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The economics (and ethics) of affordable child care


Many economists, particularly those that are male, find it difficult to understand the public interest in providing funding to child care. 

Stephen Gordon provides an illustrative example in his recent National Post column where he made the case that universal subsidized daycare fails the sniff test for good public policy as it does not address a “market failure.” Gordon finds very little public benefit in subsidizing child care services for young children, but only by ignoring the ways in which child care subsidization changes the employment and social opportunities available to mothers.  

The world of women’s employment is one in which individuals make what seem to be individually-rational decisions, but the reality is that women bear almost all the economic burden of child-rearing.

Take for example that girls often make choices about education specialization knowing that they will be the primary caregivers in their future families.  They know that, as mothers, they will face a range of decisions and realities men will not.  For example, a “motherhood penalty” in wages; part-time work when children are young; the lion’s share (that should be the lionesses’share) of parental leave in the first year of a child’s life. Furthermore, they are more likely to be denied opportunities for career advancement, and to neglect the acquisition of skills that might permit moving to a job with a higher income.  

Women now far outnumber men among recent college graduates in most industrialized countries. Girls do better in school, both cognitively and behaviourally. Logically, women should now be earning more than men and taking the preponderance of leadership roles in the economy.  

But, women are not.  

A central reason seems to be that women are primarily responsible for child rearing. Men’s roles are changing: they do more housework and child care than in the past. But women bear the negative employment effects of rearing children. This set of issues is often described as a problem of work-family balance. For women, family and work are often in conflict.  

This is all to say that making good quality child care more affordable for all families can help to reduce this conflict, and allow women to increase their permanent and full-time attachment to the labour force. Good quality affordable child care (along with changes in men’s roles) should reduce the motherhood penalty in wages, allow women to take a greater share of senior management roles in the economy, and encourage girls to imagine broader horizons.

This is not to dismiss all of Stephen Gordon’s arguments, some of which are helpful to consider.  

The quality of Quebec’s child care has not been adequate. It is a good reminder that universal child care subsidization needs to be directed towards encouraging the use of good quality care. Over half of the expansion in child care spots - 67,000 out of 115,000 - over the period studied by Baker, Gruber and Milligan and other economists cited by Gordon, were family day care spots with only minimal training requirements for caregivers.  

Another 12,000 were in for-profit childcare centers at poorer ratios of children to trained caregivers than the not-for-profit CPEs (Centres de Petite Enfance –Early Childhood Centres). Only 36,000 (or 31% of the increase in spaces) were in the not-for-profit CPEs (with more trained staff) that were intended to be the heart of the program. The Quebec government moved too fast in expanding spaces, a mistake that can and should be learned from.

We should not, however, throw the baby out with the bathwater. We know that good quality child care, including universal programs, can be beneficial for children, as a number of studies have convincingly shown. Intelligent policy design needs to ensure that these benefits are achieved.  

And, it’s also true that the Quebec government did not do enough to tilt the child care reforms to give preferential access to low and middle-income families.  It is important to recognize, however, that when there is little subsidization of child care, higher income families will always be over-represented among users. And when there is a move to a universal subsidy, many of those same higher income families are positioned to access the benefit unless efforts are made to phase in the subsidy more progressively.

The causality of the preferential access to child care works both ways: high income families are more likely to be able to afford the high cost of unsubsidized child care; but also, those families who use child care are more likely to be able to have both parents employed full-time and in decent-paying jobs.

Nevertheless, the Quebec case should not be distorted so as to suggest only high income earners have benefitted. Gordon's account ignores the evidence that Quebec child care reforms were very successful at encouraging families in which mothers had a high school education or less into long-term employment.

It is still true that higher income families benefited disproportionately from the subsidization, and that reforms could have done more to ensure that low and middle-income families were first in line. But again, with intelligent policy design, this pitfall can be avoided. 

Child care and women’s employment may not present the classical forms of market failure that Gordon advocates for to judge public policy. This is a situation, however, where individual decisions do not produce an optimal social result and governments can nudge markets and families to produce results that are better for all. 

Policies that make good quality child care more affordable for families can increase women’s employment opportunities and change the way that the market rewards women’s work.  This can be beneficial for children and families and society.  

Gordon Cleveland is an Economist in the Department of Management at the University of Toronto at Scarborough and Senior Fellow in the Graduate School of Education at the University of Melbourne.

Photo: Morgan. Used under a creative commons BY-2.0 license.