Does Universal Daycare Pay For Itself?

Zachary Lewsen

If there’s an election topic more contentious than childcare, it would be how to find the cash to pay for it. Soon after NDP leader Tom Mulcair announced his plan to introduce a universal, $15 a day childcare program, many commentators raised concerns about his ability to pay for such an initiative. Even The Beaverton, Canada’s satirical newspaper, recently released an article titled “Mulcair to balance budget with the coupons he’s been saving.”

While it’s important that each party’s platform is subject to strict fiscal scrutiny, commentators must also observe how social programs—like daycare—oftentimes provide governments with massive savings in other areas. In special cases, governments receive more savings from social programs than they are paying to operate them. And nowhere is this more evident than with Quebec’s childcare system.

So, does Quebec’s childcare program pay for itself? Economists Pierre Fortin, Luc Godboudt, and Suzie St. Czerny would likely say yes. In a 2012 paper for the Université de Sherbrooke’s Research Chair in Public Finance and Taxation, the three economists argue the introduction of low childcare fees—barely a third of those in Ontario—enabled mothers of young children to participate in the work force. This increase in female labour force participation has, in turn, increased income tax revenues and decreased provincial family transfers, which is providing savings to the Quebec government that more than outnumber the costs of universal childcare.

To understand why Quebec has record low childcare fees, one needs to observe the province’s unique cultural and political dynamics.

For an outsider, Quebec’s political landscape often resembles a complex maze of clashing interests and identities. There is, however, one priority that every Quebec Premier has shared: sustaining a strong birth rate. As members of a Francophone community in a predominantly Anglophone country, Quebecers have long feared that a decline in their province’s birth rate could spark a subsequent erosion of Quebecois language and culture. As such, the province’s Premiers have often introduced policies to minimize the challenges and expenses of child rearing. This tendency has best been described by sociologist Catherine Krull, who argues that Quebec policymakers have used “strength in numbers (‘la revanche des berceaux’—‘the revenge of the cradle’)…to redress Quebecer’s numerical subordination to English Canada.”

In the late 1980s, the province introduced an allowance that provided a one-time cheque to families with newborns. After this initiative failed to drive up birth rates, Quebecers decided they needed to change tack: this led to the creation of a universal childcare program offering subsidized rates of $5 per day. In 2004, the province lifted the daily fee to $7; in 2014, Premier Philippe Couillard introduced a sliding scale fee structure that ties parent’s fees to their income, with top earners paying a maximum of $20 per day. By 2010, the Quebec daycare system had halted a substantial drop in fertility. But, as mentioned earlier, that wasn’t the only benefit: universal childcare also left a positive imprint on the province’s fiscal capacity.

The three economists associated with the Université de Sherbrooke’s Research Chair determined that, in 2008 alone, Quebec’s low-fee childcare enabled 68,000 mothers of young children to participate in the work force—mothers who, in the absence of universal childcare, wouldn’t have participated. These labour force effects seem particularly pronounced for single mothers, as their relative poverty rate decreased from 36 per cent to 22 per cent over the 10 year period in which universal childcare was introduced. The three researchers then observed this labour force growth as it relates to the province’s finances

With higher labour force participation, tax revenues increased and social assistance payments decreased. The addition of 68,000 mothers increased income tax payments as well as payments from taxes associated with the increased economic activity (including property tax and fuel tax). In addition, the government shed most of its daycare allowance tax cut and decreased social assistance supports because many single mothers were no longer living in poverty. In sum, the three economists concluded that, in 2008, every $100 spent on subsidizing daycare provided $104 in combined revenue and savings.

So, can Quebec’s fiscal benefits from daycare be packed and shipped to the rest of the country through a National Daycare Plan? Likely not. The 2012 Research Paper is very specific to Quebec in 2008. It may be hard for a low-fee daycare system to spark a female labour force participation surge in 2015, considering low employment numbers in Ontario’s manufacturing industry and Alberta’s energy sector—and their resulting impacts across the country. In addition, the ingrained 9-5 hours often associated with public daycare facilities may not dovetail with parent’s schedules, considering the increasingly unpredictable work hours that parents face. As well, universal childcare may not be marketable to parents and voters outside Quebec due to contested research linking daycare enrollment to participants’ compromised health and social development.

Despite lacking broad applicability, the Université de Sherbrooke paper still has important takeaways: namely, that social programs—and their indispensable public benefits—should not be seen as a deadweight loss on a government’s budget. In this election, Canadians and the candidates hoping to represent them should have a more holistic conversation on public finance, one that doesn’t just ask how much campaign proposals cost, but how much they can save. Childcare seems like an appropriate topic to launch that conversation. After all, Quebec toddlers might be enhancing their province’s fiscal capacity—one daycare activity at a time.

 

 

Zachary Lewsen is a 2016 Master of Public Candidate whose interests lie in social policy, urban affairs, and public finance. Zachary is currently a Co-Editor in Chief of the Public Policy and Governance Review and a Graduate Fellow at the Institute on Municipal Finance and Governance. When Zachary is not researching policy, he’s thinking about it—while watching House of Cards.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s