NEW REPORT OUT NOW
13/07/2023
Last month, the governing committee of my sons’ childcare centre made the difficult decision to raise its fees by 5½ per cent. As a member of that committee, I took part in the deliberations. We thought long and hard before making this move.
So I have been disappointed to see media coverage suggesting that childcare centres are being opportunistic and profiteering by raising their fees to coincide with the increase in the child care subsidy that came into effect this week.
The childcare sector is diverse, made up of for-profit, not-for-profit, community-based and at-home providers. Some centres are large, servicing more than 100 children, while others are very small. Our centre is community-based and not-for-profit.
I cannot speak for other providers, but our decision had nothing to do with profit. While all centres must weigh up their own circumstances when setting fees, we decided to increase ours to keep pace with rising costs and in particular to provide our staff with a 7 per cent increase in wages, in line with inflation. Early childhood educators are some of the lowest paid in our economy. Our committee knew the rising cost of living was placing pressure on staff.
At the same time, as an economist, I am aware that the sector is facing severe and chronic labour shortages. The Australian Childcare Alliance says the shortage of qualified early childhood educators and teachers is the single most pressing issue facing Australia’s early-learning sector, with an estimated 10,000 early-childhood educators needed to fill current vacancies. Low wages are part of the problem.
The higher fees to fund this wage increase will be shared across the families in our centre. We took some comfort in knowing that most families would be eligible for a higher childcare subsidy (CCS), which would go some way to helping them absorb the higher fees.
This wage increase means improved financial security for our staff, in an environment of rapid inflation and rising interest rates. It means reducing the mental-health and burnout risks that come with being overworked. It shows staff they are valued and improves staff retention. It means staff who are less stressed, less exhausted and more productive. It means a happier and more stable group of educators, who can create better outcomes for our children.
This was a good outcome for now. But it is unclear how we will continue to maintain the real wages of staff, especially if inflation remains high. And without another CCS increase, any future fee increases will have to be borne entirely by families.
The Australian Competition and Consumer Commission is currently conducting a review into the pricing and availability of childcare, including the impact of competition on pricing. But its interim report released last week found price was the fifth most important factor when choosing a childcare centre. Location was the top consideration – parents want care close to home and childcare markets are highly localised.
All of this suggests that increasing competition is not the way to improve affordability. And personally, I wince at the idea of increasing competition in the sector, as if our children were widgets in an economics textbook.
The ACCC says it is seeking to “understand the reasons for price movements” and has warned childcare centres “they need to be transparent and honest about the reasons for any price changes”. Transparency and honesty are crucial here and if centres are seeking to boost profits they must explain why, so families can make informed choices.
Increased government support would mean that childcare centres such as ours would not have to face the difficult trade-off between supporting staff through higher wages versus supporting families through lower fees.
Increased government funding to support wages for early childhood educators makes sense as a way to alleviate staff shortages and retention challenges, while also increasing the broader labour supply in the economy.
Just after our decision, our committee received an email from one of the educators at our centre. Despite working full-time, this woman had been struggling financially. She had been considering taking a second job just to make ends meet. She told us that our decision to raise wages meant she no longer needed to look for a second job.
The moment I read that email, I knew our decision had been the right one.
This article was originally published in the Sydney Morning Herald.
