Let’s get investment in early learning and childcare right

As an independent consulting economist running Alexander Economic Views, I have greater flexibility to write commentary on issues during elections than in the past when I was an employee of large businesses. My perspectives are my own and my views on public policy are based on evidence-based research with no partisan considerations. I find that during the current federal election that there are parts of each political party platform that I like and dislike. I just want policies that improve prosperity and living standards. Now to the matter I would like to discuss. 

The pandemic has revealed several areas where Canada underinvested in prior years, including childcare. For the last decade and a half, I have been making the case that early learning and childcare (ELCC) is an economic issue and a priority. Investment in ELCC creates benefits not only to children but also to parents, the economy, governments, and society. It can be considered social infrastructure. 

Children benefit from ELCC because the brain develops significantly before entry into primary education. Children that go through a high-quality program delivered through a curriculum provided by a trained educator are more school ready with stronger literacy and numeracy skills and better behavioral and social skills. They are at less risk of requiring special education classes to address developmental or learning challenges later in life. 

Parents benefit from increased labour force participation, particularly for women. ELCC also reduces parental stress that can impact their work performance, just ask parents who had to work with young children at home during the pandemic. The higher labour force participation and worker productivity raises household income.

The economy gains from more workers at a time when labour is becoming scarcer due to an aging population. Empirical studies show that the return on investment of ELCC is very high, with returns ranging from $1.6 to $5.8 for every dollar investment. 

The economic return on investment means that outlays on ELCC generate additional tax revenues to government, something we will need post pandemic to help balance the government books and provide additional funds for future demand for key priorities – like health care. 

Studies also show that the children from disadvantaged households benefit the most from access to ELCC. This can sometimes lead to the suggestion that public support should be targeted to those kids. However, research shows that programs with representation of children from all backgrounds raises the skills development of the participants. Since children and parents from disadvantaged backgrounds benefit most, investment in ELCC can help to reduce inequality. In effect, ELCC reduces the barriers to success.

Given the potential gains, it is shocking that Canada has underinvested in ELCC for decades. This is evidenced by the lower enrollment, duration and share of ELCC delivered by accredited educators in Canada relative to its international peers. 

Which raises the question of why this underinvestment has happened? I think there are three reasons, and there is hope that they will be overcome.

First, investing in national childcare is expensive and the returns are not fully realized during a single political term. The good news is that the major political parties in the current federal election are all supporting increased investment in childcare in their platforms.

Second, ELCC falls under the mandate of provincial governments, which have the daunting task of also funding health care and public education.  Lack of sufficient provincial funds has been an obstacle for large scale investment in childcare. This obstacle can be surmounted, as evidenced by the eight provinces so far supporting federal engagement in funding ELCC, as committed to in the last federal budget.  Cooperation between provinces and the federal government is essential for adequate funding and delivery of a high quality ELCC system.

Third, my experience prior to the pandemic has been that the importance of early learning and childcare did not resonate with many Canadians due to a lack of appreciation of what early learning and childcare delivers. It is often perceived as institutional babysitting when it is really about pre-primary school education. This misperception also leads to policy recommendations on how early learning and childcare should be funded. Paying for babysitting can be done through tax credits, but funding education should be done through public funds. 

I’d like to summarize some of the international history about investment in ELCC internationally from The Palgrave Handbook of Family Policy (2020). In the industrial revolution, childcare developed in several countries to reduce child mortality and to permit low paid women to be involved in the labour market. Over time, more countries introduced childcare and the rise of feminism in the 1960s and 1970s led to childcare becoming recognized as a means to reduce the barriers facing women of all potential compensation levels in the labour market. In Europe, the Nordic countries were early adopters, but laggards eventually recognized the importance and impact. Disproportionately, the lagging European nations attempted to increase the number of spaces through a market-oriented approach, assuming the market would create adequate supply and that competition would create a push for quality. However, these expectations were generally not realized. This implies a market failure, which creates an economic case for public investment in ELCC. 

The Organization of Economic Coordination and Development (OECD) has written extensively on early learning. Their work suggests that there is a link between quality of programs and child outcomes; and, there is a link between quality and public management. 

Opponents to publicly funded ELCC have said to me that, “parents know what’s best for their children.” Of course they do, but ELCC is not about stopping parents being involved in a child’s education. It is about an early learning system that support parents, the same way that the public education system does. A trained educator can deliver an impactful curriculum that enhances skills development complementing the informal education provided by parents. Early learning does this the same way that public education does.

I cannot stress the point that ELCC is about education strong enough. We don’t fund primary school and high school through tax credits. Canada’s universal, public education system is foundational to skills development of our youth and the quality of the education system is a key reason why Canada does not have the inequality experienced in the United States. If we want the highest return on investment in ELCC, it will require direct public funding. Canada needs the right funding mechanism to create universal, high quality ELCC programs from coast-to-coast-to-coast.