Social Policy in Ontario

The folly of universal childcare

Posted on August 12, 2015 in Child & Family Policy Context

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NationalPost.com – Full Comment
August 11, 2015.   Stephen Gordon

The Conservatives’ campaign promise to introduce yet another boutique tax credit — for home renovations this time, although that scarcely matters — is almost indefensible as economic policy. Of course, if the past is anything to go by, the irritation expressed by economists will be more than compensated by its popularity with the voters.

This is probably not the most direct way of introducing a column about public daycare. But it turns out that the parallels between boutique tax credits and public daycare are surprisingly close.

I don’t think anyone seriously believes that a home renovation project is a public good that requires a government subsidy, but you do hear such arguments made about daycare. Publicly provided daycare is often compared to health insurance and K-12 education. Governments provide health insurance and K-12 education, so why not daycare as well? If you reject public daycare, aren’t you also rejecting medicare and public schools? The answer to that latter question is “no.”

The argument for public health insurance is based on a market failure. A highly simplified version of the story goes like this: if insurers can’t assess the risks for individual clients, then its premiums will be based on the average risk of the population. The problem is that low-risk individuals will find it cheaper to self-insure — instead of paying for insurance, they would simply pay for medical costs as they come up. But if low-risk clients stop paying for insurance, insurers would be obliged to charge higher premiums in order cover costs, thus driving away even more clients. In the end, the market for health insurance would simply disappear.

Publicly provided daycare is often compared to health insurance and K-12 education, but they have nothing in common

You wouldn’t use this story for K-12, as the market for education flourished long before governments got involved. Instead, the argument for universal K-12 revolves around the proposition that a basic level of education is a public good, especially in democratic countries. Democracies — and societies — work better when citizens are literate, numerate and share a certain minimal base of common knowledge. It’s not enough for you to be able to understand the issues; good governance requires that a majority of voters be informed enough to make good choices.

Neither argument applies to daycare. Firstly, there’s already a functioning market, and the fact that many people might wish that the price were lower is not in itself evidence that the market itself is dysfunctional.

Secondly, it’s hard to see how the public good argument for K-12 can be extended to daycare. There’s certainly evidence suggesting that early childhood education can offer significant benefits for children from high-risk families. But there’s little reason to believe that these results can be extended to all children, and some reason to think the opposite is true.

A prominent study by the University of Toronto’s Michael Baker, MIT’s Jonathan Gruber and UBC’s Kevin Milligan on the effects of Quebec’s subsidized daycare model finds that, “the evidence suggests that children are worse off by measures ranging from aggression to motor and social skills to illness.” Worse, the authors “also uncover evidence that the new child care program led to more hostile, less consistent parenting, worse parental health and lower-quality parental relationships.”

The regressive nature of public daycare — or, at least, Quebec’s version of it — is another area where the comparison to health insurance and K-12 education breaks down. A study of Canada’s system by New York University’s Sherry Glied finds that “universal, publicly-funded health insurance is modestly redistributive. Putting $1 of tax funds into the public health insurance system effectively channels between $0.23 and $0.26 toward the lowest income quintile people, and about $0.50 to the bottom two income quintiles.” And to the extent that wealthy families have a tendency to opt out of public schools, lower-income families benefit disproportionately more from public funds spent on the K-12 system.

That’s not the case for the Quebec daycare system. Mathieu Grenier wrote his master’s thesis at the Université du Québec à Montréal on the topic, and found that utilization rates in the highest income quartile were twice as high as those in the lowest income percentile. Several potential explanations present themselves. For one thing, the Quebec system is overwhelmingly geared toward parents who work regular business hours, and lower-income parents are less likely to have nine-to-five jobs. But whatever the explanation is, there’s an unpleasant bait-and-switch element to the Quebec model. In theory, the plight of children from low-income families was a principle motivation for the program; in practice, children from low-income families are the most under-represented.

This brings us back to boutique tax credits. Carleton University’s Frances Woolley once wrote about why they are so popular among voters, even though they are so roundly criticized by economists. Tax credits, she writes, “appeal to people’s sense that they deserve a break, validate their choices and reaffirm their sense of self-worth.”

This analysis may as well be extended to public daycare. If it were about providing financial support to defray the costs of raising children, this subsidy wouldn’t be contingent on parents’ choosing to work outside the home. It makes much more sense to see it as a way of ratifying a particular set of decisions.

As any server will tell you, people like to be told they made the right choice. And they’ll reward you for it.

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Tags: child care, ideology, participation, poverty

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