A Workable Solution To the Daycare Crisis in Canada
Canadians should be much more concerned about the ability for parents to secure daycare services. The Canadians who should be most concerned are baby boomers and seniors. They should be screaming for policies that will favour families having children. Children are their future provider of services and welfare entitlements that future seniors wish to consume, and their parents are such providers right now. More supply of services will mean lower prices, and more taxpayers means increased ability to fund welfare entitlements. If we continue on our current path, services like old age homes, home care, home cleaning services, taxis, and other services might simply become very expensive since there will be few to produce them relative to those who need them. And if there aren’t lots of people producing in the economy, what happens to the value of investments when the companies have nobody to supply to?
The immediate cost to society with the daycare shortage is the lost production by todays higher-income parents who can afford daycare but can’t secure it. They aren’t producing the goods and services society demands when they are home for six months. That means fewer doctors, teachers, etc. providing relatively scarce services.
The policy goals surrounding daycare should be twofold:
- To enable and incent parents, particularly those with the largest contributions to society, to stay in the workforce so they can produce goods and services we need now and pay tax.
- To enable families to achieve their lifetime goals, including having enough funds to raise a family comfortably and secure their own financial future.
Daycare shortages arise because:
- most daycares are non-profit, receiving funding from various sources of fundraising and government. They have an affordability mandate, and the boards are usually dominated by parents - so once you have a space you have an influence to keep the price below the price that clears the market.
- a for profit center cannot charge the market clearing price and operate a daycare because their costs are too high relative to a nonprofit.
- to keep the costs down, non-profit daycares pay their staff below the price that would clear the market. So there is always a shortage of daycare staff, and the staff tend not to stay in the field very long because of the relatively low levels of pay compared to other opportunities they have. And in BC, daycares compete with the StrongStartBC program for qualified staff.
Here is the solution, which you might find shocking, because it is not Universal Daycare for Everybody. Remove daycares from the non-profit sector. Eliminate all the tax-benefits associated with donating to daycares. Eliminate their ability to raise funds with gambling licenses etc. Eliminate government funding to daycares.
Daycare is affordable if the market is cleared at the current price (i.e. no waiting lists, no empty spots). If there is relative scarcity, those who value it most will pay for it. If we want more people to have affordable daycare or more children, we just need to write them subsidy cheques. If we want more low-income earners to have spots, write them bigger cheques,or don’t write cheques to high-income earners (in which case, they may have fewer children). The supply of daycare will respond.
Parents will at least have a choice over the price and quality of daycare instead of taking months off work hoping they win the daycare wait-list lotto. Daycare worker wages will respond as well. Parents benefit, workers benefit, society benefits, and children benefit.The real problem is then what to all the previous donors to daycare societies do with their charity?
I am sure some readers be thinking “you can’t run a daycare like a business. Think of the nasty profits made at the expense of the children”. Who is going to profit from running a daycare? Typically, a manager who will run the facility in accordance with standards and customer preferences, hire the staff, keep the costs down, and work part time with the children. If you have a kid in daycare, you know someone like this already.The “Daycare Crisis” is easily solved by markets. Eliminate non-profit daycares and it will work. Markets can solve this problem easily.