The importance of childcare

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This is evident from last week’s report of the Human Rights Commission, which found much to show that “discrimination towards pregnant employees and working parents remains a widespread and systemic issue which inhibits the full and equal participation of working parents, and in particular, women, in the labour force”.

You can see this from a largely social perspective – accommodating the rising aspirations of women and ensuring they get equal treatment – or, as is the custom in this more materialist age, you can see it from an economic perspective.

By now we – the taxpayer, parents and the young women themselves – have made a hugely expensive investment in the education of women. It accounts for a little over half our annual investment in education.

If we fail to make it reasonably easy for women to use their education in the paid workforce, we’ll waste a lot of that money. Our neglect will cause us to be a lot less prosperous than we could be.

Of late, economists are worried our material standard of living will rise more slowly than we’re used to, partly because mineral export prices have fallen but also because, with the ageing of the baby boomers, a smaller proportion of the population will be working.

They see increased female participation in the labour force – more women with paid work, more working women with full-time jobs – as a big part of the answer to this looming catastrophe.

But how? One way would be to impose more requirements on employers, but in an era where the interests of business are paramount, politicians are reluctant to do that. Make employers provide childcare or paid parental leave? Unthinkable.

So, for the most part, it’s been taxpayers who’ve picked up the tab. Government funding of childcare – now officially known as ECEC, early childhood education and care – has reached about $7 billion a year, covering almost two-thirds of the total cost. The cost of government-provided paid parental leave is on top of that.

Governments’ goals in childcare have evolved over time. In the ’70s and ’80s, the focus was on increasing the number of places provided. In the ’90s, the focus shifted to improving the affordability of care, with the introduction of, first, the means-tested childcare benefit, and then the unmeans-tested childcare rebate. Under the Howard government, the rebate covered 30 per cent of net cost, but Labor increased it to 50 per cent.

More recently, increased evidence of the impact of the early years of a child’s life on their future wellbeing has shifted governments’ objectives towards child development and higher quality, more educationally informed, childcare. This includes getting children to attend pre-school. Linked with this has been a push to raise the pay of childcare workers.

The federal government asked the Productivity Commission to inquire into childcare and early childhood learning. Last week it produced a draft report. I suspect the pollies were hoping the commission would find a way to reduce regulation of what they kept calling the childcare “market”; thus improving workforce participation and “flexibility” while achieving “fiscal sustainability”.

If so, they wouldn’t have been pleased with the results. The main proposal was the childcare benefit and rebate be combined into one, means-tested subsidy payment paid directly to the childcare provider.

This would involve low-income families getting more help while high-income families get less. There would be a small additional cost to the government, but this could be covered by diverting money from Tony Abbott’s proposed changes to paid parental leave. It was “unclear” if his changes would bring significant additional benefits to the community.

The commission wasn’t able to claim its proposals would do much to raise participation in the labour force, mainly because our system of means-testing benefits – which works well in keeping taxes low, something that seems to be this government’s overriding goal – means women face almost prohibitively high effective tax rates as their incomes rise, particularly moving from part-time to full-time work.

Like the Henry tax review before it, the commission just threw up its hands at this problem. Even the commission couldn’t bring itself to propose major reductions in the quality of education and care. Sorry, no easy answers on childcare.

Ross Gittins is economics editor.


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