Childcare: deregulate, don’t subsidise

Childcare: deregulate, don’t subsidise

Childcare: deregulate, don’t subsidise

Every time I make comments critical of childcare subsidies, the internet explodes with abuse about the evil, childless, cat-owning libertarian who doesn’t understand that bearing children requires lashings of other people’s money.

The internet outrage always misses my main point: childcare needs deregulation to bring down costs.

Over the past decade or so, subsidies for childcare have grown continuously and rapidly to the point where they now pose a real threat to long-term budget sustainability.

The main reason for this is the increased credentialism and regulation that pervades the sector. Whereas childcare workers were once just sensible, caring people, most with children or grandchildren of their own, these days they are expected to hold post-school – and sometimes even university-level – qualifications. There has also been a ratcheting up of regulation of the physical environment in childcare centres, the programs and routines offered, plus staff ratios.

For the most part this has been driven by middle-class parental guilt. That is, parents seeking to justify the decision to place their children in childcare are demanding standards that allow them to believe their little darlings are receiving a better start in life than if they stayed at home. It makes them feel better about leaving the kids with someone else.

The problem is, in the case of children from the middle-class families, there is no evidence that these standards are enhancing children’s outcomes. This was conceded in the Productivity Commission Inquiry Report into Childcare and Early Childhood Learning.

More to the point, ramped up regulation and credentialism has put the cost of childcare out of reach of the poorest parents – many of them single mothers – who have a strong need to return to work and whose children are more likely to benefit from childcare.

Currently, there are two payments to subsidise childcare fees – a means-tested childcare benefit and a non-means-tested rebate in which all families, regardless of income, receive 50% of their fees to an annual cap of $7,500. The Government’s Budget proposal will boost childcare fee assistance by 54%, after accounting for inflation, from this financial year to 2018-19.

The wealthiest families, earning more than $185,000, will be able to get $10,000 in subsidies per child each year, representing a $2,500 gain per child. There is absolutely no evidence to show that well-off parents need prompting to re-enter the workforce, nor evidence suggesting that well-off parents will change their childcare decisions if they receive even more subsidies.  The increase amounts to unprincipled vote-buying by the Coalition, which views well-off parents as a natural constituency it must retain to be re-elected.

A low-income family that sends two kids to child care full-time, costing $115 a day, will receive $50,830 a year in subsidies. Fairly clearly, payments like this are so generous that many families will receive more in childcare subsidies than they earn, making it very attractive to put kids into care.

Doing this for the most disadvantaged families may make sense. However, what the Government proposes – affecting decisions of low and middle income families – amounts to social engineering on a vast scale. Mothers who prefer to stay at home will come under enormous pressure to go to work.

Ignored in all this is the obvious point that subsidising a particular good or service increases its price. Even other failed subsidy experiments – like the First Homebuyers’ Scheme – weren’t as bad because only a subset of buyers were eligible. With childcare, everyone with young children will qualify.

Before we hit taxpayers for more money to pay for additional subsidies, the sector needs to be substantially deregulated.  Middle and upper-middle class families who expect gold-plated, diamond-encrusted childcare – with its university educated workers and low staff ratios – should pay for it themselves. While it is legitimate to screen childcare workers to ensure those who present a danger to children are excluded, the ratcheted‑up regulation and credentialism should be scrapped.

Moreover, existing subsidies should be aggressively means-tested to ensure they are not directed towards parents who would work regardless of the presence or absence of a subsidy.

I support payments for the poorest parents so that kids can be raised with good nutrition, shelter, clothing, and care.  But my support is on welfare grounds, not because it is legitimate to impose middle-class child-rearing preferences on the rest of the population. Having children is not a reason to help oneself to other people’s money.