$10 a day child care – Childcarepolicy.net

March 28, 2024

Supply-Side or Demand-Side – A Contribution to the Australian Discussion

John Cherry, from Goodstart Early Learning, has written an evaluation of child care in Quebec and New South Wales. Apparently his purpose is to determine whether supply-side funded systems (like Quebec’s) are better or worse than demand-side funded systems (like in Australia).

To summarize briefly, John finds that Quebec does better on workforce participation and affordability, NSW does better on child care accessibility and quality. So, John concludes that Australia’s system is pretty good. His conclusion appears to be that Australia shouldn’t flirt with Quebec’s fixed-fee, supply-side-funded system.

It’s a problematic paper for several reasons. First, some of the details about Quebec are wrong. Second and more fundamentally, only part of Quebec’s child care system is supply-side funded and charges parents a fixed fee of approximately $10 a day. The other part (about 20% of the total) is demand-side funded like in Australia. In the demand-side-funded part, child care providers can set whatever parent fees the market will bear and some of this later gets reimbursed to parents. So, some of John’s comparisons, particularly on affordability and quality, are actually comparing a mixed system (Quebec) to a demand-side-funded system (New South Wales). These comparisons don’t tell us much about how a supply-side funded system would perform in Australia. Third, John does not explain how a demand-side funded child care system can deliver what we want from a universal child care system – dependably low fees, financial accountability for public funds, and planned expansion of capacity according to need. Let me explain.

Much of John’s paper is captured in Table 1 – Summary of ECEC Indicators. There’s a column for Quebec and one for New South Wales, comparing results on different indicators of ECEC health. I reprint it below.

Workforce Participation
John agrees that Quebec does a better job than New South Wales in workforce participation. Absolutely true. 85% labour force participation for Quebec mothers with young children vs 71% in Australia. Add on top of that the fact that most Quebec mothers work full-time vs. Australian mothers mostly part-time and it does appear that a fixed low parent fee really does have a very substantial impact on mothers’ employment.

Affordability
John then presents comparisons of affordability, but his numbers are too generous to New South Wales and not generous enough to Quebec. The differences in parent fees between supply-side funding and demand-side funding are much bigger than he admits. On NSW, John calculates that for a family with average income, the parent fee for a first child is $29.50 per day and for a second child it is $10.05 per day. In fact, the Productivity Commission draft report says that the average per child out-of-pocket parent fee across Australia (and therefore likely in NSW) is just shy of $45 per day. That includes the extra charges for centres open more than 10 hours per day, where parents have to pay the full fee for these extra hours even though they don’t use them.

And the Quebec numbers on parent fees are too high. In the supply-side funded centres and family homes, the daily fee for every child in 2024 is CA $9.10 (or about AU $10). The figure John quotes for Quebec of CA $17.20 per day includes the children who pay $9.10 but it also includes the high parent fees paid by demand-side funded parents before the tax credit reimburses them. In a fair comparison, Quebec’s child care is cheaper than in NSW by a considerable amount, not just by a little bit. That helps us understand why mothers’ employment has been so responsive in Quebec.

Accessibility
Then there is accessibility. According to John, NSW scores high on accessibility of child care. But, he chooses a strange way of measuring it. He chooses the growth in the number of centre-based child care spaces in the last 5 years. NSW has added more child care spaces so therefore he concludes that accessibility is better in NSW.

A much better measure of accessibility would have been the coverage rate – what percent of the child population could be accommodated in approved services (licenced services in Canada). John provides these numbers on page 6 of his paper, but not in Table1 and not in his conclusions about accessibility. In fact, as he records, about 75% of children 0-5 in Quebec are in early childhood services. This compares to about 60% in New South Wales. John makes a big deal about services growing in New South Wales and not growing in Quebec. Of course, that’s what you would expect if accessibility was already better in Quebec; it wouldn’t need to grow its services as fast. The current rate of growth of services is not a good measure of current accessibility.

And if you compare the number of days of child care attended in Quebec and NSW, the accessibility in Quebec is even stronger. Over 90% of the children in Quebec who attend ECEC do so on a full-time basis, compared to about 30% in Australia (with another 25% in Australia attending 4 days a week).

Quality
Finally, we get to a part of the comparison between Quebec and NSW on which John and I agree. The quality of child care in Quebec is lower than it should be, and probably is lower than it is in NSW. The most obvious indicators of this are the child-staff ratios. 5 children to 1 staff member for very young infants in Quebec vs. 4 to 1 in NSW. Personally, I think both of these ratios are too high for the very young, but I agree that a 5 to 1 ratio is shocking. As is a ratio of 8 to 1 in Quebec after children turn 19 months of age.

Quebec is an outlier here in Canada too. In Ontario, the required ratios are 10 children to 3 staff members for children 0-17 months, 5:1 for children 18 months to 35 months, and 8:1 for children 3 years to 6 years (except for before-and-after school care for kindergarten children). NSW’s ratios are comparable to Ontario’s.

Similarly, the wage rates paid to educators in Quebec are worse than in New South Wales. John is right on this.

John overstates the differences in percent of educators required to be qualified. He says it is 50% in Quebec and 100% in New South Wales. The regulated percent in Quebec is really 66.6% or 2/3rds. It was temporarily lower due to staff shortages during the pandemic. And the requirement in NSW is for 100% of front-line staff to be certified. But this is a bit misleading because only 50% of the front-line staff in NSW must have an ECE Diploma or above. The other 50% can have a Certificate III which is a qualification well below what is needed to provide good quality care for children on one’s own.

However, the inadequate quality of Quebec’s child care system is not really evidence that supply-side funding does not work. Instead it is evidence that Quebec services have not been adequately funded. The history of Quebec’s system explains this. Back in the 1990s, Quebec struck out on its own to build a universal child care system, without any funding from Canada’s federal government. Relying only on its own funding, Quebec ended up cutting corners on quality. If New South Wales were operating either a demand-side funded or a supply-side funded system with no Commonwealth funding – relying only on state funds – I am sure that quality would suffer too. But Quebec’s history is not New South Wales’ inevitable destiny. With strong Commonwealth commitment to spending on universal child care, New South Wales can have both supply-side funding and good quality care. As you can see in John Cherry’s Table 1, public funding of child care in New South Wales is already 50% higher than in Quebec – AU $5.7 bn vs. AU $3.7 bn annually.

What Conclusions Should We Draw From This Comparison?
I understand John Cherry and Goodstart’s hesitation about a switch to supply-side funding. It would be a big transformation of funding arrangements and would constrain the power of child care operators to set their own fee levels. If it was done badly, it could have negative effects.

However, I think John and Goodstart need to explain how they will build a publicly-accountable universal low-fee high-quality child care system on Australia’s existing demand-side funding base. In my opinion, they need to answer (at least) three questions. How would they guarantee that the system will have low child care fees in the future? How can they build financial accountability for public funds into the existing system? And, what mechanisms of public planning for location of new services can ensure an equitable and efficient growth of new services in Australia?

Australia has seen parent fees rise consistently as public funding has increased over the years. The average parent fee per child is now about AU $135.00 per day. Every time the Commonwealth government pours more money into the system, out-of-pocket child care fees fall temporarily. After a short while, these out-of-pocket costs gradually rise back to previous levels. Nothing has worked to keep fees down in the long term. Supply-side funded systems guarantee low dependable out-of-pocket fees. Until Australia’s demand-side-funded child care system can provide the same guarantee, it cannot be considered a good basis for a universal system.

In a universal child care system, the vast majority of operator revenues come from governments. It is unacceptable to continue to have no public accountability for these substantial amounts of public funds. Currently, child care operators do not have to justify the fees they charge or show that public moneys are spent on legitimate costs of service provision. Goodstart should explain how this will be remedied in their plans for a universal child care system built on the existing demand-side foundations.

Finally, an equitable universal system of child care services needs to plan where new child care services will be located. It cannot leave this to the whims of private investors who all want to crowd their new services into higher income areas. How will this be accomplished within Australia’s demand-side funded system? These are the tough questions that need to be answered by the champions of a continuation of demand-side funding for Australian child care.

February 19, 2024

The Fraser Institute’s Evaluation of the $10 a Day Child Care Reforms

This is not his best work. Phillip Cross has had a notable career at Statistics Canada. He’s an expert in macroeconomic trends. But, one thing that he knows very little about is child care. Unfortunately, he has written a short paper for the Fraser Institute evaluating the success or failure of the Canada-Wide Early Learning and Child Care reforms so far.

It’s bad. Almost everything in the paper is either wrong or misleading.

So what does Phillip Cross say?

He says that the Canada-Wide early learning and child care program had 3 goals:

(1) providing more jobs in the child care industry,

(2) enabling mothers to join the labour force, and

(3) providing better care for young children.

His paper will look at the first two.

He looks at some evidence and concludes that there has been no change in the employment trends in child care staff.
Then, he looks at evidence about women’s labour force participation and concludes that it has hardly changed since 2015.
Having concluded that the Canada-Wide child care reforms are a failure, he goes on to take pot shots at Quebec’s child care system concluding that its universal child care system doesn’t really help low-income families, wasn’t really responsible for the boost in its labour force participation, has long waiting lists due to inadequate supply, and isn’t really universal.

Phillip Cross is wrong on all counts, contributing yet more false information to child care discussions in Canada. There are many problems with the rollout of the Canada-Wide program across the provinces and territories – particularly slow rates of growth in child care capacity. However, the Fraser Institute paper does not grapple with real issues and propose real solutions.

Phillip Cross, believe it or not, ignores improving the affordability of licensed child care in his list of goals of the Canada-Wide program. This, of course, is the greatest success of the program so far. Hundreds of thousands of children and families have benefited from less expensive child care. Their very high child care costs have been cut by half or more. These parents are very happy with the marvellous success of the program.

Employment in the Child Care Industry

There has been substantial growth in employment in the day care industry (NAICS Code 6244) since April 2021 when the Canada-Wide program was announced. By my reckoning, the number of persons employed in Canada outside Quebec has risen by 36.9%, a total of 32,885 additional persons employed. Phillip Cross hides this growth in two ways. First, he looks at Canada including Quebec, which is inappropriate. Quebec has a mature child care system and its employment of child care staff is not growing quickly. The focus of growth in the Canada-Wide program is on the provinces and territories outside Quebec.

Second, Phillip Cross ignores the collapse of child care employment during the pandemic and assumes that child care employment should have grown as if the pandemic did not happen. In fact, child care employment in Canada outside Quebec collapsed from over 100,000 at the beginning of 2020 to less than half of that a few months later. Employment did not climb above 100,000 until March of 2022. So, the Canada-Wide program has helped the revival of employment in the child care industry and gone well beyond. We should celebrate this, rather than hiding it. This evidence can be found in Statistics Canada CANSIM Table 14100201.

Mothers in the Labour Force

Phillip Cross concludes that the Canada-Wide program has also shown no progress in supporting mothers to enter the labour market. According to him, labour force participation hit its peak in 2015 and even after all this money spent on child care, it has only just about reached the same level. As he notes, the participation rate was 61.7% in 2015 and now it is just 61.5%.

But, Cross is not looking at the right statistics. He is looking at the labour force participation of all women 25-54 years of age. However, most women do not currently have a child 0-5 years of age. Women without young children would not have their labour force participation affected by the Canada-Wide child care program.

The Fraser Institute report should instead be looking at labour force participation of mothers with children 0-5 who are the target of the program. Here, participation rates are up by several percentage points from April 2021 to now (from 76.9% to 79.9%) even though expansion of child care has been slower than it should be. And compared to 2015, which the Fraser Institute cites as the high water mark, the labour force participation of mothers with children 0-5 is over 6 percentage points higher now than it was then. So this evidence of “failure” is false news and should not be left to become conventional wisdom. This data can be found in Statistics Canada CANSIM Table 14100397.

Quebec’s Universal Child Care System

Phillip Cross would presumably be very surprised to hear that Quebec’s child care system is very popular with parents and with the Quebec government. He believes that low-income families have been squeezed out of access to child care. In fact, there is good evidence that a much higher percentage of low-income families in Quebec have been able to access child care than was true for low-income families in the rest of Canada in the period before the Canada-wide system[1]. The universal system of child care in Quebec encouraged many more low income mothers into the labour force and into using child care. It is true, and a problem, that on average low-income families are more likely to have their children in the lower-quality for-profit child care services. The Quebec government is expanding not-for-profit centres as a partial remedy.

Cross claims that Quebec’s child care system is not universal. His evidence for this seems to be that there are 51,000 families on a waiting list for child care services. Here his lack of child care knowledge is really showing. This is a waiting list to get into one part of their child care system – the preferred part with a fixed fee and many better quality services.

There is no overall shortage of child care spaces in Quebec; in fact there are many empty spaces in the for-profit child care services funded by a tax credit. But parents don’t prefer these for-profit spaces where there is no guaranteed parent fee. These services have been shown to be much poorer quality than the not-for-profit spaces in CPEs (early childhood centres). So, yes, there are 51,000 children on a waiting list to get out of these tax-credit-funded spaces and into the fixed-fee services that they prefer.

Finally, Phillip Cross tries to deny that the universal child care system in Quebec has been responsible for dramatic increases in labour force participation of mothers. He writes that “proponents attribute the increase in female participation in Quebec to its childcare program” and “Clearly, some determinants of female labour force participation are not understood by researchers, who nevertheless loudly endorse Quebec’s initiative.” This is a bit strange, because if there is one thing that all economic studies of the Quebec child care program are agreed upon, it is that there was a substantial boost to mothers’ labour force participation and hours of work as a result of universal child care.

A summary of the results of one of the many studies goes like this: “Lefebvre and Merrigan[2] (2008) use Statistics Canada’s Survey of Labour and Income Dynamics (SLID) annual data from 1993 to 2002. Using the sample of all Canadian mothers with at least one child aged 1 to 5, they find that the policy had substantial effects on a diversity of labour supply indicators (participation, labour earnings, annual weeks and hours worked). In 2002, the effects on participation, earnings, annual hours and weeks worked of the childcare policy are respectively between 8.1 and 12 percentage points, $5,000 to $6,000 (2001 dollars), 231 to 270 annual hours at work, and 5 to 6 annual weeks of work.“

The Fraser Institute is not noted for the complete accuracy of its studies, but this is a bit ridiculous. As an evaluation of the success or failure of the Canada-Wide Early Learning and Child Care program, the Fraser Institute study is worse than useless. It is, perhaps deliberately, misleading.

Instead, we should conclude that:

Hundreds of thousands of children and families have benefited from more affordable licensed child care
There are now nearly 33,000 more persons working in the day care industry than there were when the program was announced in April 2021 – an increase of nearly 37%. Many more qualified educators are needed, but this is a good start.
Even though the growth in the number of child care spaces has been too slow, there has still been a rise of 3 percentage points in the labour force participation rate of mothers with children 0-5 since April 2021. Again, only a start, but definitely a start.
Quebec does have a universal child care program and many families access child care for less than $10 a day. It is a very popular program with families. There is no overall shortage of child care spaces in Quebec, but many families want to get into the fixed-fee part of the child care system, especially the better-quality not-for-profit CPEs. Many of these families are on a waiting list. A large number of low-income families have benefited from the universal child care program in Quebec, a much larger percentage than benefited from Canada’s targeted child care assistance. There is still important work to do to ensure that low-income families also benefit equally from better quality in child care services.

[1] Cleveland, G. (2017) “What is the Role of Early Childhood Education and Care in an Equality Agenda?” pp. 75-98 in Robert J. Brym ed. Income Inequality and the Future of Canadian Society ISBN-13:978-1-77244-044-7 Oakville, ON: Rock’s Mills Press. Proceedings of the inaugural S.D.Clark memorial symposium. That study found that:” In Quebec, 61.8 percent of children 1-5 years with an employed or studying mother with a high school education or less use licensed child care. Including children with a mother who is not employed, 43.1 percent of Quebec children whose mother has a high school education or less are using licensed child care — about 30 percentage points higher than the comparable figure in the rest of Canada.“

[2] Lefebvre, P., Merrigan, P. (2008). Childcare policy and the labor supply of mothers with young children: a natural experiment from Canada. Journal of Labor Economics 23, 519–548.

December 5, 2023

The story coming from the CSELCC survey – I don’t think we’re going to make it…not even close!

We know that child care affordability is improving dramatically because of the $10-a-day program (otherwise known as CWELCC or the Canada-Wide Early Learning and Child Care Program). But what about access and availability? It’s difficult to know. There is some activity, and lots of announcements, but are there actually more children using licensed child care? A really important question, because most of the social and economic benefits of the $10-a-day program come from improving access to children and families that haven’t used child care before.

Finally we have some solid answers. Statistics Canada just completed a massive survey of parents across the country that tells us how many children have access to centre-based child care (the overwhelming bulk of licensed child care in the CWELCC program is in centres). We can compare this to the situation before the pandemic in 2019. Unfortunately, the picture is not positive.

Looking only at the provinces and territories that are part of the CWELCC program (i.e., leaving out Quebec), there are 521,800 children 0-5 using centre-based child care in 2023. There were 483,200 children 0-5 using centre-based child care in 2019. That’s an increase of centre-based spaces in the provinces and territories participating in CWELCC of 38,600 spaces over the course of the last 4 years, an increase of about 8%.

However, the agreements signed between the federal government and the provinces and territories promised that there will be 250,000 additional child care spaces available by March 31^st, 2026. That would be an increase of over 50% compared to the spaces that were available in 2019. That’s just over two years away. I don’t think we’re going to make it. Not even close!

The CSELCC survey indicates that 49% of parents using child care reported difficulty finding it. Up from 36% in 2019.

In 2023, 26% of parents with children 0-5 who are not using child care reported that their child is on a waitlist for child care, up from 19% in 2019. Almost half (47%) of infants younger than one year who are not using child care are on a waitlist!!! That’s up from 38% in 2022.

Yes, the affordability problem has improved. But availability or access is either worse or not much better depending on your point of view. And accessibility is improving at a snail’s pace compared to the promised additional 250,000 spaces. Hurray for Statistics Canada giving us a clear picture of this problem. Now federal and provincial/territorial governments have to seriously address the problems of how to grow our wonderful child care system in the not-for-profit and public sectors that are the priority.

August 17, 2023August 20, 2023

HOW MUCH WILL IT COST TO RAISE THE WAGES OF EARLY CHILDHOOD EDUCATORS?

It is now widely acknowledged that the pay of early childhood educators is too low. Comparisons of ECE hourly wages to those in other competing occupations show that educators are paid as if they had a high school education rather than a college certificate or diploma. We can see the effects of this in the extreme shortages of fully-qualified ECEs for existing and new child care facilities. In most Canadian provinces and territories, growth in spaces is held back as much by the lack of staff as it is by the lack of organizational and financial support for planned and funded expansion.

The big questions for governments are (1) how much will it cost to raise wages? (2) how should they do it? and (3) who will pay?

Up till now, it’s been hard to answer the “cost” question because we haven’t had good data on how many program staff work in licensed services and what their average wages are now.

I’ve spent a large amount of time pulling together and analyzing the best publicly available data on this, province by province (sorry, I haven’t done the Territories yet). The details of this (staff numbers and typical wages by qualification level for each province) will appear in another blog on this site once I have finished crossing the t’s and dotting the i’s (lots of numbers and boring reading for most people). But, using those numbers, I can now make estimates of how much raising ECE wages will cost. If you have better numbers, I’m happy for you to send them to me so I can make revisions.

The table below shows my estimates of how much it would cost to raise the wages of fully-qualified ECEs across the country by 25% from whatever their current level is. For the average ECE, that would mean a raise of $5 to $7 an hour from current levels. I’m not trying to say that’s enough, or that this is the right way to raise ECE wages. If I look at the data on wage comparisons to other occupations, it very likely isn’t enough. But, it may begin to move the needle on the supply of early childhood educators. It may encourage more new ECE graduates and existing ECEs to stay in the sector.

Have a look at the last column province by province. Each cell shows the overall cost of raising qualified ECE hourly wages by 25% compared to what they are now (including the effects of wage grids, wage grants and wage supplements).

This is simply a simulation to give us all an idea of how much it will cost to have a significant rise in ECE wages. It is not a carefully thought out design for wage increases. What is needed will vary from one province to another; some provinces have done a lot already, others have done little. In provinces with generally high wage levels for all types of workers, a 25% rise in ECE wages may not do very much. In provinces that have already done a lot to raise wage levels and establish wage grids, a 25% wage rise might be very significant.

To see all of the columns, view the table below in a new window

ESTIMATED STAFF NUMBERS (0-12), CURRENT WAGE BILL, AND COSTS OF WAGE INCREASES FOR FULLY-QUALIFIED ECEs

Province	Number fully-qualified incl directors/ supervisors	Number of less qualified	Total program staff	Total FTE program staff	Current annual wage bill ($ mil)	Cost of 25% increase for fully-qualified ($ mil)
BC	16,800	6,800	23,600	20,600	$1,005.4	+$208.0
AB	13,000	10,750	23,750	21,000	$965.8	+$155.9
SK	1,650	1,300	2,950	2,600	$90.7	+$15.5
MB	3,400	3,000	6,400	5,700	$215.3	+$34.9
ON	35,000	20,000	55,000	51,000	$2,183.0	+$391.7
QC (0-4)	29,000	10,300	39,300	35,000	$1,576.0	+$315.9
NB	2,700	2,000	4,700	4,300	$186.0	+$29.9
NS	2,600	800	3,400	3,200	$142.4	+$29.9
PE	700	400	1,100	950	$42.3	+$7.3
NL	825	400	1,225	1,100	$48.2	+$8.9
CANADA	105,675	55,750	161,425	145,450	$6,455.1	+$1,198.0
CA – QC	76,675	45,450	122,125	110,450	$4,879.5	+$882.1

To see all of the columns, view the table above in a new window

Fully-qualified refers to ECEs with a 1-year college ECE certificate or a 2-year college ECE diploma, or more.
These calculations are produced by Gordon Cleveland, based on the estimated wages and staff numbers in Estimates of Staff Numbers and Wages in ELCC Centres, by Province, August 16, 2023. Numbers for the Territories are not yet included.
It is assumed that wages would have to rise equally for ECEs caring for children 6-12 years of age. However, in Quebec where fully-qualified staff caring for children 5-12 years are employed by the school system, numbers refer only to staff caring for children 0-4.

These numbers do not include the extra cost of compulsory benefits like contributions to pay for EI and CPP/QPP and vacation pay. That would add another 15%-18%, perhaps. However, these estimates do include an allowance for supply staff.

There is no magic in this 25% wage rise simulation. But, now, with data on current numbers of staff and on current wage levels, we can do whatever simulations we think are appropriate and estimate the costs of taking action (and compare them to the costs of inaction). That, I think, is a big step forward.

With these simulations in hand, we can turn to the next two questions. Question #2 was how exactly we should raise wages. That debate is too big for this blogpost, but let me make some observations. I believe that the big staff supply problem is centred in the inadequate supply of fully-qualified early childhood educators, whether that is a one-year ECE college certificate or a two-year ECE college diploma. Recruiting untrained staff or recruiting staff that need to take only an orientation course or two is not where the problem lies. That means we need to concentrate our scarce funds on raising the wages of qualified educators.

And once we have decided to concentrate our wage-raising efforts on fully-qualified staff, we need to avoid the Ontario mistake. Ontario decided to raise wages by concentrating their efforts on low-paid educators. In 2022, they boosted all early childhood educators earning less than $18 an hour up to $18, but they did nothing for anyone else. In 2023 and beyond, they are raising the pay of other educators by $1 per hour each year, but only if the educators currently earn less than $25 an hour; $25 is the top wage for this program. This focus only on low-paid educators ensures that ECE will continue to be a low-paid profession; even $25 an hour will keep educators well below competing occupations.

And, the Ontario wage supplement design ensures that most of the wage assistance will go to centres that previously were underpaying their workers, disproportionately those in the for-profit sector. The Doug Ford government is developing a bit of a reputation for favouring for-profit friends, whether it be the Greenbelt or child care, but this kind of wage supplement design will not do a good job of retaining the best-qualified and most experienced staff and making ECE an attractive profession.

Finally, there is the question of who will pay. I would be overjoyed if the federal government decided to come up with a billion dollars of extra annual funding, but I don’t think that will happen very soon, and wage rises do need to happen very soon. Some provinces may be willing to up their spending to solve wage problems, and that is welcome. But the most obvious immediate place to get funding for educator wages is to change priorities for the expenditure of federal dollars under the Canada-Wide Early Learning and Child Care Agreements. The very large majority of the federal funds under current Action Plans goes to lowering parent fees. Right now, many provinces are renegotiating Action Plans to cover the next three years. Why not allocate a larger portion of money in the next three years to cover wage increases for fully-qualified early childhood educators? And there should be provincial contributions to cover the wage increases for staff caring for 6-12 year-olds.

The numbers in the table above tell us about how much reallocation of dollars is needed in each province. Let’s get it done, or expansion will not happen and access to affordable child care will continue to be a dream for most families.

August 17, 2023August 17, 2023

British Columbia’s New Spaces Funding Program

My opinion of British Columbia’s New Spaces Fund is shaped by the context. It’s a valuable, if imperfect, source of capital funding for the expansion of not-for-profit and public child care.

The context is that we’re not doing a good job in expanding the availability of child care services in Canada. That’s disappointing, of course, but also a danger to the ultimate success of the Canada-Wide Early Learning and Child Care program.

Without rapidly expanded capacity, most parents will not be able to benefit from $10 a day child care. Women will not be able to enter the labour force. The economic growth benefits of child care will not happen. Parents will be angry and frustrated at governments that have promised them services they can’t deliver. A new government may come in and turn everything over to the for-profit sector, loosening staffing regulations, and allowing operators to surcharge parents for “extras” to make providing child care more profitable.

The decision of federal and provincial/territorial governments to rely on the not-for-profit and public sectors for child care capacity was good for the long-run, but it’s having lots of problems in the short run. Not-for-profit and public services are typically of higher quality with better effects on children’s lives. Not-for-profit and public services become trustworthy community assets, here for the long term, in a way that for-profits do not, always anxious to sell assets or property to the highest bidder.

But, not-for-profits need more help to expand than the for-profits do. For-profits have better access to capital funding from the private sector than not-for-profits do; many banks and financial institutions are unwilling to make construction loans and mortgages to not-for-profit organizations. Most not-for-profit organizations find it too risky to make expansion promises until future on-going operational funding arrangements for services are settled; some for-profit organizations are willing to take a gamble that future operational funding will be generous, or that costs can be slashed to ensure a profit. On top of all this is the shortage of qualified early childhood educators. Not-for-profits are typically unwilling to expand until they can hire enough fully-qualified educators to run good-quality programs. For-profits are often willing to plan to operate without a full complement of trained staff, hoping they can get exemptions from government regulations and be able to operate with unqualified staff.

British Columbia’s New Spaces Fund is not perfect. Yet, in the context I’ve just described, it provides some important support for child care expansion to not-for-profit and public organizations in B.C. And that’s a lot more than I can say for most of Canada’s provinces, outside Quebec. The New Spaces program provides capital grants only to not-for-profit and public organizations who are willing and anxious to expand the supply of child care services. Previously, it was available to the for-profit sector who did not need it; that was a big mistake that has since been corrected. The budget last year was $292 million, about $84 million from provincial funds and the rest from federal funding under the Canada-Wide ELCC program.

Some of the projects are for minor renovations, some for equipment only, but some are for much bigger projects. The new Ministry of Education and Child Care prefers to have projects that are funded for $40,000 or less per space, but this restriction can be waived. Since, construction costs have been rising rapidly, $40,000 per space is now below full cost for many projects. And applicants are expected to come up with 10% of the entire project cost from other sources.

It’s also a one-time capital grant, so you have to know a lot of detailed cost and design elements up-front when you apply. At the time you apply, you are guessing at much of this. This is a disadvantage. A capital program, instead of a one-time capital grant, can be more flexible.

Eligible costs for the New Spaces program include project management, design/engineering costs and site evaluations, architect and accountant fees, and business planning development (business case model and analysis). Also eligible are infrastructure costs – water, sewer, roads, sidewalks. And equipment. And GST/PST and a 10% contingency.) Not included are costs of purchasing real estate, or buildings or commercial space (however, modular buildings to be erected on site are an eligible expenditure).

Many of the applicants for New Spaces funding are local governments, school boards, health district authorities, public post-secondary institutions, and First Nations. This is a great use of the program. Many of these bodies may have access to land for building, and many will have considerable experience in managing large development projects.

The New Spaces Fund is application-driven. In other words, organizations have to take the initiative and plan child care expansion and apply for capital funding. The New Spaces Fund is therefore a capital grants program, it is not part of a program of capital expansion. In many ways, this is a weakness and this feature has been criticized. Advocates say that B.C. needs planned child care expansion, focused first on areas of higher need, with support for many aspects of expansion – not just capital grants. Most child care centres do not have the resources to take on major capital development, raising millions of dollars of capital funding and managing multi-year expansion projects. Capital expansion requires more than just money. It needs organizations that will take responsibility for development; it needs architects with knowledge of child care, it needs design standards. It also needs a much longer guarantee that facilities will stay in place than the current 10-year requirement of the New Spaces Fund. Manitoba’s Ready-to-Move program is a model to look at for how resources of different actors can be mobilized for child care expansion.

While that’s true, let’s give B.C. some kudos for having a program of capital grants at all. Believe it or not, most provinces apparently believe that (capital) money grows on trees (for not-for-profit and public organizations). Alberta offers $5,000- $6,000 per space. Ontario offers about $7,000 per space. In the context where the cost of new-build construction is often more like $50,000-$60,000 per space, that’s not a serious amount of capital assistance.

B.C. has much to do. They are planning development of a wage grid to attract early childhood educators, but there is no deadline for when this will happen.

B.C. has not yet developed a funding formula for the provision of operational funding when parent fees are an average of $10 a day for everyone. This means that future revenue streams are uncertain, so the planning of child care expansion for not-for-profit and public services is more risky than it needs to be.

B.C. has not yet developed mechanisms for planning and guiding the child care expansion that will have to happen. Based on current use patterns in Quebec where parent fees are now $8.75 a day, we can expect that B.C. will need to have spaces for 174,180 children 0-5. That would mean a need for about 77,750 additional child care spaces compared to 2021. So, B.C. needs to get its game on. As many other provinces do.