Child Care Mess Illustrates Why Canada Needs a Policy Revolution
By Gregory D. Morrow

If there was ever an illustration of why campaigns don’t make for producers of good policy it is the child care mess in which Canada finds itself following last month’s election. Let me be clear about my feelings: neither of the the options that were presented by the Liberals (a program to provide child care spaces to low-income earners) or the Conservatives (a $100-a-month allowance for each child under 6 years old) are sufficient in and of themselves. This false dichotomy is the result of campaign strategies that were intended to show the differences between the two parties. Unfortunately, both are merely partial solutions that benefit only fragments of the population.

The Conservative $100-a-month plan is being touted as giving parents “choice”. Giving parents choice is exactly what is needed, unforunately, the $100-a-month plan doesn’t do that. No doubt every Canadian would like a break on their taxes, and nobody needs this break more so than parents. So, the revamped baby bonus is a win for all families. But with an average cost of $8,700-per-year for a single child care space, a $1,200-per-year subsidy will not help low- or even middle-class earners pay for child care. For example, someone earning $20-per-hour would still need to spend over 20% of their gross earnings on child care, even after the $1,200 subsidy is factored in. A minimum-wage earner in Ontario ($7.45-per-hour) would need to spend more than 50% of gross earnings on child care, after the $1,200 subsidy is factored in. These levels of spending are impossible. There is no doubt that the $1,200-per-year allowance will help parents pay the bills and provide for their kids better. But based on the numbers, it will not provide nearly enough money to pay for child care. So the Conservative plan by itself is only a partial solution.

The Liberal plan is also flawed. A network of subsidized child care centres only benefits a select segment of the population: a) the lowest 20% of income earners, since the program can only meet the need of 1 in 5 who want a child care space, b) those that live in an area that is sufficiently urbanized that it is convenient for parents to drop off their kids and c) those that want to send their kid to child care, rather than stay at home themselves. In other words, people that don’t live in a dense urban region (or happen to live close to the centre) will not benefit from the child care centres. And, anyone earning more than about $20-per-hour will not see a benefit because the spaces will be given to those most in need. Moreover, parents who choose to stay home with their kids before they go to kindergarten (more and more a luxury these days) will also not benefit from subsidized spaces. So the Liberal plan by itself is only a partial solution.

It is clear that both programs have merits, but operating by themselves, they are woefully inadequate as a means of providing much needed child care. Child care is not merely a social program, but it is also a vital tool to drive economic growth and increase productivity. Child care allows those who want to work and have kids to continue their careers. Child care also allows parents to further their training in order to get better jobs and be more self reliant. The Liberals dismissed criticism of their plan because they were looking out for low-income earners (since only the lowest 20% get spaces), while the Conservative plan benefits middle- and upper-middle income earners the most (yes, $1,200 will surely help low-income earners pay the bills, but is nowhere near what is needed to pay for child care).

There is a simple solution that gives parents real choice … wait for it … how about let parents choose which option best suits them? Revolutionary, I know. Why not have a system of subsidized child care centres and let people choose whether they want a subsidize child care space or the $1,200-per-year subsidy. For those that choose parents who don’t want to send their kids to child care, they would choose the $1,200-per-year allowance. Folks who live too far from a child care centre would alos choose the $1,200-per-year allowance. But, for those low-income earners for whom $1,200 will not be nearly enough to buy child care, and who live close enough to a child care centre, they would choose — and be given first dibs on — the subsidized child care spaces. If there are not enough spaces to meet the demand from among those who choose the subsidized space option, those parents would receive the $1,200 allowance.

It is the best of both worlds. I discussed a variation of this in an article on 7 December 2005 (“An Innovative Canadian Child Care Plan”) - see the article for how the numbers play out. Parents who choose not to send their kids to school get the same benefit as the Conservative plan. Ditto for rural dwellers or those that don’t live close to a centre. However, those who need child care the most — low-wage parents who live in cities (where costs of living are highest) would have the benefit of subsidized child care in order to work or go back to school.

If we had a better system of developing policies in Canada — that is, if political parties actually went community-by-community and talked with people in different situations — we might very well have arrived at such a common sense solution. One-size does not fit all — not a $1,200 allowance nor a subsidized space. If policy was developed bottom-up, hand-in-hand with communities instead of the brainchild of top-down policy wonks, Canada’s parents would really have choice on child care.

An Innovative Canadian Child Care Plan: Combining Liberal and Conservative Plans
By Gregory D. Morrow

In this article, I propose an innovative solution to Canadian child care — a $7-a-day plan based on the fundamental framework of the Liberals, which would be available to those earning up to $28,211, combined with a variation of the Conservative subsidy — a $2,400 subsidy for those earning between $28,211 and $37,216 and a $1,200 subsidy for those earning between $37,217 and $45,859. No subsidies would be granted for households earning above $45,859. (All numbers assume one child, the income thresholds could be adjusted for multi-child households).

Let me explain why I feel this is a better solution than what either party is offering. First, we must acknowledge that there is an understandably passionate debate raging between the childcare plans put forth by the Liberals and the Conservatives. In a nutshell, the key points of the two plans are:

Liberals
- federally-subsidized childcare/early learning centres, modeled after Quebec
- parents pay $7/day, the rest is covered by the government
- can create enough spaces for 20% of the kids (i.e. lowest 20% income-families)
- $11 billion over 10 years

Conservatives
- no federally-subsidized childcare/early learning centres
- all parents receive $1,200 subsidy for each child under six years old
- parents choose how to spend subsidy
- $11 billion over 6 years

There are valid critiques about whether the Liberal plan prejudices single-earner families. There are equally valid critiques about whether the Conservative plan prejudices low-incomes families. I thought it would be good to compare the two plans and what it means for families at different income levels.

The Cost of Childcare
A 2004 study by Runzheimer Canada showed the average cost of childcare in Toronto was $722.88 per month per child or roughly $8,700 per year, per child. Given an average working year of 235 days (after weekends, holidays and vacations), this works out to be about $37/day.

A 2004 National Post review of Quebec’s child care system noted that the Quebec government subsidized the cost of child care — parents pay $7/day for a system that costs $38/day to run. So, the Toronto and Quebec numbers are similar, $37-38/day. The Quebec government subsidizes roughly 82% of the cost, with the parents paying about 18% (about $1,600/year). There are enough spaces to place about 20% of kids (typically, from the 20% lowest-income families). It is upon this Quebec model that the Liberal proposal is based.

Comparing the Liberal and Conservative Plans
The following table summarizes the % of income that parents from the 10 census income levels would pay under the Liberal and Conservative plans.

As you can see, there is a clear difference for some groups. The Liberal plan clearly favors the lowest two income levels (i.e. for those earning less than $28,211). The Conservative plan gives a marginal benefit to those above the bottom two income levels. It is clear that under the Conservative plan, the lowest income earners (less than $18,991 or $10/hr) could not afford child care, as it would consume nearly 3/4 of their income. It is also unworkable for those earning between $18,991 and $28,211 (roughly those earning between $10-15/hr), costing nearly 1/3 of their income. On the other hand, the Liberal plan is affordable for most groups except those earning between $28,212 and $37,216 (here, it would cost a little over 1/4 of their income), and to a lesser extent those earning between $37,217 and $45,859 (where it costs a little over 1/5 of their income). So, the range for the Conservatives is 4.1% to 72.5% of income, while it is 4.7% to 26.5% of income for the Liberal plan. Based on these numbers, I would conclude that while the Conservative plan benefits more people by a marginal amount, but the Liberal plan benefits those who need it most by a significant amount, and thus fundamentally makes more sense. However, the Liberal plan doesn’t help lower-middle income earners, since it cannot provide enough subsidized spaces.

This is where the Conservative plan comes in. However, rather than have a universal subsidy, it should be stepped by income. A $2,400 subsidy for those between $28,211 and $37,216 would mean child care would cost about 19.1% of income, a $1,200 subsidy for those between $37,216 and $45,859 would mean child care would cost about 18.1%.

Thus, under my combined scheme, no family would pay more than 20% of their income towards child care. It is still high, but it is a start and it helps low-income and lower middle-income families — every household earning less than $45,859 — those that have the hardest time paying for child care. It is a more balanced and more effective approach than each of the two parties independently. The expected cost would probably run closer to the Conservatives $11 billion over 6 years. A summary is below: