Opinion: The extension of the 20 hours of early childhood education (ECE) to two-year-olds was the frill in the 2023 ‘no-frills’ Budget. With $1.2 billion committed over four years, Labour has outbid National’s $250 million childcare tax rebate of up to $75 a week. But extending public subsidy will not address the childcare crisis for families. The next government needs to also start publicly providing early education.

Since 2008, the government has reimbursed ECE providers, including nannies, for 20 hours a week of early education for all three- to five-year-olds. But parents still struggle to pay for childcare when their kids turn three. Overall, childcare costs a greater proportion of family income in New Zealand than it does in other rich countries. On average, childcare would cost couples with young children a third of their income, and single parents still more.

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The 20 hours a week policy was never adequately funded. When it was introduced, the per hour reimbursement actually reduced government expenditure per child. Many non-profit, small and community providers, particularly those serving low-income families and Māori have gone to the wall. Others – increasingly for-profit, big chains – got around it by demanding more than the 20 hours enrolment, and charging far more for those, and introducing additional charges.

The private childcare market is also why – despite its expense – the availability and quality of childcare is poor. Since the 1990s, Aotearoa New Zealand has had a world-leading curriculum for early childhood that engages Māori and Pacific models of learning and stands to promote wellbeing for all children. But the ECE sector’s despairing workforce – and the 73 percent of providers unable to find qualified staff to fill roles – cannot realise it.

The shortage of teachers cannot be surprising when qualified ECE teachers are financially better off working in a supermarket.

Labour was right to prioritise additional funds for childcare. Early childhood education, when right, is one of the best investments a government can make. Quality early education for low-income families can not only reduce families’ expenses, it enables parents to work more, reducing child poverty directly. It can also significantly improve child development, addressing causes of poverty, and reducing the need for remedial health and educational services longer-term. But in a poorly-regulated private market, increased spending doesn’t necessarily go to addressing the availability, quality, or even affordability, of childcare.

Regulations do not limit the availability of childcare; in fact, typically the reverse is true. New Zealand already has a high ratio of toddlers to teachers. Can you imagine looking after 10 two-year-olds on your own? What stops more places becoming available is chronic understaffing. The shortage of teachers cannot be surprising when qualified ECE teachers are financially better off working in a supermarket.

When he was education minister, Chris Hipkins did set the ambition for pay parity between kindergarten and other early childhood educators. But many providers don’t have enough money to fulfil this, and pay still lags behind that of primary school teachers.

In addition to the extended subsidy, the Ministry of Education has put aside an extra 0.6 billion for ECE teacher pay, showing they recognise the sector is at breaking-point. They have also given themselves almost a year to implement several new rules and regulations, such as hourly charging, to try fix the fundamental failures in the childcare market. They should instead take on a direct role in recruiting and employing teachers and ensuring sufficient, quality early childhood education places.

In contrast, New York City rapidly recruited 2000 qualified teachers to deliver its universal pre-kindergarten commitment. It used its public spending power and scale to offer starting salaries more than 50 percent higher than the national average, and establish a partnership with the local public university to train and develop teachers. By providing a public early education system, government could not only slow inflation in a major area of family spend, but also raise pay and conditions in a major low-wage sector, again addressing poverty and the cost of living at its root.

Unlike either big-chain providers, or small non-profits, government can borrow at low rates and invest long-term in providing quality education. Excellent environments for children, low ratios, and professional development for staff are all possible when one can look beyond monthly cash flow, or profit margins. Investing in this quality is crucial to get the benefits of early childhood education. The major expansion of subsidies in childcare markets in Ontario, Canada actually led to increases in disruptive behaviour and emotional instability among children.

Quality isn’t just about more regulation of the market. In England, researchers found the benefits of attending a nursery school varies enormously by centre – but neither qualifications, nor ratings made by the national inspectorate, predict those benefits. In the US, when states increased regulatory requirements, providers met them by cutting pay.

That said, a public, universal early childhood education does not mean a one-size-fits-all model run from Wellington. In Denmark, local authorities work with the community to ensure there is a full-time, quality early education place available for each child from age one, just like we already do for primary school from age five. They work with a union to develop early childhood teachers as skilled professionals. Parents still choose where to send their children, and a third of places are provided by independent organisations. In Aotearoa, those could include iwi.

Countries with public early education systems, such as Denmark, spend only marginally more than New Zealand. But they get far better, more fiscally sustainable value for that money than they would subsidising a private market, even one with a new regulatory regime. Hipkins was quick to ditch Labour’s plans for national unemployment insurance. Building a public childcare system instead would not be a mere budget frill, but as US President Joe Biden has argued, a genuine investment in the country’s infrastructure.

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