Currently, ASX-listed childcare chains are facing tough trading conditions. Childcare providers have empty places in their centres, as continuing growth in the number of childcare centres outpaces demand.
Parents struggling to find affordable, conveniently located day care places for their preschool-aged children might be surprised to hear this, particularly as childcare costs and availability are major barriers to women’s employment. One in four regions are ‘childcare deserts’ with three children for every available childcare place.
So, what’s going on?
Lots of factors are at play in the creation of these seemingly contradictory problems. However, one significant feature of Australia’s childcare system stands out as the main culprit. This is the market logic that underpins and shapes the system, a logic that is intended to optimise provider competition and consumer choice.
For-profit childcare providers now dominate the childcare sector, making up more than half of all services and over two thirds of long day care providers. Community-based and other not-for-profits and a small number of government-run services are in the minority.
For-profit owners and investors, in particular owners and investors of some of the largest childcare chains, operate in this industry to generate returns on their investment. In theory, there is nothing wrong with that. But there is a mountain of evidence from multiple recent inquiries and reports strongly indicating the profit motive is at odds with the Australian Government’s goal for a universal, affordable, high-quality ECEC system.
Reliance on the market to distribute services has meant there are many areas where families are without any access to early childhood education and care at all. Not surprisingly, private for-profit providers do not open childcare centres in areas where they cannot readily make a profit. At the same time, there is an oversupply of childcare services in some more affluent areas in large cities.
Not only is the market approach failing to optimise consumer choice, valuable public funding for our children’s education and care is being siphoned off to private profit.
Modelling shows it makes better economic sense to invest public funds on not-for-profit and government services. Diverting current funding away from for-profit childcare providers, would produce at least $1.2 billion a year in broader economic benefits. It would also lead to estimated additional employment of 18,000 positions in 2026 and it would increase revenues for governments at all levels by over $360 million.
The strategy of relying on private-for-profit providers to manage the potentially conflicting goals of giving priority to children’s well-being and meeting shareholder expectations has failed.
For-profit provision has been shown to heighten risks that the best interests and wellbeing of children will not be prioritised, including increasing risks to quality, safety, equity and inclusion. Overall, for-profit providers are less reliable, provide poorer quality education and care, and create poorer jobs with poorer training and work environments for early childhood educators than not-for-profit services.
Not-for-profit services outperform for-profit services by providing higher quality education and care (generally at lower prices), paying higher wages, employing more experienced staff, retaining staff longer and by being more likely to deliver ECEC in under-served areas and disadvantaged areas.
A new approach is needed
Recent reforms to early childhood education and care are intended to address issues of access, equity, quality and safety. The Commonwealth, with the states and territories, has made efforts strengthen compliance with quality and safety standards, raise low wages and control prices to support affordability.
Yet the core problem of ongoing reliance on a failed market model remains.
Alternative models for Australia’s essential early childhood education and care system must ensure that all children can benefit from the positive long-term outcomes that arise from early childhood education and care. Access to affordable, high-quality care services is also critical for enabling parents’ workforce participation and for economic equality for women.
The federal government has an opportunity to build a truly universal high-quality system now.
In the wake of multiple system reviews and recent scandals exposing the sexual abuse of children in care, the idea of greater market stewardship is dominating discussions about potential change. In short, market stewardship means establishing greater oversight of the market and putting rules and incentives in place to steer provider behaviour in the right direction to prioritise children’s wellbeing.
But a market stewardship approach won’t directly tackle the fundamental problem. Put simply, stewardship doesn’t remove the conflict between profit maximisation that drives the largest for-profit childcare providers and making sure public funds go to achieving a high-quality, safe system of early education and care for all families with young children.
For-profit early childhood education and care has come with unacceptable costs. Propping up the current market system is not the answer.
A successful transition to a universal high-quality education and care system requires secure and adequate investment in children’s wellbeing and futures. A universal ECEC system reshaped as a public good should not leak valuable public funding to private profit.