Child care plan a costly disaster

Afew years and some billions of dollars later, Canada doesn’t have a national daycare program. Instead, it has a national wait-list. It’s a Liberal policy failure — a highly expensive and predictable one — and it will best be scrapped under new management.

Under the current model of federally funded cheap daycare, announced in 2021 under the “$10 a day” tag line, the Liberals give each province money to pass along to care providers in exchange for reduced fees — though, subsidized spaces don’t necessarily drop to $10 per day, as the program is geared at lowering the average fee. The intent is to free parents up for work, and income up for tax collection.

The program fails to do what it says on the tin. Instead of meeting need, it creates need. Instead of bringing in revenue, it recoups only one-18th of the cost to run it. As for raising female labour participation, a stated goal of the Liberal government, it barely moves the needle. The only thing it confidently achieves is the waste of about $6 billion per year on average, the equivalent of roughly one-seventh of Canada’s annual military budget.

That money is best spent elsewhere.

This is the experience that taxpayers have subsidized so far: thousands of names on Waterloo, Ont.’s daycare queue; a quadrupled waitlist in London, Ont.; dialysis nurses unable to return to work after maternity leave, parents unable to find daycare space despite applying back when their children were in utero. The list can go on.

The anecdotes are corroborated by Statistics Canada: in 2019, 36 per cent of parents using daycare had trouble finding spots; this rose to 49 per cent in 2023. In that time, the percentage of parents with kids on waitlists went to 26 per cent from 19 per cent. To give the program minor credit, daycare expenses (for those who can find a spot) decreased in 2023.

This, however, comes at a great cost. The Liberal program has triggered rolling daycare closures in Alberta due to the cost cuts it imposes; in that province, industry advocates estimate the average child-care operator will see half of their expected earnings wiped out in future years. In Ontario, advocates warn that closures are on the horizon if their funding formula doesn’t change. Daycares countrywide have seen their business become unsustainable overnight, and it’s fair to expect some to eventually pull out of the subsidized program and others to simply fold.

Since its initiation, the program has barely nicked a dent in the macroeconomic picture. Canada’s female labour participation rate is about the same now as it was in 2015, according to analysis released last week by the Fraser Institute. As for the participation of mothers with young children, the institute found a slight rise between January 2020 and June 2023 — but the increase was about the same as in the interval between January 2016 and January 2020. In short, cheap daycare hasn’t affected the existing trend.

Meanwhile, analysis by Toronto-dominion Bank attributes the slow but steady rise of working mothers with kids under the age of six to two things: affordable child care and flexible work. It didn’t break down the extent to which factor contributes, but it did find employment growth among mothers of young children was stronger in sectors that rely on workfrom-home arrangements. Prime Minister Justin Trudeau essentially blew billions to make the market move from a sloth’s pace to a snail’s pace.

So, parents in need are stuck without care, daycares are struggling to stay afloat and mothers are working at only slightly higher rates. Does it pay off ?

The promise was that it would: “Studies show that (publicly funded) child care alone has raised Quebec’s GDP by 1.7 per cent,” says the 2021 budget readout. “TD Economics has pointed to a range of studies that have shown that for every dollar spent on early childhood education, the broader economy receives between $1.50 and $2.80 in return.” (Unacknowledged was the inconclusiveness of the TD figures, which came with the qualifier that “a large margin of error likely exists.”)

The sobering reality is far worse. In 2022, the Parliamentary Budget Officer estimated that, from 2021 to 2026, only $1.8 billion in costs would be recovered from $26 billion spent (a result of more parents paying income taxes and fewer families claiming federal child benefits). The labour boost would be slim, with GDP projected to rise by a slim 0.4 percentage points long term.

The solution to helping families manage the childcare burden should be simple and flexible. This was the case in the past: Canada’s old system, under the government of former prime minister Stephen Harper, involved modest cash transfers to families with kids under six, and an additional taxfree payment to low-income families.

Though one Liberal staffer famously dismissed universal transfers as wasteful cash for parents to blow on “beer and popcorn,” the program managed to be respectful of family choice while coming at a low overhead cost. When the Liberals won government in 2015, they ultimately embraced the cash transfer, adding to the amounts paid (along with adjusting for income). Under both governments, these funds provided decent support to families who could use it to spend on care as needed, whether that go to daycare, babysitting or anything in between.

Whatever the next government ends up deciding, its solution to child care should not involve tanking an industry that once had a healthy balance of supply and demand.

THE PROGRAM FAILS TO DO WHAT IT SAYS ON THE TIN.