What could a $10-a-day deal mean for Ontario’s child-care businesses?

This column by Armine Yalnizyan was originally published by the Toronto Star on Wednesday February 9, 2022. Armine is a Contributing Columnist to Toronto Star Business featured bi-weekly.

If Ontario ever signs a deal with the feds for early learning and child care, we know parents will save money, kids will get better care and, when supply expands, the economy will benefit from having more people earning and spending more.

While not disputing those benefits, some commentators are saying the federal deal is bad for business, as it aims to transition our current model of grab-it-where-you-can care to a system that provides more reliable licensed public and non-profit child care in a neighbourhood near you.

Is this evolution bad for business? No. With $10.2 billion in federal funding for Ontario available, there is actually no better time to be in the business of child care, with one caveat: it’s better if you are licensed.

Caregivers can contract to work with licensed agencies that are public (provided directly by municipalities), non-profit (provided by organizations like the YWCA or even some home care) and for-profit (provided by mom-shops or big-box operators). For-profit businesses account for 25 per cent of licensed child-care businesses in Ontario.

Signing a deal with the feds could reduce operating costs and increase the pay and number of caregivers in licensed facilities. But it would do nothing for the thousands of owner-operated businesses in Ontario that are unlicensed, either by improving their revenues or reducing their costs, and consequently reducing fees parents have to pay.

But it also needs to be said: while a deal between Ontario and the feds would not help unlicensed providers, it wouldn’t hurt them, either. They are unlikely to be squeezed out of business, because in no community do we have enough care.

At last count (2016) child care was a $6.1 billion business in Ontario, of which 91 per cent was generated almost exclusively by women providing care to children through unincorporated businesses that have no employees. Mostly they are young mothers making money caring for other children while raising their own, or a retired neighbour who has time on her hands.

It’s hard to know how many unlicensed caregivers there are because many operate “off-grid,” providing cash for care; but there were at least 35,000 registered incorporated and unincorporated child-care businesses in 2016, most reporting earnings of less than $10,000 a year.

This can be critical income for women who provide care out of their homes. It’s also a critical service for parents and children who have no other options.

Virtually all of these unlicensed providers are owner-operated businesses without employees. They aren’t eligible for the new public funds because there is no reasonable way to assess and monitor whether taxpayer-funded supports are paying for minimum standards of care for kids. This part of the market has extraordinarily high turnover, typically lasting fewer than three years.

Licensing could boost the wages of these home-based providers, help cover operating costs, and lower parent fees.

So are the new federal deals bad for the future of unlicensed business? Maybe, if we expand access to care quickly. Public money is being used to incentivize the growth of licensed care. That’s a good thing. Licensed care is more reliable, whether it’s home-based or based in a centre.

Federal funding is also agnostic about current licensed providers who are for-profit or not-for-profit. All are eligible for funds that cover more operating costs so they can lower parent fees and focus on improving care, including better wages for caregivers. While for-profit providers aren’t cut out, nor does new funding favour expanding their market share.

That’s good news for anyone worried that the sector’s expansion could replicate long-term care’s expansion, where caring for profit eclipses caring for people.

But expansion is a long way off. We’re starting from our back foot. The use of paid child care fell during the pandemic, and we don’t know how much it has rebounded. Very likely there has been growth in unlicensed care.

For example, the municipality of Chatham-Kent dropped to 10 licensed home-care facilities from 16, a loss of 585 licensed spaces (a capacity cut of 27 per cent).

The wait list there has swollen to 1,200 families.

The province hasn’t systematically collected information about what capacity we have now, but there wasn’t enough paid care before the pandemic. There certainly isn’t more now.

Federal funding could add capacity with the promise of better wages. But right now women are leaving the industry. Not surprising, since workers in Ontario’s child-care sector have been critically underpaid for years. Did you know that, in Ontario, we pay garbage collectors and pet groomers more than we pay child-care workers?

There were about 309,000 licensed spaces for children aged newborn to five in March 2020, serving about 35 per cent of Ontario’s kids younger than six in a licensed setting. It is doubtful there is as much supply available now. The maddening lack of supply exists in rural and remote communities; also in big cities riddled with service deserts, especially for low-income populations, recent immigrants and Indigenous populations.

Will the federal strategy to expand access to licensed care sap business from unlicensed providers?

No. As ambitious as the federal strategy is to expand capacity, the reality is that there will be more demand than supply for the foreseeable future.

All of this is to say, nobody is worse off, and more are better off. The new federal funding expands and improves the quality of care, helping licensed businesses stay afloat and focus on the business of care. It creates more better-paid job opportunities, though we’ve still got a long way to go when it comes to providing benefits and pensions for workers in this sector. And it reduces uncertainty for parents and providers in tandem, instead of waiting for markets to deliver what they haven’t — quality care where and when it is needed.

We’ve had 50 years of that flawed social experiment.

It’s time for something new.