Wednesday, May 24, 2006

Taking childcare to market

In the parlance of modern politics, childcare is a barbeque-stopper: an issue that gets the largely disengaged suburbanite masses talking. Presumably these are the same people who spend much of their time talking to colleagues around water-coolers.

Yet again it's in the news, this time because of the 'problem' of non-working parents taking childcare places at the expense of working parents. Ho hum, yet another way to talk but not act.

It frustrates me that the issue has become a 'we need more Government funding' issue, along with health, education, criminal justice and just about every other manifestation of the welfare state. This is one issue where a market-based solution, rather than a government-centred one, would achieve plenty.

Here are the important facts, as I see it:

1. More and more parents are seeking childcare for their infant children so that these parents can re-enter the workforce.

2. Childcare workers are chronically underpaid.

3. The government pays a large subsidy to childcare centres, thereby artificially lowering the price to the consumer (ie, parent). Without this subsidy, childcare centres cannot charge competitive prices.

4. Strict regulation of the sector has meant that childcare providers have been slow to expand their operations.

And the solution? Let the market set the price. With high demand and limited supply, the price will inevitably rise significantly. This was have several effects.

Firstly, more childcare providers will be willing the enter the market and expand due to the profits to be made.

Secondly, some parents will find the price too high and instead choose to take care of their infant at home. Other parents will be prepared to pay. Logically, the determining factor will be whether the price of a day's childcare is higher or lower than the pay from a day's work for the parent who is otherwise taking care of the child, with a premium factored in for the benefit derived from spending a day with one's child. Or if they really hate the kid, a premium for spending the day with work colleagues instead.

Thirdly, firms responding to the skills shortage will increasingly introduce their own childcare services, either provided on-site or subsidied by the employer, in order to attract and retain staff.

Fourthly, childcare workers will find their pay increasing dramatically. Without an artificial cap on prices, parents will be charged the true value of providing the service including a decent income for the professional taking care of their offspring.

The problem that has pervaded the debate so far is that most critics of the status quo seek to have their hundreds-and-thousands topped cup-cakes and eat them too: they want low prices, high wages and abundant places.

It's a fool's paradise, and an impossibility, too.

12 comments:

Peter Billing said...

Howdy A,

Can't agree with much of this. Your third outcome is about right, though and probably the best solution for larger companies, but of course many people don't work for larger companies.

The reason the government subsidises this industry is because it wants people to return to work. But this is where your argument falls down.

You're assuming that most people return to work after they've had a kid because they love work. Not the case. Even the most ardent "live to work" types almost invariably find they love the house wife role, at least for a while. Most return only from economic necessity. So the sums they'll do is to compare the net they'll earn after subtracting child care costs and see if it adds up on that level.

Certainly there are folks using child care as a form of respite and I'm inclined to agree with those saying that's a bit cheeky. If there was a way to subsidise those who need it without everyone simply having access to it...

gee, can anyone say "means testing"!

Daniel said...

Hey Ari

You mention that the sector is very regulated. Now some of this may impact on your economic model but I would insist that a lot of it has to stay because it concerns the care of children. If that has the side-effect of making it more expensive to operate (because of properly trained staff and safe and secure facilities) then so be it.

Antonios said...

Point three doesn't make sense:

3. The government pays a large subsidy to childcare centres, thereby artificially lowering the price to the consumer (ie, parent). Without this subsidy, childcare centres cannot charge competitive prices.

Just because the government pays a subsidy to a child care centre does not mean that the child care centre cannot raise or lower prices as they see fit.

Private health insurance companies raise and lower prices even with the subsidy they get.

Why wouldn't a child care centre do the same?

Subsidies do not make companies less competitive if all companies offering similar services are paid the same subsidies.

Anonymous said...

Why the hell do you people care so much about childs?

Slurry, don't give up the dream, you'd make a damn fine journalist not least of all because you care about these things.

And oh yeah streetmeats, before you 'sic' me for the use of "childs" above, stop taking yourself so seriously and visit www.postmoronic.blogspot.com


Love from 666 Lord Cheese 666

Daniel said...

Re: The comment above

Do you ever get the feeling that someone participating in your conversation is actually involved in another conversation entirely but has accidentally slipped into yours? Other than the word 'childs' the rest of it seems to belong to another thing entirely.

John Lee said...

insulting people and calling them 'streetmeats' ain't the best way to get traffic for your blog...

Mothy said...

Ari,

Fundamental flaw - by making childcare something accessable only to those who can afford it you relegate one wage earner in the family (either mother or father) to a continuation of their underprivaledged economic status through inability to work due to carer's commitments.

You've removed the incentive and potential to improve on ones lot in life that so many people are so proud of.

What I want to see is a release of some public data from the Departments of Community Services et al showing the statistics on complaints and investigations of community childcare centres versus corporate ones. For-profit childcare has been the other media football of late, and I would like to run a comparison of complaints and incident reports in the community sector versus the corporate listed sector, as I think that'd shed some interesting light on the debate.

Pete B is on the money - means test childcare allowances. Revert to old theory - Let those who can, pay, and help those who can't.

Tk.

Anonymous said...

Dear Squares (Daniel and John Lee),

I am not real enough to be the authour of www.postmoronic.blogspot.com.

I am a mere fanboy/Lord.

I defer to the realness of IOYC, rightful authour of postmoronic.

Instead of being policy-wonks/wanks maybe you should check it out and learn how to be more entertaining/less square, what with six blogs between you lol.

Love from 666 Lord Cheese 666

Anonymous said...

What is that guy talking about?

Anyway, I agree entirely Ari.

Daniel said...

And you wonder, Ari, why I moderate comments...

Anonymous said...

Baphomet be blessed, take a chill-pill Danny Boy.

Slurry's anti-censorship, he told me so.

Maybe that's why he has this film on his computer: http://www.oflc.gov.au/resource.html?resource=99&filename=99.pdf

As a fan of Transformers The Movie, I think you guys take yourselves to seriously.

Remember...

You got the touch
You got the power

When all hell's breakin' loose
You'll be riding the eye of the storm

Orson Welles up ya bum!

Love from 666 Lord Cheese 666

Anonymous said...

"too"

spelling

whateverthefuck, i'm tired

- 666 LC 666