Tag: child care

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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 31st, 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.

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What  the Australian Competition and Consumer Commission Can Tell Us About For-Profit Child Care

What would Canada’s child care system look like if we let it be dominated by for-profit child care providers?  Particularly with Pierre Poilievre lurking in the wings, it’s an interesting question to ask.

So, into my inbox arrives a fascinating study from what they call the “A triple-C” (ACCC) or Australian Competition and Consumer Commission.  When the new Labor Prime Minister of Australia – Anthony Albanese – arrived in office in 2022, he commissioned two big studies of child care.  He asked the ACCC to examine how well or badly the market for child care was working.  And he asked the Productivity Commission – a permanent body rather like the old Economic Council of Canada – to report on how best to make child care universally accessible and affordable in Australia.

Both of these bodies have now produced Interim Reports.  This blog post will comment on the one from the ACCC.  The ACCC report focuses on the cost of producing child care services, the nature of competition in child care markets and the effectiveness of Australian government attempts to regulate child care fees.

You don’t want to read the whole report, so let me cherry-pick some findings for you.

  • The cost of child care in Australia is pretty high.  Centre-based child care fees per hour (averaged across ages 0-5) were $11.72 in 2022 or $117.20 for a 10-hour day. 
  • Australia’s Child Care Subsidy system (like a tax credit for child care expenses) costs the government a lot but does not make child care affordable.  For a couple on average wages with 2 children (aged 2 and 3) in centre based day care full-time, net child care costs came to 16% of net household income in 2022. In contrast, the average for OECD countries was 9%, with Australia ranked 26th out of 32 countries. This is despite the Australian Government contribution to fees being significantly higher than most other OECD countries – 16% in Australia compared to the OECD average of 7%.
  • From 2018 to 2022, gross fees in Australia increased by 20.6% in comparison to the OECD average of 9.5%.
  • Looking at detailed data on the cost of producing centre-based child care for children younger than school age, 69% was accounted for by labour costs, 15% by land/occupancy, and 9% by finance and administration costs.  But these proportions are quite a bit different for for-profit and not-for-profit providers.  69% of centre-based child care services in Australia are provided by for-profit operators.
  • Land and occupancy costs are about 18% of the total of all costs for large for-profit providers compared to about 10% for large not-for-profit providers. This is not due to what the Aussies call “peppercorn rents” (i.e., below-market rents provided on a goodwill basis).  As the ACCC report says, this may be due to non-arms-length transactions in land rental of for-profit providers (to be investigated in the final report).
  • Not-for-profit child care operators pay a higher proportion in labour costs for two reasons.  They are much more likely to pay “above-award” wages – in other words, wages that are above the minimums set by the Fair Work Commission wage grid.  About 95% of the staff in not-for-profit centres are paid “above-award” compared to 64% in for-profit centres.  The second reason is that not-for-profit providers are much more likely to hire their staff on a full-time basis, whereas for-profit providers primarily rely on part-time staff.  As the report suggests: “large not-for-profit centre-based day care providers invest savings from lower land costs into labour costs, to improve the quality of their services and their ability to compete in their relevant markets.”  The ACCC finds that centre-based day care services with a higher proportion of staff paid above award and with lower staff turnover have a higher quality rating under the National Quality Standard. 
  • The ACCC finds that parents and guardians typically prefer centr- based day care services located close to their home. Most households travel a short distance to child care – between 2 and 3 kilometres.
  • Parents’ and guardians’ perception of quality is a key factor driving decisions for selecting a child care service. As child care is an ‘experience good’, meaning it is difficult to accurately determine quality of a child care service without having used it, parents and guardians appear to rely on informal measures of quality over formal National Quality Standard ratings.
  • Providers’ decisions to establish child care centres are highly influenced by expectations of profitability within a particular area or market, which are driven by expectations of demand and willingness to pay. The willingness to pay for child care within a local area is heavily influenced by household incomes, as this influences the opportunity costs of not using child care services. These factors encourage supply to markets where demand for child care is highest, and parents and guardians are likely willing to pay higher prices. In particular, for-profit providers are more likely to supply these markets as the opportunity for profit is greater.
  • These markets tend to be in metropolitan areas of higher socio-economic advantage. This higher demand and greater willingness to pay explains why we find operating margins are higher in areas of higher socio-economic advantage and Major Cities of Australia.  The child care sector is widely viewed as a safe and strong investment with guaranteed returns, backed by a government safety net
  • While providers’ supply decisions are generally driven by considerations of viability, we note that there are providers that supply some services at a loss. This reflects that – like many other human services – child care plays an important societal role. This results in not-for- profit providers accounting for a greater proportion of services in areas of very low advantage.
  • The nature of child care markets and the role played by price, as well as the impact of the Child Care Subsidy, also mean it is unlikely that market forces alone will act as an effective constraint on prices to ensure affordability for households (including households with low incomes and vulnerable cohorts) and to minimise the burden on taxpayers.
  • Large for-profit providers of centre based day care have consistently had higher profit and operating margins than not-for-profits since 2018. The average profit margin for large centre based day care providers was about 9% for for-profit providers and about 6% for not-for- profit providers in 2022.

In conclusion, the ACCC sees substantial benefit in a detailed consideration of supply-side models, the role of market stewardship and direct price controls for child care services. There will be a final report from the ACCC soon.

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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.

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REPORT on Nonprofit and For-Profit Child Care Centres in Canada

This is the final report of a 3-year project studying nonprofit and for-profit child care centres in Canada, by Gordon Cleveland, Barry Forer, Douglas Hyatt, Christa Japel and Michael Krashinsky.  The focus has been to establish whether and under what conditions nonprofit operation of centres will lead to higher quality services.  The authors use four different data sets to answer the question.  Here is a very brief summary.  And here are a few chosen excerpts from the Final Report.  However, Chapter Two of the report provides a more fulsome summary. The report analyzes data from You Bet I Care! (six provinces and one territory), Grandir en Qualite (Quebec), the Quebec Longitudinal Study of Child Development (or ELDEQ; Quebec), and data from the City of Toronto.  It includes a reasonably comprehensive survey of relevant literature and information about nonprofit and for-profit child care in other countries.

You can download a PDF of the Final Report.