As expected, childcare workers have rallied against an upcoming Productivity Commission (PC) report into childcare, which is expected to recommend that the Abbott Government simplify childcare subsidies into a single payment that can be spent on either traditional childcare services or stay-at-home nannies, with subsidies also means tested based on a family’s income.
According to The Australian, the acting national secretary of United Voice, David O’Byrne, which represents childcare workers, has slammed the proposals, claiming that the system cannot afford nannies:
“we strongly disagree with extending government subsidies to cover nannies … The system cannot afford them.
“Not only are they too expensive, but it is also inappropriate for taxpayers’ money to be spent on unprofessional and unregulated services in such a critical area as children’s education and care.
“The evidence is overwhelming that the quality of early childhood education and care is critical for children, as well as for women’s workforce participation.’’
Personally, I view Mr O’Byrne’s arguments to be self-interested bunkum. As argued yesterday, extending childcare subsidies to nannies offers many benefits, both to parents and the Budget.
First, it enable a family with multiple young children to make their subsidy stretch further than sending each child to childcare, potentially saving the taxpayer money whilst also improving workforce participation (by making working more profitable).
Second, it would improve flexibility, providing shift workers that work outside traditional childcare hours with enhanced access.
Finally, it would free-up traditional childcare places, opening up these spots to others, whilst also placing downward pressure on fees.
It is perhaps the last point that has United Voice up in arms over the proposals, since it would reduce demand for their services and reduce their ability to charge high fees.
The Australian’s Judith Sloan agrees with my viewpoint, penning the following today:
There is no doubt centre-based formal childcare does not suit everyone. Workers with long hours, workers with erratic shifts, workers with several young children: for them, having a nanny come to their own homes surely beats a childcare centre.
It makes sense to extend childcare subsidies to nannies, something that may not cost the government any more money as parents withdraw their children from centres and employ nannies instead.
Parents’ advocacy group, The Parenthood, has also rallied against the proposal to means test childcare subsidies, claiming that it is fundamentally unfair and would reduce workforce participation:
…a means test would adversely affect women. “This is a kick in the guts to Australian parents,” she said.
“The Parenthood told the PC in our submission that up to 75 per cent of parents in paid work would either stop work or reduce their hours if the childcare rebate was means-tested.
“This is supposed to be about ‘productivity’.
“Means-testing the childcare rebate will destroy the productivity of working women in this country and hurt the economy.’’
I disagree. As argued yesterday, it is lower second income earners that face the highest effective marginal tax rates from paid work, whereas those on higher incomes are less effected. As such, it makes sense to target childcare subsidies towards those on lower incomes, in turn increasing labour force participation at the lowest taxpayer cost.
Again, Judith Sloan agrees:
…means-testing the childcare rebate… makes sense and brings this payment into conformity with virtually all other government payments.
The reality is that women with high incomes are very likely to return to work without the incentive of the rebate. They have high levels of general and specific work skills and it makes perfect sense for them to return to work lest they face the penalty associated with a significant career interruption on future earnings.
The alternative is to use the savings to make sure children from disadvantaged backgrounds can attend childcare centres and undertake some structured early childhood learning. The evidence at least backs up this strategy.
To his credit, Prime Minister Tony Abbott has left the door open to reform, which hopefully means that meaningful change might occur in this area.
