Time to Rethink The Choice in Child Care Allowance

Whoever dreamed up the “choice in child care” allowance was a political genius. It was a brilliant political counterpunch to the Liberals’ plan to create a heavily subsidized childcare system across the country.

Parents who rely on full time formal childcare (or would like to but can’t afford it) had more to gain from the Liberal proposal, but the majority of parents who prefer other arrangements for their children would have derived little benefit from the Liberal plan. By contrast, the Tory policy amounted to “free money” for these parents. For a family with two young kids and a stay at home mom, the Tory plan promised $2400 (minus the taxes) per year with no strings attached. This is a very substantial benefit, and I suspect the lure of a big fat cheque enticed many parents to pull the lever for the Conservatives.

Though a political masterstroke, I contend that the choice in child care allowance was and is dreadful public policy. This can be most clearly seen by reflecting on the name of the policy.

What does the allowance actually do to expand choice for anybody? It’s too small to expand the choices of poor families, and comfortable families have access to a wide range of choices anyway, with or without the allowance (or at least they would, if the childcare sector were not tightly regulated in ways that greatly reduce supply). In short, it is hard to see how the additional $100 per month significantly expands anybody’s range of choices. In fact, the policy doesn’t really achieve any identifiable, defensible public objective. Instead, it merely amounts to a small subsidy for parenthood that flows to the rich and poor alike. In short, the policy costs a fortune and does nothing.

Generally speaking, I am sympathetic to the government’s position that childcare should be organized and delivered by the private sector. Child care is not a public good – it is neither non-exclusive nor non-rivalrous – and it is therefore reasonable to expect that a more-or-less free market will deliver what customers actually want with greater efficiency than the government. Furthermore, as Bruce Fuller has convincingly argued, the state is a homogenizing force and excessive government oversight of childcare delivery would likely squeeze out the vibrancy and diversity of options which should characterize the childcare sector – especially in a multicultural country like Canada.

There is one major problem with relying on markets to deliver child care: the cost of high quality childcare services will be more than some parents can afford. This is problematic for two reasons. Firstly, there exists an unmet social need when low-income people are without a safe, supervised environment in which to place their children while they are at work. Secondly, there is the fact that the children who would be excluded by a purely market-oriented approach –poor kids- are the children who have been demonstrated to benefit (by far) the most from access to high quality childcare.

These are serious problems – but they can be addressed within the generally market-based approach preferred by the Tories. For example, a voucher program, or some similar mechanism designed to boost the purchasing power of poor and low-income people could be created that helps give economically disadvantaged families access to the same services used by middle-class and wealthy families. Each province already has a targeted system of subsidies, but access for low and low-middle income families remains problematic. Well-designed federal policy could help close the gaps in provincial policies and promote access.

Of course, the program would have to be carefully designed to avoid the creation of work disincentives. And it would have to provide a lot more financial help to needy families in order to actually ensure access to decent childcare services. This shouldn’t be difficult to afford though, if we simply redirect the money that is wasted through the choice in child care allowances that are now paid out to comfortable families.

The government has explicitly stated that its objective in this area is expanding choice in child care options while maintaining a private system of delivery. The best strategies for achieving this objective are using public policy to boost the purchasing power of low-income families, and encouraging provinces to drop unnecessary regulations that reduce supply. Restrictions on for-profit delivery are a good example. Through this sort of approach, we can take advantage of the efficiency and diversity of services that only markets provide, while ensuring access for low-income families.

The current approach of writing a cheque to every parent with a small child is brilliant from a political point of view- but is indefensibly unfocused and misguided public policy that achieves no identifiable public objective. By clarifying objectives and putting the public good above political concerns, the government can redesign its childcare policy in ways that take advantage of the free market’s benefits, while promoting access for Canadians who really need the help.

– Ben Eisen

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2 responses to “Time to Rethink The Choice in Child Care Allowance

  1. Thank you Ben for a thoughtful and carefully argued piece. But I for one don’t automatically equate government with inefficiency and lack of diversity or innovation. I recently had the opportunity to be part of a team contracted by the Ministry of Children and Youth Services to evaluate the provincial Best Start strategy (a comprehensive program which aims at improving early learning for Ontarian small children – including childcare) in three demonstration communities. I must say that the overwhelming majority of the families that had had increased and enhanced services and programs for the entire family for the past 5 years were raving about the tremendous benefits of the strategy. Set aside the normal glitches that still needed to be ironed out (such as the figuring out of best options for each particular community, for instance, French vs. English programming, urban vs rural considerations, Aboriginal contexts, etc.), the general sense was that early childhood education simply falls in the same category as health care (at least here in Canada)in that it is an essential need that ought to be publicly provided on a universal basis. You seem to think that a publicly funded and administered childcare program would lose on aspects such as diversity and vibrancy, but this simply does not need to be so. The solution would be – such as in the Best Strategy – to leave the planning and the coordination of preferred services and their delivery to each unique community. And believe me, childcare is one area where the main stakeholders, namely the parents, tend to be (or at least tend to want to be) heavily involved and engaged in designing and shaping the options and choices that are available to them in their specific localities.

    • I don’t think it’s surprising that parents were happy with a Best Start facility, as it is a large influx of resources.

      The fair comparison would be whether children are better off with a Best Start facility, or taking the money spent on Best Start and distributing it directly to parents. Or giving parents vouchers that could be spent at the provider of their choice. Or ask whether parents would support Best Start on a full cost recovery basis.

      As to the more general question of a public/private split in healthcare, I don’t know the answer. My gut reaction is that the state should be heavily involved in childcare because there are information asymmetry problems that the private sector isn’t good at dealing with. But that’s just a gut reaction.

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