When Times are Tough, Private-sector Daycare Proves its Worth

Education, Frontier Centre, Role of Government

Along with plastic bags and bottled water, the City of Toronto has no love for private-sector daycare, either. While it’s despised by academics, unions and many politicians across Canada, entrepreneurial child care nonetheless fills an important and necessary role for parents, children and taxpayers.

Those Toronto parents who chose for-profit daycare over the alternative are, no doubt, thankful their centres are still open for business, while the 57 municipally run centres are shuttered. Having essential services provided by non-unionized staff can be a pleasant relief.

In Quebec, where the bulk of the province’s $7-a-day centres are unionized, daycare workers frequently exercise their ability to disrupt family lives in the pursuit of more favourable contracts. And provincial early learning adviser Charles Pascal’s plan to combine all-day kindergarten with wraparound daycare in public schools will undoubtedly lead to similar labour disruptions in Ontario.

Yet, the advantages of private-sector daycare go beyond its role as a release valve for union plans to control the child-care industry.

By far the biggest complaint with respect to daycare is the lack of spaces. Demand and supply imbalances are typically best handled by the private sector. In daycare, however, many governments actively discourage entrepreneurs from creating new capacity to meet this need.
Since 2005, Toronto has deliberately stifled the private sector. This is done by denying municipal subsidies – the mother’s milk of the daycare business – to any new for-profit centre. Ottawa and Sudbury have similar moratoriums. Saskatchewan has a permanent ban on all subsidies to any for-profit centre; it’s no coincidence that Saskatchewan also has the lowest level of child-care coverage in the country.

By comparison, Alberta’s policy of providing daycare subsidies and grants equally to for-profit and non-profit operators led directly to the creation of 9,400 new spaces last year. And Alberta’s subsidy cost per daycare space is a third that of Saskatchewan.

All this should make perfect sense. Given equal access to government funding, nimble entrepreneurs are more likely to open new spaces quicker and more cheaply than non-profit operations saddled with volunteer boards of directors. If you want more daycare spaces, let entrepreneurs do their thing.

Then again, foes of private-sector daycare seem to have little interest in meeting parental demands. To them, child care is an ideological issue.

According to a 2008 report prepared for Toronto by economist and private-sector daycare critic Gordon Cleveland, “child-care markets fail to perform like [competitive markets] for two reasons. First is the existence of a public interest in child care. Second is the inability of parents to make perfect judgments about the quality of child care on offer.”

There are countless markets in which a public interest may exist but private-sector participation is desirable – health care, education, road construction, food supply, banking and on and on. Regulation is how sensible people ensure that the public interest in quality service and supply is maintained at a reasonable cost. It’s worth noting that for-profit and non-profit child-care centres face identical regulations in all jurisdictions.

Mr. Cleveland’s second point suggests that parents are incapable of making appropriate choices for their little loved ones when it comes to daycare. If this is the case, how can we countenance these same parents making other decisions on behalf of their offspring at other times? The real problem is that, left to themselves, parents frequently choose private-sector daycare despite the opinions of academics such as Mr. Cleveland.

In fact, for-profit centres often provide crucial service ignored by non-profits. In Toronto, 72 per cent of all centres are non-profit, but these provide only 60 per cent of infant spaces, which are more difficult and expensive to deliver. The same phenomenon occurs with special-needs children in other jurisdictions. Given a monopoly in subsidies, non-profits tend to cherry-pick the easiest children and leave the rest for the nasty private sector.

The animus shown for-profit daycares by local and provincial politicians serves no purpose for parents or their children. Rather, it advances the interests of advocates of union-run, government-controlled, academically sanctified, non-profit child care. While such a plan failed nationally, it’s now being implemented by stealth in many municipalities, regardless of what parents think.

Peter Shawn Taylor is the author of the Frontier Centre for Public Policy report Little Crèche on the Prairies: Evaluating Child Care Policies in Manitoba, Saskatchewan and Alberta.

(Originally published in the Globe and Mail, July 7, 2009)