Low-cost daycare is a better way to help families.
Canada child benefit rises but low-cost daycare would help more
Team Trudeau was all over social media on the weekend, promoting its favourite sop to the Canadian middle class and those working hard to join it.
Finance Minister Bill Morneau in his budget earlier this year promised to index the Canada Child Benefit (CCB) to inflation two years earlier than planned. The shift happened July 20, providing Prime Minister Justin Trudeau and his crew an opportunity to remind us of all the good they’ve done by overhauling this Harper-era policy.
“Moms and Dads, today’s the day! The Canada Child Benefit gets more generous and rises with the cost of living from now on,” Trudeau said on Twitter.
There were more Liberal posts like that one, many more.
Chrystia Freeland, the foreign affairs minister, tweeted that the CCB had helped “almost 6,000 children” in her Toronto riding, along with parents such as “Stephen,” a father of four girls, “who is saving for their education and is better off thanks to the investments we are making.”
There was no picture of Stephen and his daughters, and no last name. Instead, Freeland, or whoever was running her Twitter account, attached a graphic that stated the average Canadian family had received $4,600 over the past two years because of the changes Trudeau had made to the CCB.
“Stephen” must be comfortably middle class if he has the luxury of stashing his monthly CCB contributions in a Registered Education Savings Plans, which would definitely be the smartest thing to do with the money.
But since outfits like the Bank of Canada and the Organisation for Economic Cooperation and Development (OECD) tend to talk about the CCB as fiscal stimulus, most families likely are cashing their benefit cheques to pay for more immediate rewards or necessities.
And that’s fine. The CCB appears to have helped keep the domestic economy rolling, as household spending has stayed strong this year even as credit growth slows. (The lowest unemployment rate in at least four decades helps, too.) It also is a good idea to lean against income inequality, which Trudeau’s version on the child benefit does fairly well. Research shows that unequal societies foster political instability that in turn generates growth-killing uncertainty. For a real-time evidence of this, see: Donald Trump’s America.
So the CCB is arguably Trudeau’s most successful economic policy. But each time he and his ministers get carried away with their boasting, I feel compelled to point out that there is nothing bold about deciding to send monthly cheques to tens of thousands of adults in a vote bank as big as the “middle class.” Nor is a tax benefit aimed at parents with younger children the best way to tackle gender inequality, the societal issue around which the prime minister has built his brand.
The CCB may help some children, and it likely fuels domestic demand because it is geared to reach adults with the greatest propensity to spend. Yet there is a superior way to aid parents, especially mothers, that would do more for the economy than a marginal stimulus measure. That policy: a national daycare program, an idea that attracted previous Liberal governments, but one that has received only superficial interest from Trudeau.
Just as the federal government has previously advertised the awesomeness of the CCB, I have at other times argued for a national commitment to subsidized child care. Unlike Trudeau and his cabinet, I have some legitimately new material with which to work. The power of this policy is now undeniable, thanks to new research from Statistics Canada.
Researchers love natural experiments, where controls exist in real life and don’t have to be introduced in a laboratory or a mathematical model. Something like that exists between Quebec, which introduced low-cost daycare in the 1990s, and Ontario, which did little specifically to ease the burden of raising children. StatCan researchers Melissa Moyser and Anne Milan decided to dig into fertility rates and labour-participation rates from 1996 to 2016 to see if Quebec’s program made a difference.
The debate whether Canada should be subsidizing daycare is over. In 2003, the labour-force participation rate of women aged 15 to 44 in Quebec passed that of Ontario for the first time; the rate in 2016 was 81 per cent in Quebec and 75 per cent in Ontario. Moyser and Milan found the participation rate of Quebec women with children younger than three years of age increased 19 percentage points — to 80 per cent from 61 per cent — over the two decades studied, compared with four percentage points — to 70 per cent from 66 per cent — in Ontario.
Wages in the two provinces weren’t a factor in the difference in participation rates. However, prices for child care and housekeeping rose 72 per cent in Ontario and only 28 per cent in Quebec, Moyser and Milan found. “Family policies have encouraged mothers of young children in Quebec to participate in the labour market,” they concluded.
Canada needs more workers to offset an aging population. That means creating a social safety net that ensures the only thing that keeps a parent at home is personal choice. The CCB, for all its strengths, can act as a disincentive to work because the extra income could disqualify some households from the benefit.
A truly progressive government would admit that and seek a more appropriate policy to boast about.