Opinion & Commentary
Holes in new path to reform child care
In December, the Council of Australian Governments comprising the Prime Minister, state premiers, territory chief ministers and the president of the Australian Local Government Association announced a stringent new regime for regulating child-care centres. The ratio of staff to children will increase and more staff will be required to have formal child-care qualifications.
The changes mean that the cost of child care will rise by $1.6 billion over the next decade, resulting in higher prices for parents and requiring larger subsidies from taxpayers.
Advocates of the move say the vast improvement in quality will be worth the cost, and every parent naturally wants the best quality care for their kids.
But there is no certainty that increased spending will pay dividends and advocating more spending is always easy when it’s someone else’s money.
One of the arguments used to justify ever-increasing government expenditure on child-care subsidies is that formal care benefits kids in ways that will benefit society in the future.
An oft-quoted but incorrectly used statistic is that for every dollar of government spending on quality child care now, we’ll save $16 in the future. That’s because the kids in the study cited went on to perform better in school, were more likely to get a higher earning job as adults and were more likely to stay out of the criminal justice system.
At face value this looks like watertight evidence that government should devote more resources to child care. But dig a little deeper and the truth looks a bit murkier.
The $16 figure comes from the Perry Preschool Project, conducted in the United States. The kids in the study came from highly disadvantaged backgrounds: they were African-American kids living in poverty and assessed to be at high risk of school failure.
That child care benefits kids from these kinds of backgrounds is confirmed by other research and only stands to reason. Spending the day with a caring, responsible child-care worker and playing with other kids in a safe and stimulating environment is always going to be preferable to a poverty-stricken home environment free of books and toys. This is doubly so if a child’s parents suffer domestic violence, drug addiction or mental illness.
Greater government spending on child care is definitely warranted if it targets kids from the most dysfunctional and disadvantaged families who will benefit substantially. As taxpayers, we are likely to receive a good return on investment if we spend more on providing care for these families.
But we shouldn’t necessarily expect similar outstanding results from spending more on child care for all kids.
Of course, widely available and high quality care is always desirable for all kids, no matter what the family situation or background. But again we can’t assume that all the COAG reforms are necessary to achieve this.
A new Australian study, issued in December by Australian National University economist Andrew Leigh, found that while kids benefit from having a higher ratio of staff in child-care centres, they don’t necessarily benefit from those staff having formal child-care qualifications.
If government acted on these findings, the appropriate policy would be to subsidise not just formal child care but nannies as well, since nannies naturally provide a higher adult-to-child ratio.
A careful cost-benefit analysis of the COAG regulations is therefore needed. This would reveal one group that is sure to lose from the new arrangements. This is the 15,000 or so women who say they want to work but can’t afford child care. Rising costs will almost certainly keep many of these women out of the workforce.
Jessica Brown is a Policy Analyst at The Centre for Independent Studies.
