Rethinking the Welfare State: The prospects for ... - e-Library

Rethinking the selfare state 124
care choices will approach optimality. 21 According to this line of reasoning, significant
intervention by government is not required beyond the provision of a child care tax credit
for low-income families, so allocated for reasons of distributive justice. 22 There are
several possible responses to this argument.
Information failures
As discussed in other policy contexts, endemic information asymmetries between
consumers (parents) and suppliers of child care services justify some form of government
intervention aimed at ensuring that parents make fully informed choices. The child care
market offers a wide assortment of care. Services range from “protective custody” (or
more pejoratively, “child storage”), to care that emphasizes children’s development,
education and socialization. Since parents cannot easily observe the child care
environment or monitor quality, there is a significant problem—both theoretically and
empirically—with sub-standard provision of services, especially among for-profit
providers in jurisdictions with very little regulatory oversight in the provision of child
care. 23
Paternalism
Even assuming that information asymmetries could be redressed, a second rationale for
government intervention sounding in paternalism relates to the character of the fully
informed choices that some parents may make for their children. Because children cannot
make decisions respecting the consumption of child care services, they are dependent
upon their parents to make these decisions for them. Generally, it can be assumed that
parents will act to vindicate their children’s best interests, but there may be situations
where the child care decisions of parents may be driven more by cost considerations,
convenience, and whether parents share the values of the child care provider than by the
best interests of their child. 24
“Second-best” intervention
Government intervention in the provision of child care may also be regarded as a
necessary corrective to distortions created by other forms of government intervention. For
instance, the fact that governments typically tax labour income but not the imputed
income of self-performed child care will distort optimal private decisions. As a result of
this asymmetry, it may be privately irrational for parents to continue working in the wage
economy for pre-tax dollars and to pay for formally provided child care with after-tax
dollars, resulting in a misallocation of resources dedicated to child care that is biased
towards the use of self-performed care or informal care provided by relatives and
friends. 25 Further, government social assistance programs may also distort optimal private
decisions by subjecting parents who leave welfare rolls to high marginal rates of taxation.
As a consequence, parents in receipt of welfare assistance may decline to look for work
or obtain job training because there is little financial advantage to working and paying the
costs of child care services compared with receiving assistance and caring for one’s own
children. Lisa Powell determined that a single mother in a typical Canadian province in