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Free licensed child care. It sounds like a parents’ dream. But look a little closer at the Government of Ontario’s recently announced plan to deliver free licensed child care for preschoolers, and flaws emerge. Beyond the arguably late starting age of 2½ years, this initiative could have unwelcome consequences due to its limited accessibility and its potential to create excess demand for licensed preschool care.

Certainly the need for a solution is great. Gradual rises in dual-income-earner families and the employment rate of women in Ontario have led to higher needs for child care over the past few decades. But cost is probably the main barrier to access. According to the latest family survey by Statistics Canada, about 43 per cent of parents have used some sort of child-care arrangements in Ontario – the most expensive province for child care. And Ontario parents faced a further 9.9-per-cent increase in prices for child care in January, corresponding to the minimum-wage increase

Beside affordability, access to high-quality, early childhood care is important due to its potential positive impact on school readiness, cognitive development, and social skills. Therefore, the success of an affordable child-care approach relies on maintaining high-quality care while ensuring its accessibility to everyone.

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If implemented as planned, the Ontario initiative would expand the availability of free licensed full-time care for preschoolers, resulting in a significant increase in demand while still not providing universal accessibility.

The demand pressure would result from the cost decrease – an average $17,000 annually – for full-time licensed care. As it is, those spaces are available for only about 34 per cent of preschool children from age of two-and-a-half until they are eligible to start kindergarten in Ontario. Where would the influx go?

Other types of arrangements are available, including unlicensed home care and private care, nannies and unpaid relatives, such as grandparents. No-cost child care makes the licensed preschool-care arrangement more attractive than others. However, some parents, for example those working irregular hours, could still have to resort to unlicensed care of varying quality since 98 per cent of licensed child-care centres provide inflexible care in terms of the availability of hours and days.

What of the wider economic benefits? Put into practice, this program could influence employment decisions of stay-at-home parents providing care for their young children who could switch to full-time employment. It is reasonable to assume that many of these decision makers are mothers. More involvement of mothers in the labour market could help reduce gender inequality and potentially generate higher income tax revenue for government.

However, the economic impact depends on the capacity of licensed care to absorb higher demand. Taking into account an additional 50,000 new spaces as envisioned by the government, two in every three potential preschool children would still have no access to a free child care in 2020. Such a targeted system, therefore, is unlikely to improve employment and economic outcomes in Ontario.

Higher fertility rates are another potential benefit of such programs. Ontario’s fertility rate is about 1.5 per cent – below the replacement rate of 2.1 per cent required for population stability. A significant reduction in the cost of child care could encourage higher fertility as mothers with preschool children can afford to return to the labour market sooner. However, the fact that child-care costs remain exorbitant for children below 24 months or over four years will limit this beneficial effect.

To move toward universal child care to benefit Ontarians and help offset partially its fiscal cost, Ontario should offer affordable child care to everyone starting at the time when maternity leaves end. As proposed by a C.D. Howe study, this can be achieved by considering a generous non-refundable tax credit for child-care expenses, regardless of age and type of care arrangements, to better meet parents’ needs.

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Parisa Mahboubi is a senior policy analyst at the C.D. Howe Institute

Editor’s note: An earlier version of this article incorrectly stated that there are preschool licensed daycare spaces for 24 per cent of all children aged two to four in Ontario. In fact, those spaces are available for about 34 per cent of preschool children from age of two-and-a-half until they are eligible to start kindergarten in Ontario.
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