Education & Training

childcare

Giving kids the best start we can, in a way we can afford

Expanding access to childcare in Australia is not just a social imperative but an economic necessity. Affordable and accessible childcare enables parents, particularly mothers, to participate in the workforce, thereby boosting economic productivity and growth. However, achieving this expansion requires addressing significant challenges, including labour force shortages within the childcare sector.

Economic imperatives for expanding childcare access

Boosting workforce participation

High childcare costs often deter parents from working or compel them to reduce their working hours. For a couple with children in full-time care, Australia ranks second in the world for childcare costs, with families spending approximately 60% of average earnings on gross childcare fees.

After accounting for subsidies from the government, families spend about 26% of average earnings or 20% of net family income on early learning^[1]. This is almost double^[2] the average amongst developing countries.

The issue here is two-fold: because the unsubsidised cost is high, the cost of the subsidies (to make childcare access attainable) is also high.

We’re paying huge amounts, subsidising huge amounts, and still paying more.

By reducing these costs, more parents can participate in the labour market, increasing the overall labor supply and economic output.

Enhancing productivity

With more parents in the workforce, businesses benefit from a larger talent pool, leading to better job matches and increased productivity. The Australian government has recognized this link, with Treasurer Jim Chalmers unveiling a $900 million National Productivity Fund^[3] to encourage state and territory governments to implement productivity-enhancing reforms. Expanding childcare access is a critical component of these reforms, as it directly influences workforce availability and efficiency.

Return on investment

Investing in childcare yields substantial economic returns. Research by The Australia Institute indicates that increased public funding for childcare is nearly 20 times more effective^[4] at creating jobs than a tax cut of the same size. This is because such investment not only creates jobs within the childcare sector but also enables parents to work, thereby contributing to economic growth and increased tax revenues.

Addressing labour force shortages in the childcare sector

It’s all well and good to create jobs in childcare, but where are all the people to fill them?

The expansion of childcare services is hindered by significant workforce shortages. A survey by the Australian Childcare Alliance^[5] revealed that half of the early childhood education and care providers had been forced to cap enrolment numbers, withholding a total of 11,123 places from families within a single week due to staffing shortages. To overcome these challenges, several strategies must be implemented:

Improving compensation and working conditions

Low wages and poor working conditions are primary factors contributing to workforce shortages. Many early childcare educators receive little more than the minimum wage of around $24 an hour, despite requiring at least a diploma qualification or a bachelor’s degree. Addressing this issue is crucial for attracting and retaining qualified staff.

Recent initiatives, such as Goodstart Early Learning granting a 10% pay rise to 16,000 workers, supplemented by an additional 5% at the end of the next year, are steps in the right direction.

Enhancing training and career pathways

Providing clear career progression opportunities and access to professional development can make the sector more attractive. The South Australian government’s Early Childhood Workforce Strategy, which includes offering scholarships worth up to $25,000 for university qualifications and $7,000 for diplomas in early childhood education, aims to address anticipated workforce shortages by supporting the training and development of new educators .

Recruitment and retention initiatives

Innovative recruitment strategies are essential. Some remote towns in Western Australia are offering annual salaries of $150,000 along with free food and accommodation to attract childcare workers. Additionally, targeted recruitment campaigns and improving societal perceptions of careers in early education can help attract new entrants to the profession.

Government support and policy reform

Government intervention is critical in addressing systemic issues. The Australian government is considering plans for a flat childcare fee to counteract high costs, which could significantly impact national productivity and growth . Furthermore, the Productivity Commission’s recent report suggests abolishing the “activity test” that limits subsidies to working or studying parents, positioning early childhood education and care as a crucial tool for child development, particularly for those from low socioeconomic backgrounds .

How can we fix the subsidy scheme?

To effectively expand childcare access and address associated challenges, a multifaceted policy approach is necessary:

Abolishing the Activity Test

Removing the activity test, which ties childcare subsidies to parents’ work or study status, would allow more children, especially from disadvantaged backgrounds, to benefit from early childhood education. This approach recognizes the importance of early education in child development, irrespective of parental employment status .

Establishing fee caps and regulating fee increases

Implementing fee caps and regulating fee increases can prevent childcare costs from escalating beyond the reach of average families. The Australian Competition and Consumer Commission’s inquiry into childcare prices suggests that market forces alone have failed to meet community expectations and government objectives for childcare services, indicating the need for regulatory intervention.

Direct investment in workforce development

Allocating funds specifically for the recruitment, training, and retention of childcare workers is essential. This includes offering scholarships, providing professional development opportunities, and improving wages and working conditions to attract and retain qualified staff.

In the short-to-medium term, migration may be capable of filling labour force shortages. It is important to not rely on this too heavily, as it is an unreliable long-term fix for underlying structural issues. But it can play a supporting role, if used in conjunction with other more direct measures.