Childcare – why should it be subsidised at all?

Jul 10, 2020

Increased subsidisation of childcare seems to be the received wisdom these days, so perhaps I am the only one in step. But please tell me again why other members of the community should pay to subsidise those parents who want to farm out the care of their young children so they can do other work in lieu.

There is a growing chorus of voices calling for an increase in the subsidies for childcare, and a reduction in the rate at which parenting allowances and tax offsets reduce as income increases. This demand is gaining considerable popular support in the media and elsewhere. That there is so much popular support for this proposal really puzzles me because:

  1. Childcare is a job which parents mostly take on voluntarily, by deciding to have children;
  2. If neither parent wants to care for the children, and both would prefer to do some other kind of work in lieu, is it not reasonable that the earnings from the paid work should go towards the full cost of childcare, even if there is no surplus left over? After all, at its heart this is just job swapping.
  3. On what basis do people assume that they should be entitled to farm out the care of their children to others and receive a subsidy for part, even most, of the cost? If I buy a big house with a lawn and lots of bathrooms but I don’t like mowing or house cleaning, and I choose to pay others to mow or clean whilst I do other paid work, should other members of the community be taxed to pay for all or part of my outsourcing costs?
  4. Ditto painting, repairs, etc. – the list is endless. So, why is childcare different?
  5. Is it not generally recognised that the first 1,000 days (at least) of a child’s life are vital to their development? Do not the Jesuits say: “Give me the child to the age of seven and I’ll give you the man”? So, is it valid to provide a financial incentive for parents to avoid spending this vital time with the children they have deliberately brought into the world?
  6. It is fair enough that public schooling should be available free from age three, if that is what the educators and child psychologists believe is appropriate – even though some of the best performing countries do not start their children at school until as late as age seven, with only play-based learning up to that age. But this should be only for educational and personal development reasons, not just so parents can join or re-join the paid workforce.
  7. Is a subsidised childcare system which facilitates the creation of corporations owning hundreds of for-profit childcare centres better use of taxpayer funds than government support for community run childcare centres (e.g. the old Creche and Kindergarten Association)?
  8. Is a paid carer likely to constantly give a child the same loving care and commitment that a parent will give, in all circumstances? I personally know a young woman who works in childcare who genuinely dislikes children: “The only job I could get”, she says.
  9. And if there is value in structured learning below school age, would the childcare subsidy not be better spent teaching parents how to maximise the value of their time with their young children? i.e. Formal training in parenting – as a pre-requisite for receiving any parenting allowance?
  10. If a parent works in a profession where continuity of at least part-time employment is necessary in order to retain seniority in the profession, that parent’s earnings will doubtless be at a higher hourly rate than childcare costs – so why should they receive any subsidy?
  11. According to the Grattan Institute, childcare costs an average of $11 per hour. The Minimum Wage is $20 per hour, and people earning at that level effectively pay no tax. Therefore the minimum net financial gain from paid work is $9 per hour. So why should other taxpayers subsidise childcare? Even those oft-quoted examples of a parent going from four to five days per week and earning a net $3 or $4 per hour on the fifth day say more about the middle-class welfare system than they do about the cost of childcare.
  12. Which other members of the community should logically bear some of the cost of childcare for the children of working parents? Which other government programmes should be cut back to pay for the childcare subsidy? The money has to come from somewhere, and $4bn p.a., the pre-pandemic cost of the subsidisation, is a significant amount, even by federal government expenditure standards.
  13. With some 650,000 unemployed people in the community, and another 1,000,000 under-employed (again, both pre-pandemic), where is the employer demand for parents – primarily mothers – to join the paid workforce? Whose jobs will they take?
  14. Would it not be better to spend the money training the unemployed to take the jobs, or upskilling others so as to create vacancies in low skilled entry level jobs?
  15. The private health insurance rebate currently costs $6bn p.a. and goes to families with taxable incomes up to $280,000 p.a. Grattan validly questions the wisdom of this subsidy. Childcare subsidies cost $4bn p.a. according to a 2019 Labor election campaign announcement, and go to families with taxable incomes up to $350,000 p.a. Grattan’s Budget Policy Program Director (now CEO), Danielle Wood, said recently on The Drum that increasing the net childcare subsidy is her highest priority for tax reform. Really? Are not both of these subsidies middle-class welfare? And why is childcare a higher priority than the public health system at a time when people can wait a year or more (in agony) for a hip replacement in the public system?
  16. Grattan says we could have a full national Denticare scheme, the equivalent of Medicare, for $5.3bn p.a. Surely this should be a higher priority than subsidisation of either private health insurance or childcare?
  17. On the same Drum programme mentioned above, Danielle Wood drew an analogy with Canada, saying that if Australia could lift the workforce participation rate of women by half the current gap between Australia and Canada, our GDP would increase by some very significant percentage (which she quantified). With so much unemployment and under-employment, where will the job openings come from to employ all these extra people to produce this extra GDP? Doubtless childcare will create a few jobs, and probably aged care (to replace some of the immigrants on temporary work visas currently filling most of the Aged Care Assistant jobs in our aged care facilities?). Where else? Is this a logical argument for more highly subsidised childcare?

I know I am out of step with popular opinion, so I would genuinely welcome answers to any of the above questions. I stand ready to be convinced.

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