Depressing is the only word for it. A week before the government’s new childcare arrangements kick in – reforms that were far from perfect but were designed to deliver some welcome financial relief to Australian families – we learn that, lo, many childcare centres are raising their fees.
A report in The Australian on Monday by Rick Morton reveals that some providers have increased their fees by as much as 10 per cent, or $12 a day. Other operators have already raised their prices twice this year by between 8 and 12 per cent in total. It means that much of the mooted financial gain families were supposed to derive from the government’s reforms is hypothetical.
A spokesperson for the education minister, Simon Birmingham, disagrees with this though. “While parents might pay 50% of their current fees, they’re likely to get a higher rate of subsidy (up to 85%) in future. So, even if the fees are higher, the subsidies are higher and therefore the out of pockets go down.”
Childcare prices rising to match subsidies is not entirely unprecedented.
Rick Morton reports that in the past decade childcare fees have risen by 80% and the single biggest price hike, 14.6%, came in 2009 after the Labor government increased its subsidy from $4354 to $7500 per family, per year.
The reality is that in the past decade while the government has been spending more than ever subsidising childcare, to the tune of $10billion a year, it has not become more affordable for families and it has certainly not become more lucrative for the educators who are paid dismally. In many cases it seems providers have simply profited from the government’s open wallet.
Reports today suggest this history looks set to repeat itself, though as Executive Director of The Parenthood, Alys Gagnon, told Women’s Agenda fee hikes have been commonplace so might not be wholly attributed to the new arrangements.
“The fee rises probably were predictable but whether they are a direct result of subsidy is hard to know,” Gagnon says. “Would the fees have gone up more without the new subsidy? I don’t know.”
The minister for education Simon Birmingham says that the capped hourly rates will place downward pressure on prices.
“Our expectation is that the hourly rate cap we’re introducing will give Australians a benchmark price that over time further helps to constrain fee increases and makes this reduction even more significant to their hip pockets on top of the estimated $1300 a year better off that families will be per child because of our reforms,” the minister said.
“Child care providers have been telling us they have an oversupply of places meaning more competition for families. More competition should mean more choice and lower costs for parents so families don’t need to wear outrageous fee increases.”
Birmingham expects nearly one million Australian households will be better off under the new arrangements and encourages parents to be discerning about fee rises.
“Families will rightly be cynical of child care providers trying to rip them off. As difficult as it can be to switch services, I’d encourage any families being ripped off consider what alternatives may be available to them,” he said.
It’s a valid point but changing centres – particularly in capital cities with more than one child – is not always easy or possible. Getting the right days, for the right aged children, in a location that is feasible at a coast that is affordable is a big ask.
As a user of childcare rising fees are frustrating enough, but as an advocate for women’s workforce participation and universal access to quality early childhood education and care it is maddening.
Childcare is not just a piece in the puzzle for working families – it determines the whole shape of the puzzle in many instances. Cost is a genuine deterrent – in many cases it’s just not worth families having two parents working additional days.
Two economists have shown modelling in the past week alone which demonstrates this. And while theoretically the impact of these changes ought to be gender-neutral we know that it isn’t. When these decisions are being made, it is overwhelming women who step back from work.
Australian National University Tax and Transfer Policy Institute director Robert Breunig told The Australian childcare prices directly influence women’s workforce participation.
Gagnon says anecdotally it is already apparent that women are winding back their working days because of the new arrangements.
“For many and most families the reforms will be of benefit. Most people will have a greater level of subsidy under the new regime but there are a quarter of a million families who will be worse off, either because of the activity test or the means-test.”
Because of the siding scale – where the subsidy paid is based on household income – Gagnon says women are planning to drop hours or days at work to lower the household income and optimise the cost of childcare.
Given the government’s stated objective of raising female workforce participation and its G20 commitment to narrowing the gender gap by 2025 it is perplexing that a major reform that was as hard fought and as long in the making as childcare reform could create a disincentive for women to work more.
But the combination of ever-increasing childcare fees and the introduction of a means-test for subsidies do create a disincentive for some families.
In Australia an estimated two-thirds of long-day care centres are run by for-profit operators.
Last year in an interview with the education minister Simon Birmingham I asked whether he believes there is any conflict of interest in the provision of early childhood education being delivered as a business.
“There need not be a conflict of interest as long as they’re well regulated, as long as they’re meeting high quality standards, and as long as there’s real transparency around pricing and so on,” he said. “Another part of our reforms is to put in place a rate count mechanism that will ensure that subsidies in future are paid against an efficient price, an efficient rate, which we hope will change some of the behaviour around pricing in the sector too.”
From my vantage point until the day early childhood education and care is provided in a universal fashion – the same way school is – price hikes are inevitable. And as it stands it certainly appears that those price hikes aren’t necessarily benefitting parents, kids or educators.