In prohibiting extra-billing for added activities at subsidized private daycare facilities, the Quebec government is continuing with the centralizing and standardizing moves it began a decade ago in creating $5 daycare (now $7). The perverse effects of this standardized model are being felt increasingly. Are the parents it was intended to help really getting what they need? A study prepared by my colleague Norma Kozhaya provides answers to this question and comes up with some solutions.
A universal and equitable system?
Prior to 1997, parents received universal family allowances. Daycare fees were eligible for refundable tax credits, and the most underprivileged families were fully exempted. In 1997 the government replaced universal family allowances with sliding tax benefits based on family income, and it introduced low-contribution daycare spaces.
Nearly a decade after the reform, calculations by tax specialists show that families with incomes above $60,000 benefit most from the new system. In 2000, more than 58% of children in subsidized daycare came from families with incomes above $60,000 although this group accounted for only 49% of children 0 to 4 years old in Quebec.
Furthermore, parents who do not use $7 daycare are at a disadvantage. In 2004, this encompassed 48% of Quebec families with children aged 0 to 4. It includes those who use other forms of daycare such as leaving children in the care of relatives or at home with persons other than the parents. And most overlooked of all are those who care for their children on their own. Non-users also include parents who lack access to these services because they are stuck on waiting lists.
A costly system
The costs of the new childcare system have risen far more quickly than the development of new subsidized spaces. Subsidies paid to childcare centres and registered daycares leaped from $564 million in 1999-2000 to $1.353 billion in 2004-2005. This is an increase of nearly 140% in five years. The number of spaces rose by just 96% in the same period.
The costs of subsidized childcare services in Quebec are also higher than elsewhere in Canada. In Toronto, caring for a 3-year-old infant is reported to cost $9,600 a year, with the Canadian average standing at $6,300. In Quebec, it costs $11,600 a year for a 3-year-old to be looked after in a childcare centre (including the subsidy and the parents’ contribution).
Coming up with solutions
In contrast to Quebec, the great majority of countries with active family policies offer more choice to parents. Two ways of doing this are especially worth considering: vouchers for daycare services and universal family allowances.
If the goal is to make it easier to care for children and to conciliate work and family, the government could pay the parents of each child currently in licensed daycare an amount of about $7,000 in the form of a voucher, based on the budget allocation of $1.353 billion in subsidies recorded in 2004-2005. This works out to $27 per working day. Parents could use vouchers to cover part of the cost of any licensed childcare service. Regardless of stipulations, this system would offer greater choice to parents. By creating healthy competition among service providers, it would also encourage them to meet families’ needs and preferences more closely, especially in terms of schedules and programs.
If the aim is to help families in general, whether or not they use childcare services, the government could issue amounts of about $3,700 to parents for each child 0 to 4 years old in Quebec in the form of direct allowances or refundable tax credits. Parents not currently using childcare services would come out ahead under such a system.
Family allowances and vouchers can be combined in many ways. The government could also exempt underprivileged families from daycare fees, in whole or in part, to encourage them to register their infants in childcare centres.
Using these measures would help eliminate the mini-crises that erupt in Quebec politics when the government decides to increase the parental contribution or when a daycare facility offers parents an added service for extra cash. The government would set its contribution, daycare facilities would set their prices freely, and parents would decide freely on the type of care best suited to their children based on the quality-price ratios of various childcare service providers.
Whatever the goals that family policy aims for, there are more effective ways of meeting them. By offering greater choice to parents, Quebec would move closer to other countries with highly developed family policies.
Paul Daniel Muller is the President of the Montreal Economic Institute.