Ottawa destroying child-care market

There’s a great deal of talk about the Trudeau government’s plans for a “just transition” away from oil and gas, but the energy sector is not the only one receiving a government bludgeoning. So is child care, thanks to Ottawa’s Early Learning and Child Care Agreements with the provinces and territories. On top of costing taxpayers tens of billions, with its national program the federal government is destroying the child-care market and wreaking havoc for many private businesses.

Across Canada there are stories of the child-care industry in crisis and experiencing severe shortages. In Alberta in particular, where two-thirds of the market is served by private for-profit child-care centres, massive government spending concentrated on non-profits have had a doubly harmful effect on the private for-profit segment. First with its uneven funding the government heavily tilted the field against private operators who serve the majority of the market, and second, it inflated the costs of their inputs by artificially pumping demand.

As a letter last September from the Canadian Federation of Independent Business and the Association of Alberta Childcare Entrepreneurs to the federal government put it, “many small businesses have not been able to open any new spaces under the $10 child care agreement.” And due to licensing timeline requirements to be eligible for government funds, “no new $10 day spaces for private operators can open” so “some businesses have been siting empty for nearly a year waiting for an expansion of new spaces.”

A Global News story quoted one child-care operator in Fort McMurray who decided, due to the unevenness of federal funding eligibility, not to expand. “We can’t open new centres,” she said, “and we’re not able to expand our current ones.” Another operator, who borrowed against her house and signed a 22-year lease to open her business, regrets her decision. Due to the federal licensing timeline requirements, her centre was ineligible for new funding and therefore uncompetitive against government-funded facilities.

At the end of January, the federal and Alberta governments finally announced that 22,500 new child-care spaces among the for-profit child-care sector would be funded. While this improves on the previous situation, the limit of 22,500 spaces is likely far too low. To make matters worse, the funding eligibility is tied to vaguely worded requirements under what’s called the Alberta Cost Control Framework and For-Profit Expansion Plan.

The operative words are “control” and government “plan,” neither of which bode well. The government framework mandates that “the costs and earnings of child care businesses are reasonable and that surplus earnings beyond reasonable earnings are directed towards improving child care services.” The word “reasonable”—referring to child-care business costs, expenses and earnings—is repeated everywhere throughout the framework.

In other words, private operators must run their businesses in a way government deems “reasonable” or else suffer a massive competitive disadvantage as competitors receive billions in subsidies, driving up input costs across the industry. What government’s central economic planners consider “reasonable,” the private child-care operators do not know, creating massive uncertainty in the sector and discouraging investment.

Nor can the whims of government planners be generally relied upon to be “reasonable.” So far, whether in Alberta or other provinces, the design and implementation of the federal child-care program has been most unreasonable. In the name of making child care more affordable and accessible, the government is effectively destroying the sector by trying to take it over.