It's time for child care for all - Des services de garde éducatifs pour tous

The Centre for Future Work released a report on November 25, 2020 that identifies and quantifies the economic benefits that will come from putting in place a new Canada-wide universal system of early learning and child care (ELCC). The report, prepared by economist Dr. Jim Stanford, Director of the Centre for Future Work, concludes that universal ELCC is a social program that quite literally pays for itself. What follows is a summary of the report, prepared by Child Care Now.

Introduction

In its September 2020 Speech from the Throne, the Government of Canada has committed to significantly expand early learning and child care (ELCC) services across the country.

As Canada strives to rebound from the economic damage and social disruption of the COVID pandemic and associated recession, such an investment could not be more urgent.

Child care advocates, business leaders and organized labour agree that a system of universal ELCC would benefit children, parents, workers, employers, the economy and society as a whole.

For women, in particular, access to high-quality ELCC is crucial to their ability to seek and sustain paid work. Universal ELCC is the key to unlocking women’s economic power.

COVID hit women and women’s employment first and hardest. The pandemic has exposed the fragility of the existing patchwork of ELCC services and underlines the compelling need to target economic reconstruction initiatives to address women and the needs of those most vulnerable.

This report provides broad estimates of the economic benefits of a universal ELCC program, projecting:

  • additional economic activity from expanding ELCC services
  • increased employment and earnings for women (especially mothers)
  • long-term economic, social and fiscal benefits from improved lifetime capacities of children

It demonstrates the huge impact universal ELCC[1] will have, creating:

  • more than 200,000 new jobs over ten years in regulated child care
  • 80,000 additional jobs in industries that support and supply ELCC
  • a $70 to $115 billion boost to annual GDP after ten years
  • an added $17 to $29 billion in government revenues per year, split evenly between the federal and provincial governments
  • greater equality, and a boost to rural and regional economic development
  • long-term health and well-being benefits for future generations of Canadians – and future fiscal savings

As post-COVID priorities are confirmed, there is no more strategic and redistributive investment the Government of Canada can make than to introduce universal ELCC.

Economic Benefits of Universal ELCC

The report identifies three broad categories of economic benefits that would flow from the introduction of a universal ELCC system:

A). Direct jobs and economic activity associated with provision of ELCC services.

B). Increases in women’s labour force participation and employment thanks to better availability of quality, affordable child care.

C). Long-term benefits from improved capacities of children who participate in high-quality ELCC.

Here are broad estimates of the scale of benefits in each of those three categories:

A.) Direct jobs and economic activity from expanded ELCC provision.

In 2019, Canada’s underdeveloped child care system employed 150,000 workers, most of them women. The sector contributes $6.8 billion annually to GDP.  

A universal ELCC system would require 1.2 million additional regulated spaces by 2030 to provide space for the vast majority of 1-5 year-old children. To provide these services 211,000 new jobs will be created, with the workforce growing at a steady rate of more than 20,000 jobs per year.

By the end of the decade, these direct new jobs alone would increase employment by about one per cent and grow annual GDP by almost $10 billion – a boost of nearly one-half percentage point.

Because ELCC is labour intensive, and wages are relatively low, the spillover benefits and employment multiplier effects are significantly higher than for most other industries.

Upstream purchase of supplies and services, including specialized equipment and materials, utilities, maintenance, accounting and training, will generate $2 billion in increased demand over ten years, supporting 16,000 jobs.

In the construction sector alone, expansion of ELCC would require an estimated $30 billion in new spending on construction and renovations, creating some 8,000 long-term construction jobs.

Downstream, consumer spending by ELCC workers will have an even greater impact. Demand for goods and services (from housing to retail to hospitality to personal services) by newly-hired ELCC workers (and those in the industry’s supply chain) will further stimulate production, employment and incomes, boosting annual GDP by $7.4 billion after ten years and supporting more than 60,000 additional jobs.

The impact of universal ELCC will be felt across the country, benefiting people in every province, meeting families’ needs, creating employment, spurring construction, generating new business for supply chains and strengthening consumer demand.

But the greatest benefits will flow to those provinces and regions where existing ELCC services are weakest. The Prairie provinces will be the biggest winners, receiving one-quarter of the new spaces and growth in employment. Ontario will also receive a higher portion of spending than its population dictates, because it too has historically under-invested in ELCC. Quebec and PEI have the strongest systems today, so they will experience a more modest expansion in total ELCC activity (but presumably will also receive fiscal benefits in recognition of their existing, larger programs). And even they will see significant growth in access to quality care as well as spending power and job creation.

Within provinces, smaller towns and rural areas benefit disproportionately. Many smaller communities lack any formal group ELCC, so they will gain a disproportionate share of new spaces, new jobs and new spinoff benefits, contributing greatly to their prospects and to regional economic opportunity across Canada.

B.) Increasing Women’s Labour Force Participation and Employment

Access to high-quality ELCC gives parents, especially mothers, more capacity to seek and maintain paid employment. This is particularly true for low-income households, for whom affordable ELCC creates new opportunities to increase incomes and boost equality.

The gap between women’s and men’s participation in the labour market has narrowed somewhat in recent years. It remains widest, however, for women in prime parenting ages (especially in their 30s). And the most persistent barrier to closing that gender employment gap is the lack of access to quality ELCC.

Among young workers, aged 18 to 25, as many women as men are gainfully employed. But participation rates among women fall after age 25, as they enter prime parenting years, and don’t recover until their late-40s. The resulting consequences for women are serious and lifelong. And the consequences for the economy and society are also far-reaching.

The highest labour force participation rates for women in their prime parenting years are in the provinces with the strongest regulated ELCC systems in Canada – and the highest proportion of children enrolled. In Quebec, with 62.5 per cent coverage, and PEI, with 50 per cent coverage, participation rates among women between the ages of 25 and 50 are significantly higher than in other provinces. In provinces with weak ELCC systems – Manitoba, Alberta, Ontario, Saskatchewan, and Newfoundland and Labrador – participation rates lag far behind.

Cross-province comparisons suggest that a 10 percentage point increase in the portion of children enrolled in ELCC results in an increase of up to 1.7 points in labour force participation among women aged 25 to 50. This finding – confirmed by Quebec’s positive experience when it introduced its provincial ELCC system – demonstrate the enormous spinoff benefits of universal access to ELCC.

In 2019, with 35 per cent of children enrolled in regulated ELCC, the participation gap for women in their prime child rearing years was 8 per cent. Increasing ELCC coverage to 92 per cent could eliminate that gap. That would bring 500,000 more women into the labour force.

Even if a universal ELCC only reduced that gap by half, we can expect to see 250,000 more women participating in the labour market.

As well, the expansion of accessible ELCC services will allow many women now working part-time to work full-time. Women are much more likely than men to work part-time, but a gain this gap is smaller in provinces with more robust ELCC systems. Closing the gender gap in full-time employment would result in 150,000 to 300,000 additional (full-time equivalent) female workers.

Together, more women working and more women working full-time would add the equivalent of 390,000 to 780,000 workers to the labour force, and most of those women would find employment.

The resulting growth in employment brings a wide range of economic and fiscal benefits. Assuming unemployment rates comparable to other women, the enhanced supply of women workers would produce additional goods and services adding $44 to $88 billion in new GDP per year.

Higher output, in turn, increases family incomes and government revenues. Family incomes are projected to rise by $22 to $45 billion per year. Counting both taxes and social contributions (including EI, CPP, and workers’ compensation premiums), government revenues would grow by $17 to $29 billion each year, split roughly evenly between the federal and provincial levels.

That is more than enough to cover the costs of providing the universal ELCC program in the first place. In other words, universal ELCC is a social reform that literally “pays for itself.”

The growth in employment, incomes and government revenues that results from an increase in women’s employment will occur over several years as the universal ELCC is implemented. On an annual basis this increase in women’s participation in the labour force will contribute from 0.2 to 0.4 percentage points per year to Canada’s GDP – on top of the GDP gains that arise from building the ELCC system itself.

C.) Improved Capacities of ELCC Participants

The most important, but difficult to quantify, category of economic benefits arising from the provision of universal, high-quality ELCC is the lasting impact on the capacities of the children who receive these services in their crucial early years.

Many studies demonstrate the positive impact on cognitive and social skills, improving health, increasing employability and social cohesion, reducing inequality and enhancing life success. Rigorous research in Canada and elsewhere shows the benefits are greatest among children from low-income and racialized families.

Children who receive high-quality ELCC benefit from increased earning capacity. Over their lifetime, research suggests ELCC participant eventually enjoy increases in average lifetime earnings of 1.3 to 3.5 per cent. Applied population-wide, the implementation of universal ELCC would thus translate to $15 to $35 billion per year in enhanced earnings.

Those higher incomes among ELCC graduates reflect increased productivity, only some of which is reflected in this hike in earnings. Total aggregate gains in GDP of $30 to $70 billion per year can be expected.

Better health, wealth and well-being result in reduced spending on health care, social services and public safety. Studies show, for example, ELCC participants are more likely to graduate from high school. That results in reduced public health care expenses, potentially worth $2.5 to $5.5 billion per year. Other social and fiscal benefits could be even more significant.

Conclusion

High-quality ELCC benefits children, parents, society and the economy, spurring job creation and GDP growth. For women, in particular, and for low income and racialized families – and rural communities – it’s a game changer.

Combining the direct and indirect economic benefits from the expanded provision of ELCC services with the economic expansion resulting from increased participation by women in the labour market, annual GDP would be $63 to $107 billion higher after ten years, supporting 650,000 to 1 million additional jobs. The broader, more long-term benefits from the improved well-being of ELCC children are on top of that.

Earlier efforts to create a universal ELCC have faltered, in part because of concerns about costs. But this economic analysis demonstrates not only that ELCC “pays for itself” but its downstream economic benefits make it a “no-brainer.”

In the wake of COVID, Canada needs the economic benefits of ELCC more urgently than ever. Now is the time for the federal and provincial governments to act together to make it happen.

[1] The analysis assumes:

  • universal ELCC services are phased in over 10 years
  • regulated group care will be accessible to virtually all children aged 1 to 5
  • take up will reach 92 per cent, growing from the current 35 per cent
  • new spaces build on the existing network of regulated child care