Caring for children

CHAPTER 9

Should the state subsidise childcare?  This question appears to be a special case of the more general question, Should the state help to support children and their families?  This book has argued that the state might reasonably assist families with children.  If we were to establish such an assistance scheme -- or, better still, a tax system which had the same net effect -- then there would seem to be nothing more to be said about childcare.  Simply by assisting families with children the state would be assisting families wanting childcare, just as it would be assisting families wanting play equipment, or children's books, or to be able to afford holidays together.  Obviously it is better for each particular family to decide which of these forms of expenditure best meets its circumstances -- governments have no special insight into matters of that kind.  Looked at from this angle, it seems no more necessary to have a public policy about childcare than it is to have one about any of the other many important decisions that families make.

If we are to have a policy that subsidises childcare directly rather than through general assistance to families, then a special case needs to be made out that distinguishes childcare from the many other ways of helping children and families.  Further, the rationale for such a policy must be something more than the special pleading of a particular interest group.  It needs to be grounded in reasons which anyone can recognise as valid.  Is the present system of childcare subsidies grounded in such reasons?

The aims of Commonwealth government funding of childcare, known as the Children's Services Program, are:

1. to facilitate workforce participation by women;
2. to ensure access to appropriate childcare for special-need groups, including Aboriginal, migrant and disabled children and the children of sole parents attempting to re-enter the workforce;
3. to provide occasional care for children of parents at home;
4. to ensure that childcare is affordable for low and moderate income families;
5. to ensure a good standard of quality in childcare services;
6. to ensure that childcare is delivered in a cost-effective manner.

However, a set of objectives of this kind is not at all the same as a clear rationale for a policy.  None of the stated objectives, except perhaps (6), is self-evidently desirable.  The statement of objectives does not by itself tell us why childcare should be specially subsidised.  To pursue this question we need to turn elsewhere.  A recent paper from the ANU Centre for Economic Policy Research on Government Spending on Work-Related Child Care:  Some Economic Issues is an attempt to provide at least part of such a rationale. ⁽¹⁾  Although the paper was commissioned by the Department of Community Services and Health, it is not a government policy document.  It is, however, presented as a partial defence of the existing system of subsidies, and it seems to be the clearest discussion document available on the subject.  The authors are careful not to claim that the present system is the only way or the best way to achieve the objectives which they see as the fundamental rationale for the existing system.

The authors distinguish between two broad justifications for childcare subsidies:  an efficiency argument and an equity argument.  Roughly speaking these correspond to objectives 1 (facilitating women's workforce participation) and 2 (helping groups with special needs) in the above list.  Objective 4, making childcare affordable to lower income groups, is also presumably an equity objective.  We can discuss the other objectives after the equity and efficiency arguments have been considered.  Equity and efficiency are basic social goals;  the only question at issue is whether equity and efficiency require special subsidies for childcare.

On the efficiency question, the paper argues not on the basis of benefits to society through benefits to children, but on the basis of benefits to society through benefits to women, particularly women's participation in the workforce.  "Many of the gains that would flow from investing in an increasingly well educated female workforce may be dissipated by the depreciation of human capital that occurs when workers withdraw from the labour force for long periods of time", it contends. ⁽²⁾  This assumes that the capital invested in a woman's education does not benefit her children, and thus society, through her contribution to their education when she cares for them in the home.  It also fails to weigh up the value of the skills required in being a full-time parent against the value of those required in the workforce.  It may be that a woman's workforce skills deteriorate when she leaves the workforce but it seems equally true that she acquires other useful skills.  Increased workforce participation by mothers who might otherwise be at home with children will show up as an increase in gross domestic product, for the obvious reason that GDP measures only formal economic activity.  But this increase is not at all the same as an increase in economic activity.  For all that we can really know it might amount to a net decrease in economic activity.  The figures are distortions because they fail to measure economic activity that takes the form of domestic production.

Another consequence of the argument presented is that childcare subsidies should be proportional to the level of capital invested.  The efficiency argument requires that subsidies should be greatest to women with tertiary qualifications.  Less highly qualified mothers would be less eligible for assistance.  A further consequence is that women or men who would be more efficiently "deployed" at home with their children should be subsidised to stay at home.

There is something peculiar in the claim that those who have benefited most from public investment in their higher education should be given even more subsidies to help them reap further benefits from their education.  The subsidy is a subsidy from poorer families to richer families, often from poor single-income families to rich double-income families, and often from families with several children to families with few children.  Highly educated women are already rewarded in the salaries they command.  Any further subsidy to them is middle-class welfare of the most obvious and objectionable kind.  Anyone concerned with the well-being of low-income families should want the highly educated to repay to society the costs of their educational subsidies, not to devise new forms of subsidy.

It will be said that the working mother in the public economy is taxed and the mother at home is not.  This is misleading.  If, as Chapter Six contended, caring for children is not a form of production for private ends but is rather to be thought of as a welfare activity, then there is no reason why childcare in the home should be taxed.  Equally there is no reason why commercial childcare organisations should be taxed.  But they are not:  mothers who use such facilities are not taxed for using them.  Employees who work in childcare are taxed on their income, but so are other equally important workers such as nurses.

In Chapter Six it was argued that a tax system based on equivalent income should take some account of domestic production.  If this is all that is at issue then the objection has been met, and there is no need for special tax deductions for those who use childcare services.  Allowing for domestic production in the calculation of personal income tax will suffice to remove any economic distortions which may occur.  At present the mother at home is taxed on her share of the total family income.  The only tax concession she gets is the spouse rebate.  By parity the working woman is entitled to the same sort of tax deduction.  This could be secured by an equivalent income system whereby mutual dependency within the family is recognised and not simply the dependency of the wife at home.

On the equity issues, Government Spending on Work-Related Child Care argues that funded childcare "offsets some or all of the biases in the [tax/welfare] system that encourage women not to participate in the paid labour force". ⁽³⁾  This brings us to the second objective of the Children's Services Program, assistance to groups with special needs.  The arguments for childcare assistance to Aboriginal, migrant and disabled children involve questions about the particular characteristics of these groups which cannot be entered into here, but we can consider the claim that sole parents need special childcare assistance.

About 80 per cent of those sole parents with children under five who are in the labour force use funded childcare (compared with 26 per cent of working married women), but only 50 per cent of all sole parents are in the labour force.  On this evidence the potential savings from encouraging sole parents to be more self-supporting would seem to be considerable.  The argument would be that funding childcare will provide equity for a disadvantaged group but more efficiently and at a lesser cost than that of the social security approach.

This reasoning does have a certain logic but it is the logic of a latter-day Alice in Welfareland.  The position is this:  Alice, a sole parent, having reached a point where she feels ready to return to the workforce, finds that it is only financially worthwhile to do so if much of the cost of her child-care is paid for by the state.  In stepping in to provide that subsidy, government is in effect providing assistance to help her need less assistance.  The logic in this rests upon a premiss which disguises Alice's actual situation.  If Alice is ready to be self-supporting then clearly she no longer needs social assistance.  She therefore does not need assistance to help her need less assistance.  Alice is ready and willing to work.  All she "needs" is the removal of the main "barriers" to working, her benefit or pension.  Since she no longer needs those payments no injustice is done in ending them.

Of course if Alice is able but not willing to become self-supporting, the situation is slightly more complex.  At present the state merely waits patiently for her to declare herself willing, but justice does not require such patience.  Alice may be somewhat lazy or she may have only an intermittently active conscience about receiving payments which she no longer needs.  (Few of us are very vigilant about such matters.)  The question of when a person is ready to be self-supporting is a question for government to determine, not the recipient.  All that public policy requires is a fixed term for beneficiaries.  In Chapter Eight it was contended that there is no equity argument to show that sole parents require assistance not available to intact families.  If this general argument is correct then the same applies to childcare funding.

Government Spending on Work-Related Child Care is a model of how not to discuss these questions.  The paper moves from an efficiency argument to an equity argument as if the first props up the second, when they are clearly quite separate issues.  (The first would support cheap childcare for tertiary graduates only, and it would do so only by raising taxes on the less well-off.)  It proceeeds as if the new economics of the family does not exist.  By not counting work in the home, the paper confuses measured GDP with total economic activity, yet it wants to count home production as imputed taxable income.  It fails to see that caring for children at home is as real a contribution to the whole well-being of society as any other.  It does not establish its claim that taxpayer-funded childcare adds real jobs to the labour market.

Objective (5) of present government childcare policy is "to ensure a good standard of quality in childcare services".  The question of quality is as paradoxical as the previous issues.  Quality is often judged by adult/child ratios and by the frequency and closeness of interactions between adult and child.  By these standards the family home must rate as by far the best of all childcare environments.  The classic modern parable about childcare is that told by Linda Burton.  After researching, inspecting and interviewing all the available options, seeking someone who would "encourage my children's creativity, take them on interesting outings, answer all their little questions, and rock them to sleep", she came to see that the only person who met her own specifications for the job was -- herself.  "I had been desperately trying to hire me", she concluded. ⁽⁴⁾  If objective (5) is about giving children these advantages then it entails support for mothers at home with children.

That there are substantial advantages in very young children being at home with their mother, father or other close relative is now commonly recognised by child psychologists.  Both Penelope Leach and Dr Benjamin Spock endorse this claim.  Perhaps educational psychologist Burton White, director of the Harvard Preschool Project, can be taken as sufficient authority on the subject.  White's emphatic advice to parents is this:

Unless you have very good reason, I urge you not to delegate the primary child-rearing task to anyone else during your child's first three years of life ... Babies form their first human attachment only once.  Babies begin to learn language only once ... The outcomes of these processes play a major role in shaping the future of each new child. ⁽⁵⁾

At the very least it has to be said that there is no developmental reason for governments to favour childcare out of the home over childcare in the home, or to tax families who care for their children at home to pay for the childcare of those who do not.  This argument is not a conclusive case against funding for formal childcare institutions:  Burton White may be wrong;  some parents may be able to compensate for the deficiencies of the available out-of-home childcare;  older preschool children may benefit from some formal childcare attendance;  and some childcare centres may be warm and friendly places.  But if there is a case for subsidising any form of childcare, this is a conclusive argument in favour of funding all forms, including childcare at home.  Objective (3) of current policy, "to provide occasional care for children of parents at home", does give some recognition of the needs of mothers at home, but in practice it is little more than words in a document.  In 1986-87, Commonwealth government expenditure on occasional care amounted to less than three per cent of all childcare funding. ⁽⁶⁾

One of the many absurdities in "the childcare debate" is its exclusive pre-occupation with formal work-related childcare.  The fact that only about 30 per cent of all work-related childcare takes place in the formal sector is almost never mentioned.  (Sixteen per cent in pre-schools, ten per cent in childcare centres, and three per cent in family day care.)  The remaining 70 per cent is carried out by other family members or by informal private arrangements. ⁽⁷⁾  Yet it seems obvious that children whose parents must both work are often best cared for by grandparents, other relatives or friends, in homes where they feel at home and known personally, possibly with cousins as playmates.  (With the general ageing of the population there are now more retired grandparents available than ever before.)  All the arguments for supporting children in their own homes carry across to support for children in informal childcare arrangements.  Yet at present informal care is given no support at all, nor is it discussed in public debate, which is dominated by the voices of the formal childcare sector.  Exactly which form of childcare best suits the needs of each particular family at any particular time is a matter about which governments are necessarily quite ignorant.  This is a choice that only parents can make.  Public policy should be rigorously neutral in its allocation of funding, and leave the decision to the families themselves.

The main theme of this chapter is that the case for childcare subsidies rests on the general case for family assistance.  The point is a simple one, but it seems to escape the notice even of otherwise sharp thinkers.  A fairly typical specimen of the confusion which bedevils this issue is provided by Padraic P. McGuinness, writing in defence of the Liberal Party's 1989 commitment to providing an $800 million childcare rebate, which he acknowledges "will clearly benefit relatively well-off double income families without benefitting the genuinely poor at all".  According to McGuinness,

Genuine equality of opportunity for women must mean that they are not penalised for having children.  A high-income working woman has to incur child-care costs to earn her income, and there is a strong case for arguing that this cost ought to be fully tax-deductible at whatever is her marginal rate of taxation.  We cannot and should not try to push women out of the workforce;  and we have to recognise that if we want our population to reproduce itself, equality and equity between the sexes demand that women be compensated for carrying that responsibility.  This is an issue which has little to do with the distribution of income.  Where is the sense in compensating poor or single unemployed women for having children while placing a negative value on the children of intelligent and educated women who play a valuable role in the workforce? ⁽⁸⁾

Four reasons are being given here.  One, childcare subsidies will help to maintain our population.  But the fair way to do that is to help anyone who chooses to have children.  Two, women should not be pushed out of the workforce.  But women should not be "pushed" anywhere, out of or into the workforce.  On this reasoning we should assist all mothers and let them decide where they want to go.  Three, equality and equity between the sexes demands that women be compensated for carrying the responsibility of child-bearing.  But this applies equally to all mothers.  Four, we should support not just poor and single mothers but also intelligent, educated mothers who play a valuable role in the workforce.  But then we should support all mothers who play a valuable role in society, whether in the workforce or in the home.  Only in this way can we ensure that women have a free and fair choice about how they manage the relation between work and home.

Childcare subsidisation is not at present a large item in the Commonwealth budget -- a "mere" few hundred million dollars -- but there are plenty of signs that it may become one.  It has been argued here that the case for childcare subsidies rests on the general case for family assistance.  A rational feminism would argue the general case.  The particular case looks like nothing more that the special pleading of a sectional interest group, not a group which has at heart the interests of all women, or all children.  Those who defend the particular case (including the leaders of both major parties) have an obligation to show how, in taking from the family childcare system and giving to the public childcare system, state subsidies differ from organised expropriation.

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ENDNOTES

1.  Gregory et al., Government Spending on Work-Related Child Care.

2.  Ibid. 11.

3.  Government Spending on Work-Related Child Care, 14.

4.  Zinsmeister, "Brave New World", Quadrant, July 1989, 26.

5.  Ibid. 25.

6.  Department of Community Services Annual Report, 1986-87, Table 5.

7.  ABS Cat. 4119.0, Table 5.3.

8.  The Australian, 20 October 1989.