Lessons from Quebec's universal low-fee childcare programme

Published Tue 7 Aug 2012
In Canada, the province of Quebec has adopted an ambitious and generous set of family policies. Its income support for families is more extensive, its parental leave plan more generous, and its universal low-fee childcare programme unique in Canada. Our recent research focuses on the macroeconomic and budgetary impacts of the last of these - the childcare programme.
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We have aimed to estimate the programme's impact on female labour force participation, domestic income and government budgets. In the context of recent debates, as set out by Jane Waldfogel in her own Juncture essay, understanding the scale of these impacts is increasingly important.

The childcare programme was launched by the Quebec provincial government in September 1997. At that time it cost parents C$5 per day, and was targeted at four-year-olds. Simultaneously, full-time kindergarten was extended to all five-year-olds. In September 1998, low-fee daycare before and after school was offered to all children aged five to 12 in kindergarten and elementary school. The programme was then progressively extended to younger children. It was finally opened to all preschool-age children (up to the age of four) in September 2000. In January 2004, the daily fee was raised to $7. As of March 2011, the programme was serving nearly half of all Quebec children in this age group. Of these, 38 per cent attended early childhood daycare centres, 43 per cent home daycare facilities, and 19 per cent other subsidised daycare services. In 2011/12, the provincial government expected to spend $2.2 billion (0.7 per cent of Quebec's GDP) in subsidies for low-fee childcare.

Over the past 15 years, there has been a spectacular jump in the proportion of Quebec children to the age of four attending regulated daycare - to 53 per cent in 2011 from 18 per cent in 1998. This contrasts with elsewhere in Canada, where attendance rates in regulated daycare have continued to hover around 20 per cent for children aged 0 to five from 1998 to 2008.

Simultaneously, the labour force participation of mothers has increased more rapidly in Quebec than in other parts of Canada: it went from four percentage points lower than the national average in 1996 to higher than average in 2011.

Impact on female labour market participation and overall economic activity

Relying on existing impact studies (see footnote) we calculate that, in 2008, Quebec's low-fee childcare programme was responsible for about 70,000 more mothers being in work. This means that there were 3.8 per cent more employed women than if the programme had not existed. We have taken into account the evidence reported in one of the studies (Lefebvre et al 2009) that the use of low-fee daycare when a child is of preschool age raises the mother's employment rate not only during this early period of the child's life but also later, once the child has entered school. In other words, the programme's impact on mother participation in the labour force is not only static, but also has a dynamic extension: it persists over the long term. Furthermore we estimate that this increase in employed mothers has led to an increase of 1.7 per cent ($5.1 billion) in provincial GDP (again, for 2008).

Fiscal impact

Our research also assessed the fiscal impacts of the Quebec childcare programme, including on federal and provincial government own-source revenues and family transfers. This exercise has relied on our tax-transfer simulator and simple assumptions about the reaction of tax revenues to increases in GDP. Our estimates for 2008 range from an initial return of $500 million from higher-income taxes and lower transfers within a purely static framework to a final budgetary feedback of $2.4 billion from all taxes and transfers when the programme's static and dynamic effects are both taken into account.

This means that the tax-transfer return for the public sector significantly exceeds its cost. Our $2.4 billion estimate of the overall budgetary feedback in 2008 turns out to be 47 per cent greater than the net cost of the programme in that year - just over $1.6 billion.

However, the two levels of government do not share equally in the cost and the benefits. The Quebec provincial government bore the entire cost of $1.6 billion and gained $1.7 billion in tax-transfer return. Meanwhile, the federal government incurred no cost and reaped a $0.7 billion return. Put another way, in 2008 each $100 of daycare subsidy paid out by the Quebec government generated a return of $104 for itself and a windfall of $43 for the federal government.

Conclusion

Quebec's low-fee childcare programme is financially 'profitable' for both the provincial and federal levels of government. This in itself is interesting and reassuring.

However, this is neither a necessary nor a sufficient condition for it to qualify as a 'good' programme. There is no doubt that the programme makes it easier for parents to better balance work and family. But at the same time it needs to be recognised that its rapid growth has given rise to a number of problems. Above all, the demand for subsidised spaces still considerably exceeds the supply. Moreover, the development of new facilities, place assignment rules, the flexibility of operating hours, the quality of educational services (particularly for children from low-income backgrounds), short- and long-term effects on child development, the rate of investment in staff training, and the universal nature of the programme are regular topics of debate.

All that said, the programme is extremely popular with young families of all incomes and is definitely here to stay. Many of these problems must be viewed as challenges to be met rather than as threats to the programme's survival.

 

The authors are grateful for the financial support of the research chair in taxation and public finance of the University of Sherbrooke. They thank Nathalie Bolduc, Marco De Nicolini, Karine Dumont, Pierre Lefebvre, Kerry McCuaig, Philip Merrigan, Kevin Milligan, Lars Osberg and H?l?ne Paris? for comments and advice. They take full responsibility for any remaining error.

For the full analysis on which this paper is based see Impact of Quebec's universal low fee childcare program on female labour force participation, domestic income, and government budgets.

 

Footnote ^back

Existing impact studies are:

Baker M, Gruber J and Milligan K (2008) 'Universal childcare, maternal labor supply, and family well-being', Journal of Political Economy, 116(4): 709-745

Lefebvre P and Merrigan P (2008) 'Child-care policy and the labor supply of mothers with young children: a natural experiment from Canada', Journal of Labor Economics, 26(3): 519-548

Lefebvre P, Merrigan P and Roy Desrosiers F (2011) 'Qu?bec's childcare universal low fees policy 10 years after: effects, costs and benefits', CIRP?E-UQAM working paper 1101

Lefebvre P, Merrigan P and Verstraete M (2009) 'Dynamic labour supply effects of childcare subsidies: evidence from a Canadian natural experiment on low-fee universal child care', Labour Economics, 16(5): 490-502

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