Platform Crunch: A $10-a-day national child care plan will mean big savings for parents

The April federal budget had some very exciting news about child care: for the first time since 2005, it looks like a national child care plan is a real possibility.

One thing that’s different about this child care plan compared to previous plans for a universal child care program is that it's targeting fees instead of spaces.

As we’ll see below, this presents both opportunities and pitfalls. The upside for parents, particularly in some provinces, is the potential for huge savings. Parents in some cities could save over $10,000 annually, per child, by 2022 and almost $20,000, per child, by 2026.

If implemented, the federal government’s national child care plan would result in a 50% reduction in child care fees by 2022, and a national maximum $10-a-day child care fee by 2026.

There are plenty of issues to be resolved still, like would this apply to fees just for full-day programs or also after-school programs? Would fees include low-income subsidy and sliding fee programs? And so on.

To make the plan a reality, the federal government will have to negotiate agreements with each province, so results may well differ depending on where you live. The first agreement with B.C. was reached on July 8, followed by the announcement of a deal with Nova Scotia on July 13, so it looks like the feds aren’t wasting time.

For this exercise, I’m assuming that the intention is to create a "Quebec-style" system by directly reducing up-front fees. I’m assuming the starting point for the 50% reduction would be full-time median child care fees for 2020 (based on our most recent data and what was highlighted in the budget itself).

Under those assumptions, parents with infants (under 18 months) in the Greater Toronto Area (GTA) and, specifically, the City of Toronto would see the biggest savings in child care fees.

In 2020, the median cost for an infant in full-day child care was $22,400 a year in the City of Toronto proper. It was slightly less in the GTA suburbs—between $17,400 and $19,300—but that is still a lot of money for one child.

If we look forward to 2022, the new national child care plan would mean parents with an infant in Toronto proper would save $11,200 a year. In the GTA suburbs, the average savings would be $9,100 a year for an infant. By 2026, parents in Toronto proper would save $19,800 a year for an infant and in the GTA suburbs the savings would be $15,600.

For any families with one (much less two) children in child care, these types of savings would be substantial.

Across any city where we have data—outside of Quebec, where child care fees are already less than $10-a-day and don't vary by age group—families with the youngest children would see the largest savings. This is because child care fees for younger children are higher because of the larger number of staff needed to care for them.

In B.C. and Alberta, average savings for families with an infant in the big cities would be $6,000 by 2022 and $10,000 by 2026.

Even in provinces like Manitoba and P.E.I., which already have set fees subsidized by those provinces, parents could see those fees further decline since federal money would support the existing system. By 2022, average child care savings in Winnipeg would be $3,900 per infant, with savings of $4,400 a year in Charlottetown.

The parents of older toddlers or pre-schoolers in full-time care would see slightly fewer savings, but it would still make a big difference to a young family’s budget. Parents with a pre-schooler in Toronto would see savings of $7,500 in 2022 and $12,400 in 2026, as fees would drop to $10-a-day.

In the interactive graphic below, I’ve calculated the savings in 37 cities in 2022 (50% reduction) and 2026 ($10-a-day). These calculations are based on our 2020 child care fee survey.

Just hover over any city to get that city’s details. You can also change the age group for the children in care at the top right of the interactive graphic.

There are some areas, like the GTA and Greater Vancouver, where plenty of cities overlap. In those cases, use the provincial zoom drop-down list on the top right to zoom into those areas and move those circles apart.

While reducing fees may be the most saleable aspect of this plan to Canadians, it is only one piece of what must be a broader plan. A reduction in fees alone, without the other pieces, has the possibility of making a real mess of things.  

In order to reduce fees and avoid rapid growth of waiting lists, many more spaces must be built to accommodate increased demand. But those spaces need capital money to get going and Early Childhood Educators (ECEs) to staff them and a planned strategy to ensure that expansion occurs when and where it's needed. Without additional ECE training and substantially higher wages to attract them to those jobs, staff won’t materialize from nothing. Training dollars, better working conditions and higher wage stipulations have to be part of any national plan. 

Often for-profit child care providers are better positioned to take quick advantage of these sorts of opportunities, however, in basically every city we surveyed, for-profit providers charge higher fees, as they have to pay their investors in addition to running the actual child care. If we rely heavily on for-profit providers for expansion, it will cost more. Thankfully, the federal government has stipulated its preference for a "primarily" public and non-profit system.

As well, there is the possibility that “fee reductions” will happen not by actually reducing fees, but by providing parents with a set payment, say $200 a month. Paradoxically, these sorts of “cash for care” approaches often lead to higher fees, not lower ones, eroding affordability a year or two down the road. Cash for care also does nothing to create new child care spaces, especially in cities with long waiting lists. 

Unfortunately, the policy floor is littered with previous promises of a national child care plan—going back to the 1980—that never made it across the finish line. They usually met their fate around elections, sometimes because the party proposing them lost and sometimes because the party won, but still didn’t implement them.  

This child care plan is much more ambitious than the previous ones in the scale of its expenditures, as shown below (after adjusting for GDP). It is several times bigger than any previous attempt.  It is also much larger in its policy commitments.

This plan has yet to face an election, though one may come as early as this fall—and so it holds the potential of becoming a ballot box issue for parents.

Previous plans had also been much more focused on the creation of extra spaces. This was likely based on the naïve assumption that more spaces would lead to reduced fees through simplistic assumptions around demand and supply. In the real world in Canada, low fees have nothing to do with the number of spaces. They have everything to do with provincial government policies on provider operational grants.

The cities with the lowest fees are always those in which the province sets the fees and then makes up the difference through operational grants to providers. Quebec is the best known example of this strategy, but Manitoba, P.E.I. and Newfoundland and Labrador employ similar models.

The fact is that child care is a highly regulated industry, with costs largely determined by adult-to-child ratios and ECE wages. You certainly want it to be a highly regulated industry to ensure a high quality of service, but the net result is that fees can’t be reduced through competition. It turns out that market dynamics are different for child care than they are for, say, toothpaste.

It is only through direct government involvement that you substantially reduce the fees and ensure quality care.

So fees matter, but in the actual construction of a new system, they are only going to be as useful as the government's ability to increase the number of spaces, staff those spaces, raise ECE wages and keep costs down by cutting profits out of the equation.

And that’s not all, as the feds will have to hammer out agreements province by province, a notoriously difficult task, with some premiers already indicating they do not support the plan, citing concerns over options for parents. These are big challenges, but the payoff will be a huge burden lifted from young families, great care for kids, more parents going back to work and stronger economic growth for Canada.

Projected change in annual infant fees in 2022 and 2026