Personal Finance

Canada’s Federal Budget 2022: What the National Childcare Program Really Means for Canadian Parents

What the National Childcare Program Really Means

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When Canada’s federal finance minister Chrystia Freeland tabled the 2021 budget in the House of Commons in April, childcare advocates and parents across the country rejoiced. After decades of discussion and proposals drafted by various governments promising to create an affordable national childcare program, Freeland told reporters, “We’re finally going to get it done.”

While the subsequent feel-good headlines touting $10-a-day childcare likely came as a salve to parents of young children — many of whom had to scale back on paid work (or forgo sleep) to care for their kids during pandemic lockdowns — it’s important to look at the fine print before cracking open the champagne to celebrate.

To help you understand how the budget may change the future of childcare in Canada, we’ve outlined what exactly the feds are proposing, why it makes sense from an economic standpoint, and what it could mean for you.

What’s on the table

The 2021 budget proposes the following in terms of childcare:

  • Federal investment of $30 billion over five years. This includes $2.5 billion to support Indigenous childcare providers and $29.2 million to enhance childcare accessibility for kids with disabilities.
  • Ongoing spending of $9.2 billion per year. The amount scales up annually over five years, starting with $3 billion in new funding for 2021-22. Legislation to enshrine that spending will be introduced this fall.
  • A 50% reduction in average childcare fees by the end of 2022.
  • Average childcare costs of $10/day across the country by 2026.

To access any of this funding, each province/territory (aside from Quebec, which already has $10/day childcare) must sign a bilateral agreement with the federal government. This is necessary because childcare is currently a provincial, not federal, responsibility.

Furthermore, once a province signs the bilateral agreement, it will have to show it is meeting the above fee targets in the required timeframe to continue receiving funding annually.

“The provinces need to sign on. They need to agree to the parameters we’re setting up around quality, around affordability, around the meaningful impact on people’s families,” Prime Minister Justin Trudeau said in a YouTube interview with Today’s Parent. “But that money is there, and we already know there’s a number of provinces very, very excited about moving forward quickly.”

Why it’s a big deal

As the pandemic has shown, daycare is an essential service. Without access to daycare during the lockdowns, hundreds of thousands of Canadian parents — primarily women — left the workforce or reduced their hours. The impact of the resulting recession, commonly referred to as the “she-cession,” has underlined the importance of accessible, safe, quality childcare to keep the engines of the economy running.

“Childcare is a really important pillar of the economy,” says Katherine Scott, senior economist and director for gender equality and public policy work at the Canadian Centre for Policy Alternatives. “But what we currently have is an incredibly expensive patchwork system — the cost of childcare is just short of paying for shelter and more expensive than post-secondary education — so many families go without.”

And, as any parent who has tried to secure a daycare spot in a large Canadian city this century knows, the private sector has failed to provide an adequate number of quality spaces — regardless of price. That’s why a stable source of public funds earmarked for childcare would be a game-changer.

“This would be a critical investment — for younger families in particular — who are already being squeezed with the high cost of housing,” says Scott, adding that Canada lags behind other OECD countries when it comes to spending on early childhood education as a percentage of GDP. “We’re seeing families not having kids because of the high cost of childcare.”

Of course, the benefits would be felt across the economy, not just among young families.

The economic case for a national childcare program

While critics may balk at $30 billion in new federal spending, suggesting that the cost of creating a national childcare program is unaffordable and would leave the next generation to pick up the tab, that isn’t an accurate assessment, says Scott.

“That argument simply doesn’t hold water,” she says. “In Quebec, for example, the rate of employment among mothers has gone up, and the taxes generated from their labour market participation offset the cost.”

Here are some of the specific ways the Canadian economy would benefit from a national childcare program:

  • Higher employment. A national early learning and childcare program would facilitate increased labour force participation and employment for up to 725,000 Canadian women who are in their prime parenting years, according to research by economist Jim Stanford, director of the Centre for Future Work (CFW). The national program would also create more than 200,000 jobs in childcare centres, and 100,000 jobs in industries that support and supply the early learning and childcare sector, the CFW report finds.
  • More discretionary income, which goes back into the economy. These new workers, as well as families paying lower childcare fees, will have more discretionary income to spend elsewhere in the Canadian economy on anything from homes to food, and cars to clothing. This is especially true for lower- and middle-income Canadians, says Scott, as they are less likely to save the extra money or spend it on travel outside of Canada.
  • Increased GDP. With higher employment, annual Canadian GDP would be $63 billion to $107 billion greater (by the end of a 10-year implementation period) than it would be without expanded childcare, the CFW report indicates.
  • Greater tax revenue. As a result of the increased economic activity, $17 billion to $29 billion in additional revenue would go to federal and provincial government coffers each year, finds the report. This is far more than the amount of spending proposed to fund a national childcare program.

“The economics are incontrovertible,” says Scott. “Affordable childcare truly does raise all boats.”

What does it mean for you?

If you’re a parent who’s hoping for a quick reduction in daycare fees, you may have to temper your expectations.

For one, it’s not yet clear which provinces will sign on to the deal. Some jurisdictions that have indicated their support — such as B.C., Nova Scotia and Newfoundland —could receive increased funding as early as the end of this year. Others, including Alberta and Ontario, have appeared less keen, suggesting that the feds’ proposal doesn’t offer enough flexibility to meet the needs of all parents.

But even among provinces that do sign on right away and receive funding promptly, much will depend on how much of a non-profit childcare infrastructure already exists locally. Funding will go toward increasing spaces and boosting wages for the childcare staff who work there, not just cutting fees.

“It’s important to understand that each province is at a different place,” says Scott. “We need to come up with ways to make sure it’s the right investment — that the money goes into system building.”

In other words, this is a massive undertaking and will take time — just as it took time to create our public school and health care systems.

But there are reasons to be optimistic. The sum of dedicated public funds on offer is significant, and the Canadian public is ready for action.

“The level of fatigue and annoyance with the perennial exchange of blame back and forth between governments is very high,” says Scott. “I think you’ll start to see Canadians across the board mobilizing to support this program, and provinces that turn their back on this money will pay the price at the ballot box.”

Michele Sponagle

Michele Sponagle is a prolific, award-winning journalist who has contributed features to a wide range of top media outlets, such as The Globe and Mail, Washington Post, Ottawa Citizen and Maclean's. She has been an avid investor since she was 18 years old and has written about personal finance for publications like the National Post and Chatelaine.

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