Rounding it up
The cost of childcare has been increasing exponentially over the last several years, placing somewhat of a drag on the economy.
Prime Minister Justin Trudeau has announced a $27 billion plan to subsidize childcare costs nationwide, bringing the rate to just $10 per day for families over the next five years.
While you’re waiting for the plan, you can continue to save by budgeting and checking out free activity options.
If you have kids, you know that there are very few things more important than their development. You want to make sure they’re in the best schools, surrounded by awesome friends and knowledgeable teachers. In the same vein, you want them to be in a great daycare with people who nurture and love them. And you want all of that without paying an arm and a leg, right? Well, unfortunately, it might be difficult to get all those things at once, but that may soon change.
Childcare costs quite a bit, but the Canadian government has committed to lowering that burden. In fact, earlier this year, Prime Minister Justin Trudeau announced an ambitious plan to spend $24 billion to lower the cost of childcare over the next five years. So what does this mean for you? Are childcare costs increasing or decreasing meaningfully? We’ll answer those questions, look at some of the additional programs that are available to Canadians, and discuss other ways you can save.
Are childcare costs increasing in Canada?
Over the last decade, childcare costs across the nation increased exponentially. As of 2021, each family was paying more than $96 per day for childcare, in addition to all the other costs that come along with raising children, from clothes to sports to the obvious need for ice cream. High childcare costs are a hit to the pocketbook of any Canadian burdened with them. It makes it more difficult to make ends meet and may force parents to choose less desirable options for their children’s care.
The COVID-19 pandemic only exacerbated the problems that already existed with childcare costs in Canada.
As parents shifted from heading to the office each day to working from home, they required more space and a quiet place to work. Children, unfortunately, were forced home as well – often for many weeks or months at a time – as a part of efforts to keep the virus from spreading. This caused parents to split their time between watching their kids and working, if they could work from home at all. If they couldn’t work from home, it left them with very few options for someone who would take care of their children.
Households with two guardians were better off but, in most cases, ended up having one parent simply stop working altogether. This type of scenario makes making ends meet harder and is bad for the economy.
In Canada, the rise in childcare costs has outstripped inflation by more than 20% since 2016. Across the United States, childcare costs have ballooned by more than 41% since the start of the pandemic. These are staggering increases for households to attempt to absorb with all the other pressures facing modern Canadians, including rising food costs, skyrocketing rent, and a stagnant economy threatening wages.
And there is an additional element here that often gets missed: economics. Economies function best with high, gainful employment, high wages, and a broader national economy that’s able to produce things the world wants. When workers are removed from that equation – either because of the pandemic or because of other reasons – economic production suffers.
The pandemic aside, high childcare costs drag on an economy because they force households to buy fewer things. Yes, they do allow for childcare providers to make money, but the government estimates the loss of economic activity from paying higher prices far outweighs the amount childcare providers might “lose” if families are paying more (more on this loss later).
What we’re talking about here isn’t just an economic problem for parents who currently send their children to childcare – it's an equity and access problem. Parents who are living paycheque to paycheque or have inconsistent pay may not be able to access childcare at all at current prices. A hit of $96 per day is simply impossible for many families making a solid wage, let alone those who aren’t.
Another key here is the quality of the childcare received. Yes, anything is better than having children with little to no supervision, but the government estimates that the economy gains about $6 for every single dollar spent in high-quality early childhood education programs. That’s a return on investment worth taking.
The answer for increasing childcare costs, at least partially is…
…to lower the price of childcare. How? By subsidizing it. The government of Quebec has for many years had a robust subsidy system for childcare, lowering costs for many parents.
The government of Canada took notice, and in March, Prime Minister Justin Trudeau was able to rally enough support among the provinces to completely subsidize childcare and early childhood education. The ambitious goal is to lower childcare costs to just $10 per day over the course of the next five years. The plan would also create 86,000 new childcare spaces by 2026, further reducing the demand pressure on childcare. The prime minister also estimates that the plan will allow more than 240,000 additional people to enter the workforce due to the number of people who no longer have to stay home to care for children.
The government also argues that the investment in childcare can be seen as a measure to fight inflation, as money that was once headed for childcare is now directed at products and services. Additionally, the increase in workforce will help spur the economy. The government believes that the plan will essentially pay for itself in additional economic activity.
In practice, childcare is delivered by the provincial governments, so it was necessary to secure their support. Ontario proved to be the final holdout as it wanted more financial support. The plan would attempt to lower costs by 25% by April 1, 2023, with an additional cut to come later. Provinces are able to keep their current systems for childcare delivery but agree to certain wage and fee requirements.
Too Good to be True?
Perhaps – but it remains too early to know for sure. One of the cons that many throw out is the lack of space for childcare. In Quebec, for instance, where subsidies childcare has been a hallmark for nearly two decades, families are often stuck on long waiting lists for one of the publicly-funded, subsidized childcare centers. Private centers are available but tend to be more expensive and of lower quality. The Trudeau plan tries to solve this by adding more spaces for children, but the plans for this expansion remain somewhat opaque.
Second, the plan tends to run counter to the Canada Child Benefit–or CCB–which was expanded in the last several years. Under the plan, the Canada Revenue Agency makes monthly payments to families to help with the cost of raising children. The maximum is just north of $6,700 a year for families who qualify before additional provincial subsidies. This amount, however, is only available to families making just over $32,000, meaning many middle class families are still left out. The goal of the plan is to provide funding for families to spend as they see fit on their children, as opposed to providing straight subsidized care. Some argue this is a better way to get families the help they need.
Finally, the plan only covers registered, public childcare facilities, which means that a number of families who rely on family members to help with childcare are left out.
Ways You Can Save on childcare costs
While you’re waiting for the plan to kick in, there are a few ways that you can save on your childcare costs.
The best thing you can do is start your childcare search early. Make sure you understand exactly what you want and need; there are a whole host of options from in-home daycares to large centers.
Get to know the other parents at the childcare you choose. While you may be paying the centre your children are currently in, you may be able to save on other childcare options. Additionally, you may be able to share childcare if need be.
Children are a large budget item. Whether it’s clothes, sports, or other activities and needs, they cost a lot of money. A proper budget is key to ensuring you can provide for what they need and still have some extra spending money at the end of the day.
There are lots of ways to cut your budget outside of childcare. Check out the programs offered by local recreation centers, parks, and other government programs. There’s no need to entertain your kiddos on the weekend with activities that cost an arm and a leg.
Final thoughts on increasing childcare costs
Over the course of the next five years, if everything goes to plan, you should see the cost of childcare go down. While there are still many things that need to be sorted out with the broader subsidy plan, you can begin to count on lower childcare costs. As it stands now, you’ll want to ensure you have childcare budgeted appropriately and plan for the future.
Dan is a runner and writer living in the Washington, D.C. area, where he currently works for a financial services trade association as the Communications Director.