need is a development champion – a development agency that specializes in handling all the details involved in building new capacity or renovating existing capacity. This is familiar territory for co-operative housing or not-for-profit housing developments. There are specialized agencies that handle the housing development and then turn the housing over to co-ops or not-for-profit housing agencies to manage and operate.
Neither of these barriers is particularly insurmountable, but they do require governments to facilitate surmounting them. In many cases, public agencies such as municipalities, school boards, and community colleges can help a great deal in supporting not-for-profit and public developments. And the federal government should be open to expansions of kindergarten integrated with before-and-after school care. This is particularly true in Manitoba, Saskatchewan and Alberta that currently have only half-day kindergarten for 5-year-olds.
Ontario shows that rapid expansion of not-for-profit child care services is very possible. The information is available in the annual Ontario statistical report on early learning and child care. Over the last 10 years to 2019-20, centre spaces increased in Ontario by 198,600. Fully 85% of the increase (168,900 spaces) was in not-for-profit child care. There are now 462,800 centre spaces in Ontario.
On balance, what should we conclude about for-profit child care?
Some for-profit child care providers are good, some are bad. This is not really a discussion about individual operators. Particularly when small for-profit operations are run by persons knowledgeable about early childhood education, they can sometimes do quite a good job providing child care services.
The real issue is “Should the early learning and child care systems that we are building in Canada be dominated by for-profit corporate child care operators?” We know that if government policy is agnostic between for-profit and not-for-profit, and generous operating funding for over 80% of costs is made available to both, we will quickly have for-profits dominate new provision of services. You can bet that for-profits will move fast when generous profit opportunities appear. The federal and provincial/territorial governments when they are negotiating the bilateral funding agreements (which they are doing right now) have to explicitly decide to favour new not-for-profit and public providers for support. That means that new or expanded for-profit operations should not be eligible for operating funding going forward. The time to decide the future of the early learning and child care sector is now!
This study seeks to answer the question “What is the best way to improve the affordability of licensed child care for infants, toddlers and preschoolers in Ontario?” It seeks to provide a comprehensive analysis of alternative funding and policy options and to recommend steps forward that can dramatically improve child care affordability for families.
This is the final report of a 3-year project studying nonprofit and for-profit child care centres in Canada, by Gordon Cleveland, Barry Forer, Douglas Hyatt, Christa Japel and Michael Krashinsky. The focus has been to establish whether and under what conditions nonprofit operation of centres will lead to higher quality services. The authors use four different data sets to answer the question. Here is a very brief summary. And here are a few chosen excerpts from the Final Report. However, Chapter Two of the report provides a more fulsome summary. The report analyzes data from You Bet I Care! (six provinces and one territory), Grandir en Qualite (Quebec), the Quebec Longitudinal Study of Child Development (or ELDEQ; Quebec), and data from the City of Toronto. It includes a reasonably comprehensive survey of relevant literature and information about nonprofit and for-profit child care in other countries.
