Whenever anyone says that government spending on a particular program or activity pays for itself, believe me it doesn’t.
Here we go with Jessica Irvine trying to make the case for taxpayers subsidising childcare fees. (If she felt she didn’t need the Childcare Rebate, she didn’t have to apply for it, by the way. She could have even saved the taxpayer some money.)
It seems to me the only case for the taxpayer picking up the tab, or some of the tab, for childcare costs is so children from disadvantaged backgrounds can attend childcare because their welfare is enhanced relative to being ‘cared’ for by the parents. Their lifetime prospects may improve too.
Mind you, this may well be a case for taking the children away from the parents and allowing them to be adopted into loving families. But that is not going to happen in the short term, so the case stands – in theory.
But heres’s the real rub: the take-up of subsidised childcare places by children from disadvantaged backgrounds is extremely low. The places and subsidies are snaffled by middle class families with most of the benefits passing through to the childcare workers and the centre owners.
My solution is to have a program specifically targetting children from disadvantaged backgrounds and leave everyone to their own unsubsidised arrangements in a much more flexible, deregulated childcare space.
And note that the argument for the government subsidising 15 hours of pre-school for all 4 years olds is not an issue related to subsidising childcare. It is about helping 4 year olds prepare for school whether or not they attend childcare.
Believe me, spending $7 billion plus of taxpayer funds on childcare fee relief will never pay for itself. And if the fee relief is more tilted to low income families, then there will be little by way of a return in revenue because these families pay no net tax. And let’s not forget about the impact of the excess burden of collecting the tax in the first place.
Here is the piece by Jessica Irvine:
Libertarian Senator David Leyonhjelm poked a hornets nest this week by suggesting childless Australians should not be forced to subsidise childcare.
“Having kids is not a social service that governments should subsidise, it is a choice,” he said.
Courageous man. He is right in one sense, and wrong in another.
Leyonhjelm is right that parenthood is a personal choice.
“Big benefits, but big costs” is how one economist neatly summed up parenthood when I spoke to him last week for the first time since I returned to work after the birth of my first child nearly seven months ago.
Economists are right that the decision to have children, or not, is an intensely personal one and one that should ideally be made after full consideration of the potential costs and benefits. However, real life observation suggests it’s a decision parents-to-be often make with an excessive focus on the benefits and little appreciation of the costs.
Nothing can quite prepare you for the pain and physical toll of childbirth, not to mention your immediate introduction to a form of sleep deprivation that would seem cruel in a gulag. I’ve been so tired, I can almost almost taste it. Surely, parents are due some sort of help for all those sleepless nights?
I didn’t give birth because I wanted to reproduce the workforce or create the next generation of taxpayers (although I did do that). I selfishly wanted a family, some extra people to hang out with when I’m old.
For all the upfront costs, I’m confident this is an investment that will yield ever greater benefits over time. (Although a particularly honest mother recently confided to me this “break even” point may be closer to the two-year mark.) So too with my decision to return to work. It still makes sense financially for me to work, even after deducting tax and the cost of childcare. Not to mention, I enjoy it.
I almost felt embarrassed heading into Centrelink to register for the non-means tested Child Care Rebate – which pays parents 50 per cent of their out-of-pocket childcare costs, up to an annual cap of $7,500. I don’t need it. I would work anyway. I agree with Leyonhjelm that it’s unfair of me to effectively ask my childless friends to subsidise a choice I made freely and can fully afford.
But it’s a different story for low income women and their families. This is where Leyonhjelm is wrong.
Australia’s family payments system, including childcare subsidies, is there for a very good reason: to protect against child poverty and disadvantage. We all – parents and childless – benefit from the happier, healthier children that grow up in homes untouched by poverty, through reduced crime and less reliance on welfare.
Forget the warm fuzzies, as self-interested taxpayers, we should all be happy to fund services that help those less well off.
And studies suggest there are enormous benefits from early care, not only for parents but for children.
Because most of our brain development occurs in the first four years of life, children who go to childcare can get a head start that yields dividends for life. This is particularly true for low income children who not only get the benefits of early education, but may also escape an unstable home environment.
Subsidising childcare also helps vulnerable mothers. Becoming a mother is a life-changing event, and one in which, sadly, women still bear a disproportionate burden of those “big costs”: physical, mental and financial.
Keeping a foothold in the workforce after the birth of her child is the most important thing a woman can do to boost her financial security. Even a relatively a small gap can inhibit career advancement and take a hefty toll on retirement savings.
And yet, low income women face punitive effective tax rates when they go back to work. Not only do they pay taxes, they also suffer the withdrawal of benefits. Some extra money for childcare may well tip the scales in favour of returning to work and create a safer financial future for those women.
However, there do need to be changes to the way we subsidise childcare. As the government prepares to release its childcare and families package, most observers accept the current system is overly complex and ineffective. The childcare rebate and benefit should be rolled into one single payment, and this new payment should be denied to high income families.
The payment should also be based on a new funding formula to reflect the actual cost of providing care. And it should be recognised that subsidies which do nothing to address the supply side of the equation end up doing little but pushing up prices – just like the first home buyers grant.
So, let’s argue about how to subsidise childcare and for whom. But as citizens who care about creating an equal society for women and their children, let’s not question the value of childcare itself.
By boosting the human capital of at-risk children and the workforce skills of women, childcare assistance helps to pay for itself.