New CIS research: Why childcare isn’t affordable

Eugenie Joseph

30 August 2018 | MEDIA RELEASE

Despite billions of dollars in public subsidies, childcare is becoming less and less affordable in Australia largely due to increasingly stringent regulation, according to new research by the Centre for Independent Studies.

Why Childcare is not Affordable outlines that the regulation of childcare under the National Quality Framework has had a significant impact on fees and affordability.

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Report author, senior policy analyst Eugenie Joseph, says the greatest impact has been the mandatory staff-to-child ratios and qualification rules for childcare workers, which have required childcare centres to employ more staff with higher qualifications.

“The staff-to-child ratios and qualification rules are driving up the operating costs of childcare services, , and the increasing cost is at cross-purposes with the aim of increasing women’s participation in the workforce,” Ms Joseph says.

“Services have to employ more staff to meet the minimum ratios, while childcare workers have to invest in costly qualifications, even though the returns from these qualifications may be poor for some workers.

“These costs are being passed on to parents in the form of higher fees. And this is happening at a time when more parents are relying on formal childcare to support their participation in the workforce.”

The resarch outlines that childcare fees are growing well above inflation, and parents’ out-of-pocket costs have increased by nearly 50% in real terms in just six years.

It estimates that fees for long day care, the most common type of childcare, were 11% higher in 2017 than they otherwise would have been, due to the effects of the staff ratios and qualification rules.

“These impacts should not be surprising,” Ms Joseph says.

“In fact, the Council of Australian Governments anticipated that the staff ratios and qualification rules would add over $1.2 billion to the costs of providing long day care. It also predicted that most of these costs would be passed on to parents. And that is what we’re witnessing right now.

“The costs of these regulations are evident, but the benefits have been overstated and are not supported by strong evidence.

The research also finds that the regulation of childcare quality and subsidisation of childcare fees are working at cross-purposes.

“By driving up the cost of childcare, quality regulations undermine the effectiveness of the government’s Child Care Subsidy,” Ms Joseph says.

“Using one hand, governments are driving up the costs of childcare through regulation. With the other hand, governments are trying to reduce the costs with taxpayer subsidies. This is not sustainable in the long-term.

“By defining childcare as a form of early education, state governments have justified the qualification rules, even though they make childcare more expensive — and actually discourage parents from using formal childcare and working.”

“If we want to support women going back to work, we need affordable childcare — and that is not being achieved, even though the annual taxpayer cost of childcare subsidies is expected to hit $9.5 billion within the next four years.”

This report recommends that the federal and state governments examine the case for reducing the scope of the staffing and qualification requirements under the National Quality Framework.

“Realistically, parents cannot afford to pay more. And we know that mothers’ decisions about returning to work and how much to work are influenced by the cost of childcare,” Ms Joseph says

“If Australians truly want affordable childcare, a more flexible approach to regulation is needed.”

Eugenie Joseph is a Senior Policy Analyst in the economics program at The Centre for Independent Studies

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