December 7, 2005
A Cautionary Tale from Australia
Over the past two decades, Australian child care expert Lynne Wannan has witnessed the impact of large-scale for-profit early childhood education (ECE) facilities in her own country. With help from the Canadian Child Care Advocacy Association, she embarked on a three-week tour of Canada in October 2005 to share lessons from Down Under with her Canadian colleagues.
The CCSD sponsored her concluding talk in a briefing session on October 20 at the National Press Club in Ottawa. During that session, Wannan shared both cautionary tales from Australia and her impressions of the Canadian child care situation with a wide variety of social analysts and advocates. She also answered questions about pay scales for child care workers and culturally appropriate child care for Aboriginal children.
The session was timely. Just a month later, controversy exploded in Quebec over the increasing presence of commercial child care chains in what has been seen as Canada's model provincial child care system. Then child care and in particular, the idea of funding parents rather than a system - became a major election issue.
Following is a report of Wannan's remarks.
People have asked me if I came here of my own initiative, and it's true: I did come of my own initiative. I realized that we got it wrong in Australia, and you could get it right. We jokingly said that I was coming over here to save Canada.
My dominant concern has been the transformation of child care into a profit-making industry.
In Australia before 1991, we had a predominantly not-for-profit, publicly owned child care infrastructure. And we had a national plan to develop a quality, universal, affordable, and accessible system. We described what we wanted in much the same way you do.
The federal government gave priority to communities most in need of support. Child care received capital funds from our government, and centres were almost always built on government land. Child care was non-profit, and was really a public facility with a parent management committee. My role was to facilitate proposals for child care in low-income and disadvantaged communities.
Then in 1991, the Labour Party - a "progressive government" - opened up funding to the for-profit sector. The arguments they gave for doing so are the same ones you are hearing now: families must have choice; it's not fair for families who are accessing non-profit service to get the federal subsidy, while those using private child care do not; the market can better deliver higher quality child care at a lower price; and so on.
In fact, the results have been the opposite of what the government was striving for, and none of those economic rationalists' goals have been achieved.
After the change in 1991, a four-year allocation of funds for children's services disappeared within the first year. The community-based sector had warned the government that that would happen if they didn't put in some controls. For a business, getting somewhere around 60% of revenue guaranteed from the government is obviously pretty attractive.
The for-profit child cares were allowed to open services wherever they wanted. Services were established where they knew existing services were doing pretty well, where there was a market, where you could run a good business. One state with a lovely warm climate became a hub of child care delivery because retirees with pensions who were living in the area invested in child care.
The funding was no longer going to the service, but to the parent - I know that's an issue here in Canada, too. Of course, that was based on giving parents the choice, and parental choice was supposed to determine how the service system developed. But parents can't really control where a service goes, they can only purchase a service if it's there. The notion that they are going to influence the market, I think, is a bit of nonsense. To this day, we still have more demand than supply.
Because so many services opened up in areas where there were already lots of other services, working parents no longer got priority. I don't have a problem with non-working parents accepting child care. I think child care should be universal and that it's really important to support developmental opportunities for all children. But nevertheless, you've got to have priorities.
Once commercial services started to open up, the competition became ruthless. Before, child care had been a very cooperative sector. The commercial sector had been made up of small companies and the biggest child care centre probably only had about 60 kids. It was perhaps a bit like you have in Canada today. This new competition was something we had never seen before. There were predatory pricing practices: smaller providers were squeezed out because some of the bigger companies coming in could survive for a couple of years without making any money. That way, they could get rid of the competition and have the market to themselves.
Today more than 70% of our sector is commercially owned, whereas it was 85% non-profit back in 1991. And 25% of our provision today is with one shareholder company. We only began getting shareholder child care companies on the stock market in 2000, so it has quite a short history. And to move to 25% control of the sector in that short a time is pretty amazing.
When you are publicly listed on the stock market in Australia, your prime responsibility is to make profits - that's the law. You have to generate profits to distribute to your shareholders. You have to compete and grow in order to increase shareholder profits.
It's not that easy to make tons of money from any one child care centre. But a centre with about 100 places, within one of those big companies, makes about $100,000 a year. They make about $1,000 per place, per year. And to increase its value, the corporation has to keep taking over other companies and consolidating the market. They will close down local services in order to have one bigger centre that can be really full and viable.
We no longer have a child care system in Australia that is part of our local community, integrated with existing services, and aimed at supporting families and serving children. It's an industry now that is striving to make a profit.
Another way of making a profit is to reduce costs. The large child care companies spend 50% on staff - and they aim to spend less - whereas small commercial centres spend about 60% on staff, and non-profits spend 80-85%. The large companies claim to be more efficient and to reduce costs by centralizing administration. In fact, the non-profits are spending the smallest component on administration - roughly 15%.
So you'd think we'd have really cheap child care in Australia, thanks to all those shareholder companies. But actually, the cost of child care in those companies is comparable to the cost of child care in the not-for-profit sector. Sometimes it's even more expensive. In a wealthy inner-city area they can charge - you'll be shocked when I say this - $100 per day.
So that's $500 a week for child care. For most of our services, the average fee across the country is $220. But that's pulled down by some low-cost services. You'd be hard pressed to find child care in Australia now for less than $280 or $300 a week. So privatization certainly hasn't made our child care cheaper.
It's been shocking to me to discover how low the child care wages are in Canada. Ours are not great, but yours I think are really worrisome. Poverty must be a major issue for your child care community; I don't even know how they can live. It's a lesson for Australia, because we're moving to a similar industrial relations environment as yours, and from what I've seen here, I'm very scared about that.
We've had a very different industrial relations environment in Australia. It's difficult, I know, for Canadians to even comprehend that we can have something like this, but we have a system where everyone in an industry is guaranteed a certain minimum wage, depending on their qualifications and experience. We call them "awards," so we have a child care award for everybody who works in child care. It is slightly different from one state to the other, but generally there is equity across the country.
So we have a minimum guaranteed wage in the child care sector. It doesn't matter whether you've got a stock market company as your employer or a not-for-profit service. They can pay more, but they can't pay less. And we've had improvements to those wages through an industrial court, where the unions and employer bodies argue their cases. It can take quite a long time, but you can get an improvement. You never get a downgrading. On top of your salary, your employer must contribute an additional 9% of your salary into your pension fund.
We also have licensing which prescribes the ratios of staff to children, and staff qualifications, and age groups, and things like that - very similar to yours. On top of that, we have a quality assurance system which a number of Canadian provinces are looking at. They are actually looking at the Australian one as a model. Ours is a compulsory system - unlike any in Canada so far. Families cannot get a subsidy for a child care service unless it meets the licensing and quality assurance requirements.
So theoretically, we're all working in the same environment. But the reality is that those big shareholder companies can't be paying the same wages - otherwise, how could they reduce their costs? One way is to employ the minimum number of staff required, whereas the non-profit services often employ more staff than the minimum. Our licensing requirements for child care of infants are worse than those of most of your provinces. Generally we must have one staff person for every five infants, whereas you generally require one staff to three infants, or one to four. Our not-for-profit sector will generally go beyond the requirements.
Another way to cut costs is to hire people who are not fully qualified. Because we have a shortage of qualified staff, it is sometimes possible to fill positions with staff who are exempt from the usual qualifications, and therefore do not have to be paid the specified salary.
Whenever we have a review of regulations and quality assurance, we have a really strong lobby against any improvements. In fact in some states, there has been some loosening of licensing requirements. And that is because 70% of the sector is now actually for-profit services, so it's very hard to get any improvements to licensing in that kind of environment. There's a lot of pressure downwards on standards, not upwards, contrary to popular economic rationalist theory.
And we still only have sufficient child care for 20% of our children - we're miles away from meeting the demands. We won't have child care where the commercial operators don't want to go. We have to look at how the government subsidizes child care services, because the big companies are going to make $88 million - much of which comes from government subsidies.
Those commercial operators are really litigious, as well, so nobody says much. You certainly don't name anybody.
We have a huge dependency on public child care, but those big companies could close down tomorrow. They don't connect with other family support services, and the drivers of service are not those of community building. In the last couple of weeks, one big company has put in a submission saying that they can't provide care for infants under age two because it's too expensive.
Yet the importance of child care is so clear. It's about building community. I don't think child care should be delivered cheaply.
At this point in time, the Australian government faces some choices. They can keep giving subsidies; they can just let go; or, given that only 20% of those who need it are being served, they could start funding the non-profit sector.
Interestingly, we have not lost service in that sector, which has been around for 35 years. We still have a public facility that's publicly owned. But our government has not invested in infrastructure for child care. Instead, they have just created a quick fix by giving funds to the for- profit sector. The bulk of the money for growth was used for fee subsidies. Yet they wouldn't have had to spend any more for non-profit delivery. Had they put money into infrastructure, we would have had some guarantees for the future.
Finally, I want to offer some "lessons for Canada" as a result of my recent tour across your country. Following are the main observations I've made in the course of my tour:
There is no retention of staff when wages are really low. This is a big problem in Canada.
There do seem to be some planning provisions here. You haven't been as cavalier as Australia.
There will be problems unless a link is established between outcomes and funding.
Like us, you need to have some sound systems, a regulatory environment, and spot checks. In our old age care system, we do spot checks, but the government is very reluctant to do them for the child care system.
I think you have a strong community movement for child care, and your understanding of how it fits in with the rest of the public infrastructure is fantastic. You have a lot of energy here in support of child care.
Questions and Answers:
Q Having travelled across Canada, I wonder if you have any thoughts about any particular provincial models that people could look to?
A I gather that Quebec is probably the best system. I think Saskatchewan is funding a non-profit system. I think the only way forward is a public infrastructure.
Q Concerning messaging: Do you have any advice on how we can leverage our message and stay on a positive note? We want to caution against commercial child care, but make sure that we don't feed the message that all child care is bad.
A I think the best way to do that is to keep focusing on your vision of quality, affordable, and sustainable child care. It will then be reasonable to ask, "what are the drivers for such a system?"
Q - Concerning wages and benefits: How were you able to establish the whole minimum wage system in Australia?
A Australia has been more of a unionized country than Canada, and we're struggling to hang onto it. I don't know how you would build that. Our government is now trying to dismantle our labour system. Unfortunately, it's hard to build, and easy to dismantle.
Q Concerning quality assurance in the Australian system: Does that include rights of Aboriginal children to access culturally appropriate services? How engaged are Aboriginal single mothers in the delivery of services? In Canada, the Indian Department determines and delivers services. There is no protection for women on reserves. It's an ongoing jurisdictional battle, rather than governments taking responsibility.
A I think Australia is probably worse than Canada on the issue of Aboriginal people. We have a shocking record. We had an Aboriginal advisory board but it has been disbanded. Concerning services for Aboriginal families, we do have one terrific model that was developed by Aboriginal communities themselves. It's called Multifunctional Aboriginal Services, but it only operates in some regions. It includes not only child care as core, but also age care and youth care, and it is run by the Aboriginal communities themselves. We have to try to get more of this model. Access to our mainstream services is poor for Aboriginal people.
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