Tag: child care

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The Triumph of Ideology Over Policy Analysis

Parisa Mahboubi and Tingting Zhang wrote a pretty good policy analysis paper for the CD Howe Institute back in March 2026 entitled “From Promise to Practice: A Critical Review of the Federal Childcare Plan”.   I didn’t agree with all of it, but much of it was a reasonably balanced assessment of some problems with the universal child care system ushered in by the Liberal government in 2021 (known as the Canada-Wide Early Learning and Child Care program, or CWELCC). 

Mahboubi and Zhang acknowledged the huge impact that the Quebec universal program had had on the labour supply of mothers 25 to 54 years of age (from 60.5% – 3.3 percentage points below the rest of Canada – to 78.9%, about 9 percentage points higher than the rest of Canada).  But, they worried about whether this sort of increase can be replicated now in the rest of Canada.  And they were anxious to make sure that costs and availability were especially improved for populations where barriers to employment are the highest.  At the same time, they recognized that there are important affordability barriers across income groups – on average 40% of a parent’s earnings are taken up by child care costs and taxes when she enters the labour force.

And, in their CD Howe paper, Mahboubi and Zhang articulate some key principles of good child care policy: “ensuring accessibility and affordability across all income levels; offering a range of options to meet diverse family needs (including various care modes, flexible scheduling, and diverse facility types); and investing in high-quality early childhood education.”

In order to achieve these goals, they come up with a number of main policy recommendations. 

  • Provincial and territorial governments need to prioritize creation of licensed child care spaces for underserved groups and areas by directing operating and capital money to incentivize these priorities. 
  • Provincial and territorial governments need to improve wages, working conditions and professional development opportunities for early childhood educators to maintain high quality services. 
  • The federal government should “ensure stable, long-term funding for the CWELCC system while promoting provincial accountability and progress towards consistent national standards.”  
  • For families not using CWELCC-funded child care, the authors called for an “income-tested, refundable tax credit similar to Quebec’s model to increase flexibility and support families using non-subsidized care”. 

I don’t agree that the best way to provide care during non-standard hours and to improve flexibility is to create a parallel funding system of tax credits.  Much better to provide funding incentives for existing providers to lengthen their hours and provide more flexible services.  But, I do agree that the priority now is the expansion of regulated spaces with stable long-term funding, planning and financial supports for new spaces,  and improved compensation for educators.

Unfortunately, a couple of weeks ago, the same authors wrote a commentary piece in the Globe and Mail.  It’s apparently based on their CD Howe study, but their balanced assessment has now become crudely ideological.  Now they say that Canada’s $10-a-day plan has made child care “less accessible”.   Gone is the recommendation to provide stable long-term funding for the Canada-Wide universal child care model.  Gone is the recommendation that improving wages and working conditions of ECEs are top priorities. Now, they want “targeting” – different child care fees for every family – instead of universal services at a known price.  They want income-related fees for all families, both for licensed child care and for families using any other type of care.  They seem to believe that charging income-related fees will deal with the accessibility problem and ensure that low and middle income families gain access.  As they put it: “Without better targeting, $10-a-day child care risks becoming a well-intentioned policy that delivers too little, to the wrong people, at too high a cost.”

Now we have simple right-wing solutions to complex child care problems – against universal services, for targeting assistance to the truly needy, don’t even mention gender-based rationales for funding child care universally.

Let me offer a few correctives.

Accessibility of child care is not worse than it was in 2019, it’s better.  Back in 2019, there were about 591,000 licensed spaces in child care centres for children younger than kindergarten age.  In 2025, there are a little over 750,000 such spaces.  On top of that there are over 100,000 family child care spaces available for children 0-5.  And, there are also quite a few before-and-after school spaces available for children who are in kindergarten (over 125,000 in Ontario, for instance). Over the period from 2019 to 2025, the population of children 0-5 years is constant at just over 2.2 million.  So, accessibility of child care has improved, not worsened. 

What has changed is that the latent demand for child care, which was suppressed by its high price, has now emerged.  Demand has risen; supply has not fallen.  Mahboubi and Zhang seem to believe they can deal with this excess of demand by income-related fees.  That will only happen if child care fees rise very substantially, high enough to choke off child care demand by middle and higher income families.  This would violate the principle that these same authors articulated in their CD Howe piece: “ensuring accessibility and affordability across all income levels”, and would be unacceptable socially and politically.

Although ideology appears to have driven Mahboubi and Zhang towards recommending “targeting” in their Globe and Mail comment, this is no solution to the actual problems the child care system faces.  The key problem now is insufficient supply of good quality child care services to meet the now higher demand.   The only way to deal with this problem is to create more services quickly, and that means finding sources of capital funding, mobilizing resources to ensure that land and buildings are available, that planning permissions are given quickly, that expansion is planned to take place in the areas and for the populations where need is most acute, that adequate supports are given to providers that will be managing the expansion, that access to continuing operational funding is guaranteed early in the process of expansion, that the process of obtaining a licence is smooth.  Rapid expansion also requires dealing with shortages of qualified early childhood educators, which requires ensuring that pay, benefits and working conditions are attractive enough to increase workforce supply.  “Targeting” will not provide the additional child care services needed; their CD Howe paper did not imply that it would.

I’m also frankly a bit stunned that these authors could recommend an income-tested refundable tax credit “similar to Quebec’s” as a major new form of funding child care.  These authors know that the Quebec tax credit has been a disaster for child care quality.  They refer to it in their CD Howe paper in this way:

“Between 2019 and 2022, about 30 percent of Quebec childcare installations… failed the provincial educational quality assessment. Quality outcomes were significantly weaker in for-profit daycares than in non-profit CPEs, despite refundable tax credits and other measures intended to support the expansion of commercial daycare services. For-profit centres also tend to rely more heavily on unqualified staff and are more likely to fail both the quality evaluation and qualified‑staff ratio requirements.” 

I have summarized this evidence on quality in the tax-credit-funded Quebec child care centres here, and it amounts to a damning assessment of this form of funding.

On top of all this, there is little evidence that would lead us to believe that the best way to help low-income families and vulnerable children access child care is by targeting child care assistance to them and charging high fees to others.  After all, “targeting” was the basic child care funding model that Canada had since the late 1960s – child care subsidies targeted at low-income families and vulnerable children.  These subsidies have had some positive effects, but targeting has not worked to solve workforce access problems of many low-income Canadian families.  And yet Mahboubi and Zhang think that doubling down on targeting will somehow make it work better. 

Mahboubi and Zhang should be learning a different lesson from Quebec’s experience – universal programs can provide the best conditions under which low-income families will access child care as employment and income support.  As economist Pierre Fortin has noted “In 1996, child poverty rates across Canada were at an all-time high and children in Quebec were amongst the worst off.  Today, it’s the opposite.  …Quebec’s child poverty rate is 44% lower than all other Canadian provinces.”

Economists Baker, Gruber and Milligan have recently confirmed that these effects of Quebec child care are causal.  Looking at the long-run effects of Quebec’s universal system, they have found significant positive effects on employment, mostly full-time employment, for mothers with less than high school, and those who have completed high school or college.  They found significant lifetime reductions in the likelihood that mothers affected by the child care program collected EI benefits or social assistance.  And there have been substantial reductions in family poverty, especially when mothers are in their childbearing years, but also at later ages.  We could conclude that the best way to improve CWELCC’s positive effects on low-income families and vulnerable children is to expand access and make the program work better, not to change horses in mid-stream.

I’m disappointed with the Mahboubi and Zhang piece in the Globe and Mail.  For a while, I thought that disagreements over how to solve the problems of the current CWELCC program were narrowing and becoming less ideological.  I’m sorry to have to abandon that point of view.

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Prominent Canadians Support Investment in Quality Child Care

Have a look at the website https://givekidsastrongstart.com/.  22 prominent Canadians have put their names to an open letter telling governments and citizens that more child care is good for business and the economy and good for children and their families. In other words, more child care is good for Canada.  The open letter calls on leaders from all sectors to join them in supporting early childhood education as a nation-building investment in Canada’s future. 

And see these explanatory comments from prominent Canadians.

The 22 signatories are a cross-section of senior Canadian corporate, financial, health, research and civic leadership, with multiple signatories from business and finance as well as academics, Canadian Olympians, and a prominent former politician.

What a great initiative!

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Globe and Mail Fantasies

Did you see the Globe and Mail editorial last Sunday (June 28)?   The Globe has plans to fix everything that’s wrong with the Canada-Wide Early Learning and Child Care program.  A good objective, but I do wish the Globe would do some serious research before trotting out the same tired old solutions that have never worked for child care. 

Their plan would return us to market-driven child care solutions with no controls on rising fees, no financial accountability for the expenditure of public dollars, and no preference for non-profit child care.  There would be financial assistance for low-income families but not for others.  Child care is apparently not a women’s issue and a children’s issue, it’s only a poverty issue.  We’ve been there before.  It didn’t work and we don’t want to go back.

The Globe and Mail wants free market child care with the add-on of a new voucher or tax credit system – to be run by Canada Revenue.   The plan is to provide nearly free child care for low-income Canadians but little or no financial assistance to families that earn higher incomes. 

Has the Globe and Mail investigated either of the Canadian examples of a tax credit used to fund child care?  If it had, it would find the results have not been impressive.

Ontario’s CARE tax credit was implemented in 2019.  Families earning above $150,000 were not eligible.  Despite this, the Financial Accountability Office of Ontario reported that “Approximately two-thirds of the total CARE tax credit benefit will be distributed to families with incomes over the 50th income percentile…. Only three per cent of the total CARE tax credit benefit will be distributed to families with incomes below the 25th income percentile.”   And the average benefit that a family receives is only $1,300 per year.  So this tax credit is not very generous and apparently not a good way of helping low-income families that the Globe and Mail says it wants to prioritize.

The other example of a tax credit to fund child care is in Quebec.  From about 2009, this tax credit was used to encourage for-profits to enter the sector and provide more capacity. These providers could set their own fees and did not have the financial reporting requirements faced by other centres.  Money poured into this part of the sector; it provided an increase in spaces but these spaces are publicly acknowledged to be of shocking average quality.  Quebec’s Auditor General reported that nearly half (47%) of these tax credit funded child care centres did not even reach the minimum quality level.  As shown in the charts below, staffing is much worse in these for-profit child care centres – apparently not their priority – and low quality follows as night follows day.  Now that there is sufficient child care capacity in Quebec, large numbers of families are leaving these tax-credit-funded child care centres.

The Globe and Mail gets so many other things wrong, they are hard to count.  They want to get rid of universal Canada-Wide child care because according to them:

  • there are staff shortages that are not improving,
  • the compensation of educators is not rising,
  • the Canada-Wide child care program is failing to have any perceptible effect on mothers ability to access employment
  • one-third of all Canadians with preschool children are on waiting lists and unable to access child care
  • there is a narrow focus on non-profit child care, with punishing restrictions required by Ottawa on subsidies to for-profit child-care centres

On every one of these indicators, the Globe is wrong or misleading.

After reading the Globe editorial, you would probably be surprised to learn that the number of employees in the day care industry in Canada outside Quebec rose by 44.1% between January 2019 and January 2026 (Statistics Canada Table 14100220).  Over that same period, across all industries the growth in employment was 8.5%. 

You might also be surprised to hear that average weekly earnings in the day care industry rose by 43.5% from April 2019 to April 2025.  Over the same period, average weekly earnings across all industries rose by 27.4%.  Compensation for child care educators is still low relative to other industries – average weekly earnings across all industries was $1,302.86 in 2025 – but it is improving.

Again, you might be surprised to hear that, contrary to what the Globe and Mail would have you believe, there is good evidence of rising labour force participation of mothers most affected by the child care reforms.  Labour force participation rose by 3.7 percentage points from 2019 to 2025 for mothers with a youngest child 0-5, meaning about 65,000 mothers joined the labour force.  For an appropriate comparison, look at mothers with children not affected by the Canada-Wide program.  Mothers with a youngest child 6-12 increased their labour force participation over this same period by only 0.7 percentage points.  And mums with a youngest child 13-17 increased labour force participation by only 1 percentage point.

It’s true that there are a lot of children on waiting lists.  Of course there are, because child care fees have fallen by 50% and more.  But if you dig into the big parent survey that Statistics Canada conducted in 2023, you find that only about 16% of families are both on a waiting list and not already in licensed child care.  You see, parents can be already using licensed child care and at the same time on a waiting list for a preferred licensed arrangement.  Removing these still leaves a lot of children who need either new child care spaces or need existing spaces closed due to staff shortages to become operational – about 350,000 compared to the 927,000 children already in licensed care.  We would need to increase enrollment by about 38% to eliminate these waiting lists and this, in my opinion, is where policy attention should be focused. 

The Globe would have you believe that the “narrow focus on non-profit child care” is a big problem.  Statistics Canada finds that about half of all child care centres serving children 0-5 years are for-profit businesses.  Because non-profit child care is typically of better quality than commercial child care, the agreements signed between Canada and the provinces and territories call for new child care growth to be predominantly in non-profit, public and family child care facilities.  Contrary to the Globe’s beliefs, this policy has not been a major barrier to  for-profit child care expansion.  Only 27% of new spaces since 2022 have been in non-profit facilities and another 16% in home-based child care.  The rest of the expansion (57%) has been in for-profit facilities.

As you can see, most of the Globe’s analysis of the situation in Canadian child care is based on incorrect information.  The Canada-Wide program is beginning to work – increased affordability, increases in child care capacity, increases in employment of child care staff, increases in the pay of child care workers, increases in the labour force participation of mothers with young children.  It’s not fast enough and governments fight over who should pay the bills, but there is measurable progress.

The Globe has a point when it says: “Still, money is the main obstacle: There simply isn’t enough of it to keep fees this low and also create enough spaces to meet demand.”  

There is good recent evidence that governments would find spending on child care to be a wise investment.  The Globe editorial refers to this: “Recent research based on data from Quebec, finds that when child-care subsidies help mothers join or stay in the labour force, the benefits last for the long term, with women working and earning more throughout their careers. This boosts tax revenue and reduces reliance on social assistance for decades after families stop needing child care.”  But the Globe apparently thinks that this research only applies to mothers with low incomes.  In fact, that research shows that universal child care, available to all mothers in Quebec, generates enough fiscal return to pay for itself.  Quebec’s program encouraged many lower-income mothers into employment, but the fiscal payback comes disproportionately from the increased taxes on mothers who earn above the median.  Universal child care may pay for itself.  Heavily targeted financial assistance for child care will not.

Even if governments are currently cash-strapped, throwing away universal child care in favour of a narrowly targeted voucher would not make sense.  The maximum child care fee in Ontario is currently $22 per day, rather than $10.  Staying at $22 makes a lot of sense if money is too tight, as long as governments also have equitable and accessible child care subsidies for low-income families.  Reaching $10 a day can wait for another day. The immediate priority is expansion.

Despite cherry-picking evidence from the C.D. Howe paper, they ignore one of its two key recommendations:   “Ensure stable, long-term funding for the CWELCC system while promoting provincial accountability and progress toward consistent national standards.” Instead, the Globe and Mail plans to solve the money problem by cutting off financial assistance to many families.  And they have the gall to claim in their editorial’s last line that their voucher/tax-credit plan will “provide a child-care spot for every kid who needs one.” 

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ACE National’s New Proposal to Reduce Affordability, Access and Accountability in Ontario Child Care

ACE National is an organization that groups together child care operators, most of them for-profits, to lobby for reforms that serve their interests.  Their chair and most prominent spokesperson is Krystal Churcher, who owns a child care centre in Fort McMurray, Alberta, and also heads up the Churcher Group which is a consultancy firm supporting child care operators.

ACE National recently published a report recommending 10 major reforms to CWELCC in Ontario. These reforms would apparently create “A Structurally Sustainable Framework for CWELCC” for the years 2027–2031.

Unfortunately, their report is actually a slide deck – with 10 very briefly described reforms and no research or evidence evaluating their likely impacts.  So, this is more like a press release than it is a report.  Nonetheless, it is worth looking at to see what ACE National has to offer.

According to the report, their recommendations are aimed at helping Ontario continue its participation in CWELCC.  They say that their proposals would avoid the need for substantial new funding, would preserve affordability for families and would control costs structurally.   It sounds like a dream.

Unfortunately their 10-point plan would reduce services offered to children and families, increase costs to parents, and totally eliminate eligibility for some children and families. On top of this they want to reduce measures of financial accountability for the public money that providers receive, and they want to shovel public money towards the 8% of providers in Ontario that have refused to enter the CWELCC program (almost all of them for-profit operators charging high fees without any financial accountability).  None of this passes my sniff test as a useful, well thought out set of policy reforms to make CWELCC sustainable.

Let me give you a few details about their 10-point plan: 

  • ACE would adopt a “Tiered Affordability Model”.  Apparently this means parent fees that vary with income.  There would still be a fee maximum, but we don’t know how high, or how much families would pay at different income levels.  And we don’t know how it would be administered.  Would operators have to income-test parents to determine how much they would pay?  Parents wouldn’t like that.  According to ACE, a few $10 a day spaces would be available but only  to a “limited budget-controlled subset” of families.  ACE suggests that this tiered affordability system would save $300 million – $600 million per year, which is less than would be saved by simply keeping the maximum fee at its current $22 a day level while increasing subsidy funding for low-income families.  Not a very sensible suggestion in my opinion. 
  • ACE would make the standard child care day only 8 or 9 hours per day, rather than the current 10 or 11 hours.  Any family who needed to use extra hours would have to pay extra.  Of course, this means that most parents working an 8 hour shift would face extra-billing. 
  • ACE would cancel eligibility for child care for ALL children in Junior or Senior Kindergarten.  There are currently about 128,000 before-and-after-school spaces for these children in Ontario.  All these children would lose CWELCC child care assistance.  That’s close to 40% of the children currently benefiting from CWELCC in Ontario.
  • ACE wants to get rid of cost-based funding of child care in Ontario (i.e., the funding formula).  Instead, child care providers would get “standardized per space operating grants”.  And, there would not have to be detailed financial accountability for public money received.  Instead only risky operators would have to undergo audits.  Apparently, there would also be no more limits on the percent of public revenues each year that can be taken as profit, unlike with the current funding formula.
  • ACE wants the province to define clearly which services are part of CWELCC and which are not.  Services that are not included would be additional costs to parents above the daily fee.
  • ACE wants the government to provide money to operators who have refused to join the program so they can provide low-fee child care for families. Currently, government subsidies and revenues are only available to operators who are part of the CWELCC system.  But ACE wants to reverse that and subsidize the profits of these operators outside CWELCC.
  • ACE wants to eliminate local planning restrictions on expansion of child care services.  Instead of planned expansion with a priority on underserved communities, expansion would be allowed wherever shortages exist (i.e., everywhere) and whenever projects were ready to go.  Sounds like a free-for-all for the for-profit sector which would receive guaranteed future operating funding for new spaces they are willing to provide. 
  • Even when it comes to a recommendation about staff wages, ACE can’t get it right. There is currently a wage floor of $25.86 per hour for Registered Early Childhood Educators, rising over time. ACE wants to establish a wage floor for non-RECEs – program staff that are not required to have any child-related qualifications.  However, ACE proposes that unqualified program staff – Early Childhood Assistants – should have a guaranteed wage that is no less than $2.00 per hour below the RECE wage!   I wonder how many RECEs will want to spend two or more years getting qualifications and paying annual registration fees to the College of Early Childhood Educators when they could earn nearly as much with no training.

Overall, this is an incoherent mishmash of ideas designed to reduce services to families, charge extra to families for the “voluntary” services that they need, eliminate child care services for children who are in kindergarten, and reduce or eliminate financial accountability and restrictions on the amount of profit.   All of this in a proposal which is free of any evidence that supports its claims.

On top of this, government revenues would now be funneled towards the 8% of (for-profit) operators that refused to join the program initially.  And any operator who wanted to open and had the money to open a new child care centre could do so with few restrictions and then would receive government operating funding as a right.  

ACE National calls this “A 10-Point Plan to strengthen affordability, access, and accountability in Ontario childcare.” However, as we’ve seen, their plan would reduce affordability, access and accountability. Sounds like a dream scenario for some entrepreneurs and a nightmare for parents and the Ontario government.  This is policy advice the Ontario and federal governments should reject.

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My Submission to the Standing Committee on Finance, 2026

The House of Commons Standing Committee on Finance has been taking pre-budget submissions from whoever wants to contribute. I chose, unsurprisingly, to focus on funding child care, especially child care in Ontario. Here’s what I wrote:

RECOMMENDATIONS

  1. Expansion is the key priority for this next 5 year period. Provinces who are not yet at $10 a day should be allowed to get to $10 a day more slowly than originally planned to focus scarce funds on expansion. 
  2. The federal government should increase its annual amount of CWELCC funding sufficiently to allow child care capacity to continue to grow in all provinces and territories. Equally important, the federal government needs to credibly commit to maintaining and expanding the child care program.   Across Canada, an extra $4 billion to $6 billion annually would allow for maintaining the program and increasing capacity.  A clear commitment to maintaining and expanding the program can substantially reduce expansion risks for non-profit child care providers.
  3. In Budget 2024, the $1 billion Child Care Expansion Loan Program for non-profit child care was announced.  This program should now be implemented in its original or amended form. Non-profit child care operators have little access to capital funding to expand.  This would be of great assistance, especially to multi-site non-profit operators.
  4. The Child Care Infrastructure Fund of $625 million to support expansion is being sunsetted.  This has been a good model, with money distributed through provincial/territorial authorities.  It should be repeated and expanded, perhaps with some tweaks to funding rules.

TOPICS

  • The benefits of universal child care
  • How much more child care does Ontario need?
  • How is Ontario doing on expansion?
  • Why is child care expensive to provide?
  • What is the average operational cost of a child care space?
  • What could Ontario do with additional federal funding?
  • Should Ontario lower its fee to $10 a day?
  • Would income-testing help?

The benefits of universal child care

Much has been written about the benefits of universal child care.  Two recent papers are especially important.  

The first is by economists Michael Baker, Johnathan Gruber and Kevin Milligan.[1] They analyze universal child care in Quebec to show that:

  • Mothers’ employment in Québec rose by a lot and stayed permanently higher through those mothers’ lives (+12 percentage points by age 50).
  • Mothers’ incomes grew very substantially over their lifetimes as a result of maintaining attachment to the labour force and not losing skills when their children were young (+27% by age 50).
  • There was a substantial drop in the level of family poverty, particularly during childbearing years. The program was particularly important for those without a university education – the policy had a consistently strong effect on mothers with levels of education below university
  • Based on analysis of Canadian tax records over a long period, Quebec’s $5 a day child care reforms generated enough government tax revenues and reduced social benefit payments to pay for the costs of the program.  

The second paper, again analyzing universal child care in Quebec, is by economists Montpetit, Carrer and Beauregard.[2]  They uncover two important results:

  • In addition to the important gains in employment and earnings for mothers, they measure substantial additional benefits that we might describe as work-family balance.  Universal child care makes all the tasks associated with caring for children less stressful and onerous for the family.
  • This point is obvious but generally overlooked.  All of the benefits of universal child care – employment, earnings, work-family balance, etc – depend on increasing the supply (availability) of child care even more than on improvements in affordability.  The benefits depend on making more spaces available to families.

Our takeaways from these studies: Not only does early learning and child care deliver very substantial economic benefits to mothers and families, it also delivers very substantial fiscal benefits to governments.  These benefits depend on continuing to grow the child care system, making it available to all families.

How much more child care does Ontario need?

The federal government has set 59% of children 0-5 years of age as a target.  This is a reasonable definition of “universality” given that Ontario already has full-day early learning for children 4 and 5 and maternity/parental benefits and leave for children up to 12 or 18 months of age.  To reach 59%, Ontario would need to have 515,430 child care spaces for children 0-5.[3]  As of the end of December 2026, Ontario plans to have 375,111 spaces.[4] 

After December 2026, Ontario would reach the federal target if it had 140,319 additional spaces inside CWELCC and all of them were operational. 

How is Ontario doing on expansion?

In Québec’s successful child care rollout, growth happened quickly – was planned and organized.  Québec started with 18% coverage of 0-4 year old children in 1997.  By 3 years later, it had added another 11 percentage points of coverage.  By 8 years after the program started, it had added another 23 percentage points of coverage and provided enough child care for 52% of all children 0-4 by 2005.  This strong commitment to expansion of the program greatly aided its acceptance and ultimate success.

In the first 3 years, from 2022 to 2025,  Ontario’s centres grew from about 34% coverage of children 0-5 to about 39%, an increased coverage of only about 5 percentage points.  Ontario’s child care system is growing much more slowly than Québec’s did.   Without this growth, families and governments will not reap the benefits of a universal affordable child care program.

Why is child care expensive to provide?

It’s not a surprise that child care is expensive; it requires a lot of skilled labour.    Registered Early Childhood Educators (RECEs) in Ontario now earn about $27 an hour on average and Educator Assistants earn about $22 an hour. 

As an example, how much in staff salaries does it cost to provide care for toddlers in Ontario?  According to regulations, one RECE and two Assistants can look after 15 toddlers and the child care centre is open for perhaps 10 or 11 hours per day.  If these ratios need to be maintained all day, you can calculate these salary costs on a 10 hour day and add 20% for benefits (not generous).  Then the staffing costs per toddler amount to nearly $57 per day per child.

That’s without adding in the cost of food and food preparation, supplies, the costs of leasing the centre and playground, the cost of replacement staff for holidays and a share of the costs of the supervisory and administrative staff.   Or the cost of providing an allowance for profit.  So, the provision of child care can be expensive, even on the relatively low salaries and benefits that are currently paid. 

What is the average operational cost of a child care space?

Ontario has a funding formula that they developed based on evidence that the Ministry of Education collected about the cost of providing child care.  We can reverse engineer this funding formula to give us estimates of the typical operational costs of providing child care – program staff, supervisory staff, operations and accommodation.

In Ontario, this estimate based on the 2026 funding formula is $130 per day for infants, $85 per day for toddlers, $65 per day for preschoolers and $35 a day for kindergarten children.   A single cost estimate per space, irrespective of child age, is meaningless; costs vary depending on the ages of children using child care.  Note that costs in Ontario are higher than in many other provinces, for good reasons.  Typically, the quality-related regulations are stronger and better enforced in Ontario.  That’s good for children.

What could Ontario do with additional federal funding?

Many of Ontario’s child care spaces – about 80,500 – are licensed but non-operational.  The Auditor General of Ontario advises that “many of these centres operate below their capacity because of staffing shortages, including RECEs” (Auditor General of Ontario, 2025, p. 42). 

To solve staffing shortages, compensation of early childhood educators will have to rise.  Currently the average educator wage for program staff appears to be about $27 per hour and for staff without these qualifications about $22 per hour.  A rise of about 25% in compensation (wage and benefit improvements) has been called for to aid recruitment and retention of staff.[5]  

If Ontario had an extra $1 billion of operating funding, I estimate it could fund nearly 70,000 of these already licensed but non-operational spaces at rates allowing for a 25% compensation increase for educators.

Alternatively, $1 billion of new operational funding could support services in about 57,000 NEW spaces with a 25% compensation increase for educators. New spaces receive a growth supplement to operational funding in Ontario and therefore cost more. 

Ontario needs at least $2 billion additional funding in order to stay on track for building an affordable universal child care system.  Since, Ontario is about 38% of Canada’s population, an extra $2 billion annual funding for Ontario would imply about $5.3 billion annual funding for all provinces and territories combined. 

More one-time-only funding is also needed for capital grants to support expansion.  Overall, the federal commitment needs to rise by between $4 billion and $6 billion annually.  That would allow building of adequately staffed and stable child care services serving over 100,000 more children in Ontario than was true in 2025.

Should Ontario lower its fee to $10 a day?

No.  Not right now.  The parent fee of a maximum $22/day (actual average $19/day) brings in significant revenue which is needed given Canada’s current economic situation.  Ontario has had a good child care subsidy system targeted at lower income families and vulnerable children.  It subsidizes many families that cannot afford $22/day and should subsidize more.  This subsidy system should be made more accessible; it is important to retain and improve access to child care subsidies.

Would income-testing make child care more affordable for governments?

The existing child care subsidy system is a form of income-testing, helping those who cannot afford $22 a day ($5,742 per child for a full year).  Maintaining this subsidy system or improving it is very important.  However, this is not what most people mean when they advocate income-testing.

There are two other types of proposals for income-testing.  One would mimic the funding system used in Québec for several years (2015-2019) under Premier Philippe Couillard.  In Québec, everyone using a fixed-fee provider paid the provider $7.30 per day.  Then, at tax time, the family would be assessed for how much child care they had used and would pay an income-tested extra amount to the Québec government.

The scheme became unpopular very quickly.  Families were “surprised” when they had to pay a few thousand extra dollars at tax time.  And, it didn’t raise that much additional revenue for governments.  So, the incoming CAQ government cancelled income-tested fees and returned to a fixed fee, rising over time with inflation.

The other kind of income-testing is like that used by the Australian Government.[6] The trouble with this kind of scheme is that it is entirely market-based.  There are no controls on provider fees and fees tend to rise constantly.  The average total fee charged by providers in Australia, irrespective of child age, is over $130 per day. And there is no financial accountability by providers for the subsidy money they received on behalf of parents.  This results in an unaffordable and unaccountable set of funding arrangements.

Both of these income-testing alternatives take a considerable amount of administration.  Unless governments are willing to have some parents pay much higher fees, they don’t raise that much revenue from parents.  On the other hand, a fixed fee model provides certainty to parents and, arguably, is a large part of the reason why the labour force impacts of Québec’s child care program have been so large over time.

Staying at $22/day with a well-functioning subsidy system is a better alternative than dropping the fixed-fee to $10 a day and layering income-testing on top of it.

[1] Baker, M., Gruber, J. & Milligan, K. (2026) Investing in Mothers? The Long-Run Impact of a Universal Child Care Program on Maternal Work and Income.  Working Paper.  https://drive.google.com/file/d/1PqKGMyrqKMMvUEXiahcx5jbQ4JhbLsYo/view

[2] Montpetit, S., Carrer, L., & Beauregard, P-L (2026) A Welfare Analysis of Universal Childcare Lessons from a Canadian Reform.  Working Paper. https://sebastienmontpetit.github.io/WebsiteSM/MCB_QCchildcare.pdf

[3] Ontario has 873,610 children 0-5 years of age as of July 1st, 2025 (Statistics Canada table 17100005).  

[4] Auditor General of Ontario (2025) Performance Audit: Canada-Wide Early Learning and Child Care Program.  Special Report 2025.  Office of the Auditor General of Ontario, p. 15.  But also see Moran, H. (2025) Updates to 2025 Ontario Child Care and Early Years Funding Guidelines. Memo to SSMs. https://efis.fma.csc.gov.on.ca/faab/Memos/CC2025/EYCC01_EN.pdf. This memo suggests capacity at end December 2026 will be 400,881 licensed spaces.  This may include spaces outside CWELCC.

[5] A. Shariati (2024) Addressing the Early Childhood Educators Labour Shortage in Canada: Challenges, Solutions and Impacts.  Centre for the Study of Living Standards Report prepared for YMCA Canada.

[6] Cleveland (March 2025) Does Tax Credit Funding Work for Child Care: Lessons from Australia.  https://childcarepolicy.net/does-tax-credit-funding-work-for-child-care-lessons-from-australia/

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Child Care Investments Really Do Pay Off

Economists Michael Baker, Johnathan Gruber and Kevin Milligan have just produced a remarkably important research study. 

We all know about the studies (here, here and here) that show that Quebec’s $5 a day child care had really significant positive impacts on women’s labour force participation.   The employment rate of Quebec women went from substantially below the rest of Canada to substantially above.  The fixed, predictable parent fee removed a major barrier to mothers’ employment.

And Pierre Fortin and his colleagues (here) have given us good reason to believe that these increases in women’s employment generated by predictable parent fees brought in enough additional tax revenue to more than pay for the costs of the child care program.

But this paper by Baker, Gruber and Milligan goes farther and deeper than that.  This paper uses Labour Force Survey data and anonymized tax records to:

  • Show that the short term rise of about 9% in mothers’ employment generated by the Quebec program stayed at a permanently higher level, rather than being temporary.  Most of this employment was full-time
  • Show that over time mothers who were affected by the child care program had incomes that grew much faster than they otherwise would have, as a result of their attachment to the labour force and not losing skills when their children were young
  • Show that there is a substantial fall in family poverty in the childbearing years
  • Show that the program was particularly important for those without a university education – the policy did not provide a significant employment boost to those with university degrees but had a consistently strong effect on mothers with lower levels of education.
  • Confirm that even if we only consider income taxes and social benefit savings, Quebec’s $5 a day child care reforms generated enough government tax revenues to pay for the costs of the program (or very close).  Earlier work had calculated that the short run fiscal return to governments was nearly 40% of the program cost.  These new results show that the fiscal return over the lifetime of those mothers affected by the program is approximately enough to cover the total cost (between 75% and 117% of the total cost depending on what discount rate is used in the calculations).

Our Carney government needs to hear this message.    Most provincial and territorial governments are telling him now that the current federal commitment of money to this program – about $8 billion per year – is too small to keep it alive for the next five years.  Some are talking about leaving the program altogether or changing it dramatically to make parents pay more.  It makes no sense to ditch a social program that helps hundreds of thousands of Canadian families, raises employment, raises women’s earnings, and increases tax revenues sufficiently to pay for the program.

But there is more in this study that the federal government should hear.  One way of viewing the results of this study is to focus on the message – “Universal child care can pay for itself!”.

But, a second way of viewing these results is that there is strong evidence here that universal child care dramatically improves women’s lives for the better. 

As many of us know, having children tends to have strong negative effects on women’s labour market outcomes, but not on men’s.  This has come to be called the “motherhood penalty”, or sometimes the “child” penalty.  For example, Canadian economists have found that, even ten years after a birth, mothers’ earnings  are typically 34.3 percent lower than they were before birth, and on average nearly 15 percent fewer of these mothers are employed.  That’s a huge motherhood penalty.

But, the research in Baker-Gruber-Milligan paper shows that Quebec mothers who benefited from its universal $5 a day child care program in the early 2000s had much higher earnings later in life as a result.  This earnings impact was progressive, reaching an average of 27% by the time these mothers reached age 50. 

So, not only did Quebec’s child care program more or less pay for itself, it also dramatically reduced the motherhood penalty that Quebec women faced throughout their lives.  If that’s not a good news story, I don’t know what is.

And what it means for our government is that the investments they make right now in child care will make mothers’ lives better and family incomes higher for years and years to come.  It sounds to me like the Canada-Wide Early Learning and Child Care program is just the kind of Major Project that Prime Minister Carney should be investing in.  And while many of the Major Projects being discussed appear to be somewhat male-oriented, this one dramatically helps women to overcome the barriers that hold them back in the workforce.

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A Plea to Mark Carney and Provincial/Territorial Governments

Relying on the private sector can make sense in competitive markets.  The selfish pursuit of profit is counterbalanced by the force of competition, so that results may be socially positive.

But some pursuits don’t work well when dominated by private interests; early learning and child care is one of them.  The counterbalance of competition isn’t there and guardrails need to be established to ensure socially positive results.  Child care in Canada already has substantial amounts of for-profit child care – more than half of the providers in a majority of provinces are commercial operators.  The Canada-Wide Early Learning and Child Care program has declared that child care is more like education and less like manufacturing cars, so we should bend the curve back towards non-profit and public child care.  The care of children while parents work and study is of intense public interest and governments need to make sure it is done well.

In the last 5 years, we made a good start in transforming Canada’s child care system.  Much lower fees, expanded services, new funding systems, higher wages for educators.  Nearly a million children benefitting from better access to affordable child care. 

The provinces and territories signed agreements setting up guardrails about how the new child care system should be developed – expansion prioritizing vulnerable and underserved families, focus on improving staff wages and conditions to enable recruitment and retention, emphasis on expansion of not-for-profit and public services to prioritize quality and service stability, fees dropping to an average of $10 a day. 

But now, if rumours are right, many provincial and territorial ministers responsible for early learning and child care want to get rid of many guardrails.  And If they don’t get what they want, they might pull out entirely!  They want “flexibility” – where flexibility is code for getting rid of any of the guardrails these provinces and territories don’t like.  The biggest guardrails are restrictions on the percent of expansion that takes place in for-profit operations, restrictions on the amount of profit that can be earned, and prioritization of expansion in vulnerable and underserved communities.  The for-profit lobbyists don’t like these guardrails.  But they are important if we want a stable high quality child care system that serves those in need and everyone else.

It’s true that we have big shortages of child care spaces and of qualified early childhood educators.  And there has been considerable policy and program work for provinces and territories as new rules have been developed.  And, in particular, the system needs more money.  Federal money and provincial money.   But these are not good reasons to throw the baby out with the bathwater.

What about the “for-profit” issue?  Provinces and territories are often besieged by entrepreneurs that want to make a buck selling child care services to governments willing to provide 90% of the daily revenues.  It’s the path of least resistance to change the rules and let for-profit entrepreneurs dominate in provision of new services.  What could possibly go wrong?

We have been running a sort of natural experiment in Quebec for nearly 30 years to give us answers to that question.  Quebec faced a big shortage of child care in the early 2000s and decided to invite in the for-profit sector.  In 2022, the former Minister of Families, Mathieu Lacombe talked to the Globe and Mail’s Andrew Gee about the experience.  “Allowing for the expansion of private daycare, he said, was the ‘biggest mistake the Quebec government committed in the last 25 years.’”

Quebec’s Auditor General Report from 2023-24 provides the evidence to explain this conclusion: the quality is much worse in Quebec’s for-profit centres, and part of the reason is that for-profit centres often find ways around regulations about using fully-qualified staff.  Provinces and territories think that since regulations apply equally to for-profit and non-profit child care, both will provide the same quality of services to children.  Quebec’s experience and a mountain of academic and policy studies suggest otherwise.

Federal, provincial and territorial ministers need to find more operating money for building the system, and capital money for expansion, but keep guardrails in place in new Action Plans.  Ontario was able to double its kindergarten capacity in five years in the early 2000s.  That same kind of public effort should go into doubling child care capacity now.  Parents and children will thank you for building on a sound foundation rather than on sand.

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EVALUATING ONTARIO’S IMPLEMENTATION OF THE CANADA-WIDE EARLY LEARNING AND CHILD CARE PROGRAM

On December 3rd, I sponsored a small webinar providing an assessment of how Ontario -the province I live in – is doing in the implementation of the Canada-Wide Early Learning and Child Care program (CWELCC).

It’s a bit of a misnomer to call it “Canada-Wide” because every province and territory is implementing this program differently.  Some are making good progress, others not.  So, I wanted to figure out for myself how I would judge Ontario’s efforts so far.  

I sent out two slide decks to participants.  The first reviews the basic regulations and the structure and responsibilities of institutions responsible for different aspects of ELCC in Ontario.  The second slide deck pulls together evidence about progress implementing CWELCC in Ontario. 

SLIDE DECK #1 – ONTARIO’S CHILD CARE RULES AND INSTITUTIONS

SLIDE DECK #2 – EVALUATING ONTARIO’S IMPLEMENTATION OF CWELCC

If you click on this link, you can access the video of the hour and a bit long webinar.

There is a caveat to this presentation. A couple of days after the webinar, Ontario posted its 2025 annual report on early learning and child care in Ontario, which can be used to update some of the data I present in this webinar. I haven’t taken this new report into account in this presentation.

See you next year.

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PARENT-ONLY CARE AND CHILD CARE ATTENDANCE BY CHILD’S AGE

56% of children 0-5 years of age across Canada use some form of non-parental child care on a regular basis. This is the finding of a large parent survey – Statistics Canada’s 2023 Canadian Survey on Early Learning and Child Care. However, nearly 980,000  or 44% – are cared for exclusively by their parents. This seems surprising to many, and apparently contrary to the notion that families need child care when their children are young.  However, when the data are looked at more closely, some of the reasons become clear. 

In the first year, or sometimes the first eighteen months of a child’s life, many parents are eligible for paid maternity and parental leave in order to spend time with their newborns.  According to the Statistics Canada data about 270,000 children or 12.1% of all 0-5 year-old children have a main caregiving parent who would normally be employed during the day, but is currently on maternity or parental leave. 

There are another 235,000 children, or 10.7% of the total who are 4 or 5 years of age and currently attend a different form of early childhood education – kindergarten – for much of each weekday. Kindergarten is not considered to be a child care arrangement by Statistics Canada, but kindergarten does provide care for children.  The large majority of kindergarten arrangements across Canada now cover the full school day, and often for 4- year-olds as well as 5-year olds.  Sometimes, before-and-after-school child care is available for these children, but not always at a low parent fee.  Many parents are able to adapt their work or school schedules so their children do not need any non-parental care other than kindergarten.

Another 475,000 children – 21.1% of all 0-5 year-old children – do not have parents on leave and are not in kindergarten, but in any case are cared for entirely by their parents. Close to half of these children – about 202,000 – have a main caregiving parent who is currently employed.   Parents may cover child care needs while they are at work through off-shifting between parents (parents working or studying different shifts so one can always be with the child).  Or one parent could be providing care while working from home. About 55,000 of these children were on a waitlist for child care in 2023. 

A bit more than half of these children – about 269,000 – have a main caregiving parent who is not currently employed.  About 41,000 of these children were on a waiting list for child care.

In sum, the picture of children in parent-only care is a complex mix of different situations in which parents currently do not use child care.  Many of these children will use or have used child care and kindergarten at different ages, but are not currently using child care.



CHILD’S AGE

The likelihood that children participate in  licensed child care is strongly affected by the child’s age.  Only 24% of children who are less than two years of age (0-1 years) currently use licensed child care. This is, perhaps, unsurprising because so many parents take a year (or in some cases, eighteen months) of paid maternity and parental  leave when children are first born.

However, 55% of Canada’s children who are two or three years of age are in licensed child care. When children are four or five years of age but not yet in kindergarten, 68% currently use licensed child care.  For children who are four or five years of age and are currently attending kindergarten during the day, 33% use licensed child care.

The use of parent-only care also varies strongly by child age.  62% of children who are less than two years of age (0-1 years) are cared for only by their parents.  This falls to 30% when children are 2-3 years of age and 22% when children are 4-5 years of age and not yet in kindergarten.  For 4-5 year-olds who are already in kindergarten (full-school-day in most provinces), parent-only care is the main complement to kindergarten for about 51% of children.

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HOW MANY CHILDREN ARE USING LICENSED CHILD CARE?

According to recent data, 938,200 children are regularly attending licensed or regulated child care services across Canada (not including the Territories).  That is about 42% of Canada’s children 0-5 years of age who used licensed child care as their main care arrangement in 2023.  A much smaller proportion of these young children (6.8% and 7.4%) respectively) are using unlicensed child care provided by a non-relative or care by a relative as their main arrangement.

The data comes from Statistics Canada ‘s Canadian Survey of Early Learning and Child Care, which collected data about child care arrangements from nearly 30,000 parents in 2023.  The Public User Microdata File gives us the results shown here.

Nearly 44% of children 0-5 (982,910 children) are, for various reasons, not currently in child care.  Close to half of these are children whose parents are currently on maternity or parental leave or are 4 or 5 year-old children attending kindergarten, often for a full school day. 

Licensed child care is now the dominant type of child care arrangement that parents choose for their children 0-5.  Of children using any type of non-parental child care arrangement, 75% use licensed care.