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
- 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.
- 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.
- 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.
- 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/