Childcare, the 'business case' and economic development: Canadian evidence, opportunities and challenges.

• Author: Prentice, Susan
• Position: Report

Abstract

This paper reviews the evidence, opportunities, and challenges associated with the business case for childcare in Canada. In Canada, as in the US, childcare is increasingly framed by the state, business spokespeople, and social actors through economic idioms. In Canada, the business case for childcare authorizes more policy attention and service development, as well as a higher public profile. Concurrently, the approach raises empirical questions, alongside policy and political concerns, about the capacity of the approach to promote a national childcare system.

Introduction

David Dodge, Governor of the Bank of Canada, has observed that "more should be done to convince politicians of the value of investment in early childhood development" (Dodge, 2003, p. 8). Despite his apparent heterodoxy, Dodge is expressing an increasingly common view: enhanced public spending on childcare is a solid investment, and should be a higher social and political priority. This marks a near-reversal in the realm of policy debate, if not yet policy-making. The human capital approach has become "one of the main Canadian drivers" for early learning and childcare, and the business case is equally prominent in the US (Friendly, 2006, p. 8). (2)

Historically, spending on childcare has been conceived as consumption, an immediate cost to the economy. This perspective is surprising, given the well-known capacity of childcare to support women's employment and its intimate relationship to labour policy (Pierson, 1986; Waldfogel, 2002). Nevertheless, thinking about childcare in North America has been brought to a paradigm shift. The first significant challenge to the traditional approach was child development and 'brain science' research, which convinced observers from economics, politics and health to "embrace the idea that high quality early learning and child care is the foundation for lifelong learning and fundamental for a prosperous twenty-first century society" (Friendly, 2006, p. 7; McCain & Mustard, 1999; Shonkoff & Phillips, 2000).

The tipping point came from analyses of the economic effects generated by childcare. A well-known figure associated with this view is James Heckman, who has vigorously argued for the strong contribution childcare makes to human capital and productivity (James Heckman, 2000; J. Heckman & Masterov, 2004). The discovery of childcare's positive effects on human capital (both child and adult) means positive returns can be realized from social spending on childcare services. As arguments drawing on human capital and brain science ('the years before six last the rest of their lives') aligned, the combination proved potent. Promoters of early childhood care and education now include business leaders, bankers, economists and middle-of-the-road politicians, significantly expanding an advocacy community which had been made up primarily of feminists, the labour movement, and early childhood educators (Prentice, 2001; Timpson, 2001).

Economic arguments are now more widespread than earlier justificatory frames--such as gender equality or work-family balance. When social policy spending is characterized as investment, it has the effect of reorienting decision-makers away from a narrow focus on immediate costs and towards a longer-range perspective on social return. In an era of restructuring and new approaches to social risk, investments in the future seem like the "optimal anchor" for the modernizing redesign of welfare states (Jenson & Saint-Martin, 2006).

Under the business case, significant service expansion is occurring, and the policy status of childcare has risen. Childcare is increasingly seen as a prime site of investment and opportunity, and public spending on childcare is increasing in both the US and Canada. This is one of the chief benefits of the 'business case' for childcare, and one of the main reasons social movement advocates have promoted the perspective.

In this paper, I review and contextualize Canadian evidence about the business case and childcare, and then explore the opportunities and challenges associated with the investment frame. Alongside identifying promising outcomes and strengths, I raise concerns about the empirical, strategic and political implications of the business case.

Economic Evidence--Canada

Economic research increasingly finds economic benefits from spending on childcare and early childhood education services. Much of this literature, in both Canada and the US, makes bold conclusions. With titles such as "Exceptional Returns" (Lynch, 2004), "Early Childhood Development: Economic Development with a High Public Return" (Gruenwald & Rolnick, 2006) and "Investing in our Children is Good Public Policy" (Vancouver Board of Trade, 1999), the message is purposive. The bulk of childcare economic studies are American, but there are a small number of Canadian contributions to the burgeoning literature.

The Canadian landmark study is the 1998 Benefits and Costs of Good Child Care, written by University of Toronto economists Gordon Cleveland and Michael Krashinsky. The widely-cited report was initiated by the Child Care Advocacy Association of Canada, and has more than lived up to the promise of its subtitle: "The economic rationale for public investment in young children." Cleveland and Krashinsky's bottom-line conclusion was that the benefits of childcare services had the capacity to "far outweigh the costs" (Cleveland & Krashinsky, 1998a).

The Benefits and Costs of Good Child Care assessed the economic impact of a major investment of public funds to create a universal system of early education and care services. The study calculated the costs and benefits of providing publicly funded early childhood care and education for all children 2-5 years of age--those whose mothers are in the paid workforce, as well as those whose mothers are not. The newly-created system would retain a parental contribution of 20 percent of the total cost, scaled to income. Total incremental costs of developing such a system would be $5.2 billion/year net (all figures in 1998 CDN dollars). The authors assess the additional benefits to children and parents at $10.6 billion/year.

On job creation, Cleveland and Krashinsky project the new universal childcare system would create 170,000 new jobs, but would replace 250,000 unregulated child minders, for a net employment loss. These new jobs are assessed at an average wage and benefit level of $36,000/year, a significant increase over then-current low wages and minimal benefits. Cleveland and Krashinsky focus on productivity benefits, and so do not include employment multipliers in their analysis. Instead, they focus on the gains to be made by young children from high quality early childhood education and care (estimated at $4.3 billion/year) and the much greater benefits from changed maternal labour force participation (calculated at $6.24 billion.) As they point out, parental gains come variously from mothers newly entering or re-entering the labour force; moving from part-time to full-time work; and women's increased lifetime incomes, decreased chances of poverty at the time of divorce or widowhood, and increased financial independence. The political message of the cost-benefit study is clear:

In order to maintain and improve its competitive position internationally, Canada must invest in today's children. Dollars spent on education for young children are far more effective than dollars spent at any other time in a person's life. As the study shows, there's a payback of 2 to 1 (Cleveland & Krashinsky, 1998b , p. 3). The reach of the Cleveland and Krashinsky report is impressive. It has been cited in sources as diverse as an analysis of poverty commissioned by the Calgary United Way (Shiell & Zhang, 2004), a review of child development undertaken by the government of Prince Edward Island, and the OECD's report on Irish childcare (OECD Directorate for Education, 2004).

Drawing on the Cleveland and Krashinsky findings and buttressed by borrowed US reports, the business case has been adopted by a range of Canadian organizations, including population health experts. This approach forms the foundation for the authoritative Improving the Health of Canadians, produced by the Canadian Population Health Initiative (Canadian Population Health Initiative, 2004). That report points out that returns may be as high as $8 for every $1 invested, and stresses that investment in quality child care can increase the productivity of parents as well as improve the outcomes of children who have received early educational experiences (Canadian Population Health Initiative, 2004, p. 54). The Canadian Institute for Health Information summarized that "intensive child care programs, while costly, can be effective and can provide long-term benefits that exceed initial program costs, especially for high-risk children" (Canadian Population Health Initiative, 2004, p. 69).

Population health studies are particularly influential in Canada, with its universal healthcare system. The links between the social determinants of health approach and early childhood care and education are now firmly made. The connections show up in often unconventional contexts. For example, in a recent study of high school graduation rates, the Institute for Research on Public Policy (IRPP) observes that

Much research has demonstrated the remarkable power of quality early childhood care and educational programs to improve a vast range of social outcomes, particularly for socio-economically disadvantaged children: reduced grade retention, higher reading and mathematics scores, increased IQ, higher levels of social competence, higher graduation rates, lower teen pregnancy rates, less smoking and drug use, higher employment and income levels, and lower crime rates (Brownell et al., 2006, p. 21). The IRPP report recommends in favour of childcare, in large part to prevent potential social losses: "These...