A Strategic Assessment of the Children's Services Industry

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STRATEGIC ASSESSMENT OF THE CHILDREN’S SERVICES INDUSTRYIn May 2006, children with additional needs as a proportion of all children in child care (allservice types) was 16.4 per cent predominately made up of children from culturally diversebackgrounds (11.0 per cent) followed by child with a disability (2.8 per cent) and ofAboriginal/Torres Strait Islander (1.7 per cent) (DEEWR, 2008a).When looking at the economic literature a number of important relationships and trends werenoted. A study conducted by the National Centre for Social and Economic Modelling atUniversity of Canberra, showed school age children are increasingly making use of formalcare, even when other factors were compared; children residing in capital cities were morelikely to use formal care than children in other areas, possibly reflecting fewer formal careservices for this group in rural areas; no significant differences were noted for the use offormal care by family income categories (Cassells and McNamara, 2006).A study of demand for child care and household labour supply by Doiron and Kalb (2005),concluded that non-parental child-care costs in Australia are low on average; the costs varysubstantially across households depending on the presence of preschool children and on thelabour supply of parents; the demand function showed a substantial and negative-priceelasticity for formal care; and a 10 per cent increase in the price of child care reduces theparticipation rate by approximately 0.5 per cent for lone parents and 0.2 per cent for marriedwomen (Doiron and Kalb, 2005).The Kalb and Lee (2007) study on child care use and labour supply (an update to the Doironand Kalb 2005 study), data from wave 2 of the Household, Income and Labour Dynamics inAustralia (HILDA) survey and the Survey of Income and Housing Costs (SIHC) were used.The study found that for couples and sole parents, more formal child care is required whenyoung children are present, particularly 1-4 year olds (Table 5.4). Informal child care costswere found to be highest for children aged 3 and 4 due to attendance at preschools.Table 5.4. Percentage using care by age of the youngest child and labour force status inWave 2 of HILDA (2002)Age of youngest child 0-2 3-4 5-9 10-11 TotalCouple families: Two workers 83.0 92.1 64.1 46.2 70.9Couple families: One worker 43.3 49.1 37.6 10.4 40.7Couple families: No Worker 37.2 32.6 18.5 0.0 27.8All Couple families 60.7 71.5 54.2 35.% 57.1Sole Parents: One worker 93.0 84.0 80.6 74.6 81.2Sole Parents: Non worker 43.0 62.3 20.2 3.1 35.0All Sole Parents 55.1 69.8 55.2 54.0 57.6Source: Kalb and Lee (2007)Kalb and Lee (2007) found that increasing the mother’s labour supply by one hour willrequire 0.21 extra formal hours of child care and 10 cents of extra costs in informal care, theeffect is stronger for sole parents. The study also measured the labour supply sensitivity tochanges in prices paid and net costs (i.e. prices less the subsidies using 2002 figures). Theyfound that parents with preschool child were quite sensitive to price changes, and more so ifthey were sole parents. They concluded that a 1 per cent rise in prices will lead to a drop inthe hours worked by married women with preschool child of 0.02 hours and 0.58 hours forsole parents, and if they are on low wages as well, the drop is more significant at -.03 hoursand 0.93 hours respectively (Kalb and Lee, 2007).49
STRATEGIC ASSESSMENT OF THE CHILDREN’S SERVICES INDUSTRYThese findings are of particular concern when the price of child care is examined. In lookingat the price index of child care, it needs to be noted that the Australian Bureau of Statistics(ABS) measures child care fees minus any subsidies/rebates available to families (ABS,2007). Currently two subsidies/rebates are factored in. They are the Child care Benefit (CCB)that was deducted from the actual child care prices in measuring the cost recorded in theconsumer price index (CPI) from September quarter 2000. The rebate available under theCCTR was not in the scope of the CPI prior to the September quarter 2007 because the CCTRwas paid through the income tax system and income tax offsets are excluded from the scopeof the CPI. The CCTR ceased to be a tax offset and is now paid directly to families as a rebateby the Family Assistance Office (FAO). This change brought it in scope of the CPI and isincluded in the CPI calculation from September 2007 onwards.There are also differential rates of growth depending on geographical location. Melbournecity price index grew at a much faster rate as compared to the national average and othercapital cities.Figure 5.7: Child care consumer price index, Australian and capital cities, quarterly,original350.0300.0250.0200.0150.0100.050.00.0Mar‐1982Jan‐1983Nov‐1983Sep‐1984Jul‐1985May‐1986Mar‐1987Jan‐1988Nov‐1988Sep‐1989Jul‐1990May‐1991Mar‐1992Jan‐1993Nov‐1993Sep‐1994Jul‐1995May‐1996Mar‐1997Jan‐1998Nov‐1998Sep‐1999Jul‐2000May‐2001Mar‐2002Jan‐2003Nov‐2003Sep‐2004Jul‐2005May‐2006Mar‐2007Jan‐2008Index Numbers ; All groups ; Australia ;CanberraDarwinPerthSydneyAustraliaHobartAdelaideBrisbaneMelbourneSource: ABS, 2008b50
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