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

Rethinking the selfare state 130
Middle-income parents may have the fiscal resources to purchase child care, but not highquality
child care of the kind essential for capturing positive externalities and avoiding
negative ones. For example, Fuller finds that, “based on structural characteristics, the
quality of centers attended by middle-class children was worse, on average, than the
quality of centers attended by poor children.” 68 Fuller speculates that this is largely the
result of the disparities between government expenditures in poor and middle-class
neighborhoods, respectively. This suggests a need for additional resources to be allocated
to middle-income families so that they can purchase higher-quality care for their children.
And, fundamentally, the positive externalities generated by quality early childhood
development are latent in all children, not just the poor: “Once we start considering
ECEC as the first stage of most children’s education, the motivation for universal
services becomes clear.” 69
Problems with program under-inclusiveness are manifest in the recently introduced
reforms to the Australian child care system. In place of direct operational subsidies, the
government introduced Childcare Assistance (CA) and the Childcare Rebate (CR) as
voucher subsidies for families. 70 Although these subsidies eased some of the burden of
child care expenses, their design did not significantly facilitate the purchase of child care
for many parents. Both the CA and the CR are paid up to a specified amount, independent
of the actual fee charged. In places where child care fees are higher, there is a substantial
gap fee which must be paid by parents regardless of income—and only a handful of
parents can afford to pay. The CA is the more progressive of the two subsidies, providing
greater assistance to low-income and multi-child families, but is still insufficient to
address affordability problems for all parents. 71 In response to mounting concerns over
the accessibility of child care services, the government later introduced the Childcare
Benefit, which increases the fee subsidies given to parents using approved services.
These increases are directed disproportionately at low-income, single parents. 72 Child
care in Australia suffers from significant quality problems. 73 At base, Australia simply
does not spend enough on subsidies to encourage broad participation, and where
spending is increased parental choice is reduced to a limited range of services. A welldesigned
voucher system must avoid these pitfalls.
Qualified suppliers
The design challenges of qualified supply in child care are twofold: ensuring good quality
care and avoiding information failures which would undermine that quality.
In terms of quality, a severe tension arises between the two predominant modes of
child care—protective custody versus early childhood education. This tension is brought
into sharp relief by the fact that informal child care arrangements with relatives,
neighbours, friends and nannies (which comport only weakly or not at all with the early
childhood education concept of child care), are so common. With informal arrangements
it is difficult to know what ex ante entry restrictions are likely to be appropriate or what
ex post performance disclosure requirements are feasible. Moreover, many of these
informal arrangements (especially with relatives) presently involve no or low levels of
remuneration. To allow them to qualify for voucher payments would dramatically
increase the public costs of child care, while not necessarily substantially increasing the
supply of early childhood education. It may be argued that the provision of free or