Labor reveals price tag for resolving childcare tensions

The childcare policies unveiled by Labor yesterday are eye-poppingly big: $4 billion across the forward estimates on subsidies. Half a billion to increase the pay of childcare workers over the forwards — but rising to $10 billion over the next decade as a long-term commitment to a 20% real increase kicks in. It’s a colossal intervention in the sector, and one that deserves more debate than purely about Labor’s political tactics.

Not that the tactical debate isn’t important. Having done the political hard yards of putting in place a range of unpopular tax measures to generate additional revenue, Labor has been relentlessly focused so far in the campaign on telling voters of all the goodies they’re going to get from them — in particular, in health.

Childcare subsidies continues the theme of telling voters the higher taxes (which fall predominantly on high income earners and wealthy seniors) come with the benefit of more affordable basic services. The Coalition wants to keep voters’ minds focused on the tax part of the equation, not the services, having admitted they can’t keep up with Labor’s spending commitments. And Labor’s pitch is primarily to low income and — partly — middle income earners.

The subsidies package will make childcare free or as near as for households making up to $70,000, then tapering back to 85% for households making up to $100,000, then tapering back to 60% for those making up to $175,000. All recipients of current subsidies will get over $1000 more a year.

The package would, at least for low income households, complete the transformation of childcare into a Medicare-style service. The next battleground will be a childcare version of “out of pocket expenses” driven by the charging of fees above the current hourly fee cap, though Labor promises the ACCC will be charged with pursuing “excessive fee increases and unscrupulous providers”. What constitutes “excessive” when the government pumps $4 billion in extra demand into an industry isn’t clear.

Curiously, it was not the use of taxpayer money to increase demand in the childcare industry that drew the wrath of employers — after all, they’re the beneficiaries of workers who will have more affordable childcare options. It was Labor’s commitment to fund an increase in wages for childcare that drew criticism.

“The wages of childcare workers are paid by their employers, not by the government,” Innes Willox of the Australian Industry Group thundered. Worse, he warned, it would encourage workers elsewhere to demand wage rises. “How would unions or workers in other sectors be stopped making claims against taxpayers and ­employers for a similar 20% wage increase?”

James Pearson of ACCI echoed the complaint about “longstanding union demands for wage increases in other industries”.

It’s no wonder we have entrenched wage stagnation and our industrial relations debate hasn’t moved at all in a decade that employer groups react with anger to a proposal for government to fund increases in salaries in a targeted sector because unions might “make claims” for wage rises elsewhere. That’d be the unions that in a number of industries have barely been able to prevent their workers from going backwards in real terms for the last six years.

Labor’s 20% wage increase is designed to support the long-term transition of childcare to a more professionalised, if not fully professional, career, driven by a National Quality Framework that has increased staff-child ratios and qualification requirements for childcare workers to deliver higher quality care and integrate care into early childhood education.

The childcare workforce has notably lifted its qualifications but remain poorly paid despite the massive increase in government subsidies to the sector in recent years, with one in five early education workers reported to be considering leaving in 2016. The Centre for Independent Studies argues that the additional regulatory requirements of the National Quality Framework (NQF) should be stripped away to make childcare cheaper. That’s unsurprising for a right-wing think tank, but it also asks an important question:

Governments at all levels must also decide if the primary policy objective of supporting childcare is female workforce participation or the early education of children — as the regulation and funding of childcare currently work at crosspurposes.

Labor tries to address this tension with its wage subsidy — thus illustrating just how expensive it is to reconcile the two objectives. It has fully signed up to the early education agenda — much more so than the Coalition. It already has a $1.75 billion proposal to extend funding of preschool to three-year-olds (the only response from the government so far has been the weird LNP senate candidate who suggested it was some sort of socialist conspiracy). 

Labor’s plan would also further enhance a notable tendency of the current government — to pump more money into female-dominated service industries, driving up female employment, female participation and female wages growth via health and care industries like aged care and childcare. As Australia becomes ever more a service economy, its need for some services grows apace.