New Support for the Economic Benefits of Universal Child Care

I met Sebastien Montpetit at the Canadian Economics Association meetings in Winnipeg last year.  He is a Canadian and Quebecer who has been studying for his PhD in economics at the University of Toulouse.  And he, with co-authors, has come up with a really fascinating analysis of the impacts of Quebec’s universal child care program ushered in the late 1990s and the early 2000s. 

The paper is complex, has multiple parts, and the latest version of it is available here.  It has been selected as one of three finalists for the Canadian Labour Economics Forum prize at the upcoming Canadian Economics Association meetings in Toronto.  I’ll give you the main take-home points right away, and then delve into where the results come from.

Sebastien’s main conclusions?

  • The importance of the supply of child care services has been underrated.  Greater supply of child care – availability – is as important as improvements in affordability.  In Quebec, the regions that had the largest increases in child care supply had the biggest impacts on mother’s employment and increased child care use.  Lowering fees without increasing coverage has modest effects on the benefits to families.  The bottom line: increasing local child care supply is key to the effectiveness of child care reforms.

  • The economic benefits from improved maternal labour supply in Quebec have been well studied and Sebastien confirms them.  But, there are very substantial non-monetary benefits for mothers too.  Think of this as work-family balance, things like the reduced search time for child care, the shorter distances that have to travelled each day when child care is much more available and affordable. 

  • When all the benefits are summed, benefits total more than 3.5 dollars of benefit per dollar of net government spending – more than twice the benefit that comes from looking only at increased mothers’ earnings.
  • Earnings gains for mothers impacted by Quebec’s child care reforms are concentrated in the fifth through the eighth decile of income. In other words, many of the fiscal benefits to governments of a universal child care reform come from mothers who can earn moderate to reasonably high incomes.  These are mothers who will not be reached by a targeted approach to child care spending.  A universal approach may therefore be more fiscally responsible than targeted child care initiatives.
  • Michael Baker, Kevin Milligan and Johnathan Gruber became renowned for their paper concluding that there were a range of negative effects on children who lived in Quebec during the early years of Quebec’s child care reforms (and may have participated in child care).  Sebastien looks at data on those children many years later and assesses whether their educational development was negatively impacted.  He finds no evidence of this; educational attainment of students in Quebec and the rest of Canada is very much the same.
  • Michael Baker, Kevin Milligan and Johnathan Gruber gained some additional notoriety for a follow-on paper that found increased juvenile criminality amongst Quebec children who were exposed to Quebec’s child care reforms.  Sebastien Montpetit looks at the evidence on juvenile crimes and finds that most of the increased juvenile crime that may have occurred was very minor and that the societal cost is relatively small.

The main data source for all of his analyses is the National Longitudinal Study on Children and Youth.  He also uses data from the Canadian Censuses of 2016 and 2021. 

There are four types of analysis that compose this complex paper.  First, with new data on regional child care coverage rates, Sebastien uses a difference-in-differences approach to compare mothers in Quebec to those in the rest of Canada.  He finds that in regions where child care supply increased the most, employment and child care use increased much more when other factors are controlled.

In particular, in regions where child care supply expanded more, the child care reforms boosted mothers’ labour force participation by 40% more than in other regions

Further, Sebastien finds that mothers with low levels of education also respond more in these regions with high levels of expansion.

Results suggest that for high educated mothers with a post-secondary qualification, the main incentive to take up employment was the fee reduction.  For mothers without a post-secondary qualification, access to a space was key. 

Sebastien uses a non-linear difference-in-differences model to estimate earnings gains across mothers’ income distribution.  Mothers’ earnings gains from the child care reforms are found to amount to $1.42 per $1.00 of net government spending.

Baker, Gruber and Milligan found that eligible children in two-parent families experienced worse developmental outcomes and lower consistency in parenting.  Other researchers found substantial heterogeneity in these results.  Haeck et al (2015,2018, 2022) found that most negative impacts on children and parental behaviour fade away over time.

In order to look at children’s educational attainment later in life, Sebastien employs a triple-difference model which compares education levels of same age individuals born before or after the reforms in Quebec to similar individuals in the rest of Canada.

The paper concludes: “We find no evidence of negative effects on educational attainment of eligible children in the long-run. This pattern is true for each educational level, namely for university, high school, and college completion….

 As a result: “…the negative impacts on child behavior documented by Baker et al. (2008, 2019) do not translate into depressed economic outcomes later in life.” (p. 2)  “…this evidence thus suggests the absence of negative fiscal impacts stemming from eligible children’s economic outcomes in the long run.” (pp. 2-3).[1]

Triple-difference estimator compares same-age individuals who vary in eligibility status based on the census year and their province of birth.   He finds no evidence of negative effects on educational attainment of eligible children in the long run.  This pattern is true for every educational level. 

Sebastien Montpetit takes Baker and colleagues’ estimates of increases in youth criminal activity (2019) and estimates what the victimization costs and productivity losses would be.  Using recent estimates of the costs of crime, he finds that these social costs are small.

Difference-in-differences estimates seek to use good control groups to help judge the effectiveness of some policy change.  So, for instance, children 0-4 years of age in the rest of Canada where there was no major child care reform, might be considered to be a good control group to compare to what happened with children 0-4 or the mothers of those children in Quebec.  Why is it called difference-in-differences?  Because this statistical technique does not compare the level of a variable (like mothers’ labour force participation) in Quebec to the same level in Canada.  Instead, it compares the change in mothers’ labour force participation (called a difference) in Quebec to the change over a few years (another difference) in the mothers’ labour force participation in the rest of Canada.  This analysis is done in a regression framework including other variables, so that we can see the impact of those variables on the policy result.

Montpetit then estimates a structural model of maternal labour supply and child care choice in order to make inferences about the size of the non-monetary benefits that mothers receive from Quebec’s universal child care system.  The non-monetary benefits are found to be substantial.  Using the model to do additional simulations, Sebastien concludes that these non-monetary benefits are particularly closely related to the availability of child care services in the local area.  He concludes that universal child care policies for children 0-4 can generate substantial social returns.  And he concludes that increased availability of child care is particularly important to these returns.

Sebastien notes that the quality of Quebec child care in this period was very uneven with CPEs having higher quality and other child care centres having lower quality.   Sebastien is not able to include quality measures in his analyses. 

Altogether a very interesting, carefully crafted and timely paper.  Congratulations Sebastien and co-authors!


[1] Montpetit, S., Beauregard, P., & Carrer, L. (2024). A Welfare Analysis of Universal Childcare: Lessons From a Canadian Reformhttps://drive.google.com/file/d/1dDWvj2e08YodXAWd5zdmBKP3j-kxt1Uj/view

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. 

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.

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

ProvinceNumber fully-qualified incl directors/ supervisorsNumber of less qualifiedTotal program staffTotal FTE program staffCurrent annual wage bill ($ mil)Cost of 25% increase for fully-qualified ($ mil)
BC16,8006,80023,60020,600$1,005.4+$208.0
AB13,00010,75023,75021,000$965.8+$155.9
SK1,6501,3002,9502,600$90.7+$15.5
MB3,4003,0006,4005,700$215.3+$34.9
ON35,00020,00055,00051,000$2,183.0+$391.7
QC (0-4)29,00010,30039,30035,000$1,576.0+$315.9
NB2,7002,0004,7004,300$186.0+$29.9
NS2,6008003,4003,200$142.4+$29.9
PE7004001,100950$42.3+$7.3
NL8254001,2251,100$48.2+$8.9
CANADA105,67555,750161,425145,450$6,455.1+$1,198.0
CA – QC76,67545,450122,125110,450$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.

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.