Childcare centres at financial risk
Early in the pandemic, Dani Dafoulis tried to save some money by pulling her two kids out of childcare to look after them while she worked from home.
It was “just impossible”, says the Geelong high-school teacher, to try to teach while balancing the care of a two-year-old and a five-year-old.
The introduction of free childcare, announced by the government in April, came as a welcome relief. It meant Dafoulis could plan and deliver remote lessons without interruption, while her husband, who’d lost all his work in film and television as the sector virtually shut down, could job hunt and prepare for potential work while he was on JobKeeper.
“It was a safety net,” says Dafoulis, “and it was money that really came in handy and meant we didn’t have to live on beans and rice.”
On Monday this week, the government ended the free childcare scheme, under which existing subsidies were suspended and childcare centres were instead paid 50 per cent of the hourly rate cap by the government, while parents were not required to pay fees.
It is the first pandemic support measure to be withdrawn in the prime minister’s “snapback” – the foreshadowed moment when the coronavirus crisis ends, and relief spending is cut. Only the pandemic hasn’t ended, nor has the economic impact it is having on families.
“We’re going to have to find just over $300 a fortnight now,” says Dafoulis. “I have a car that I will just have to sell for less than it is worth so we can get some money.”
Asked why free childcare was the first Covid-19 measure to be withdrawn, Education Minister Dan Tehan did not respond. Nor could he be drawn on whether he was concerned about the impact on children whose parents will no longer be able to afford childcare.
The minister instead told The Saturday Paper the package had “succeeded in its objective of keeping services open and viable” as 99.3 per cent of about 13,400 childcare services were still operational as of July 1.
But “operational” is not synonymous with sustainable. According to an Education Department report in May, a quarter of childcare centres found the scheme had not helped them to stay financially viable.
“As Australians return to their workplace, businesses reopen and children return to classroom learning, the government will resume the Child Care Subsidy (CCS) to support families to access affordable childcare,” Tehan said.
Although the CCS is means-tested, says Grattan Institute chief executive Danielle Wood, a family receiving the maximum relief is still paying about $9000 a year to have two children in full-time care.
“The average Australian family with two parents and two children in care pays full-time childcare costs of about 25 per cent of net income,” she says. “That is high compared to the OECD average of 11 per cent.”
Wood says that even without a pandemic, women, particularly those in relationships with men, face strong disincentives to work more than three days a week once they have children, due to the high cost of childcare.
For a couple, each earning a full-time equivalent of $60,000, a mother taking on a fourth day of work would be doing so for just $2 an hour once you factor in the cost of childcare, tax and the meagre clawback of tax benefits. By the fifth day, she would be working for free.
Grattan’s modelling found the government would have to spend more than $20 billion a year – triple what it does on the current CCS – to make childcare free.
However, there exists a cheaper solution: Wood says a subsidy of 95 per cent for low-income families, tapering down to zero as the family’s income increases, would boost gross domestic product by about $11 billion a year as more women entered the workforce, while costing the government only $5 billion more than the CCS.
“You get a short-term economic payoff and a longer-term payoff as women stay attached to the workforce, and a social payoff reducing the long-term financial gender gap between women and men with children,” she says.
Wood says that if parents suffering the economic impact of the pandemic start pulling kids out of childcare, many childcare centres won’t be viable, leaving families with fewer options when and if they do return to work – the exact problem the government was hoping to avoid by offering free childcare in the first place.
“I’m not convinced … we are at a stage of the economic recovery where that isn’t still a risk,” says Wood. “We know parents have lost jobs and hours and their capacity to pay what were already very high out-of-pocket childcare fees is in doubt.”
A survey of 2280 families by parents’ group The Parenthood found that for 60 per cent of families, ending free childcare would force one parent to cut their working hours, and one-third of families would need to reduce the number of days their kids are in childcare.
But the group’s campaign director, Georgie Dent, is not surprised the government is rolling back childcare first.
“I think of all the different [pandemic support] measures it is probably fair to say that the decision to provide free childcare to parents was the furthest from this government’s comfort zone,” Dent says.
“Ending it is premised on the idea that if we just get on with things and get people ‘back to normal’ then things will be okay. But even with the health risks aside, we’re certainly very much in the thick of the economic devastation and we know almost half of families using early education have reported that they have lost employment.”
For those families surveyed by The Parenthood, 16 per cent had seen both parents either lose their jobs or have their income radically reduced during the pandemic.
Dent, who spent 35 per cent of her household income on daycare with her first child, sees the cost of childcare as a “fundamental point” where men and women in heterosexual parenting relationships are set on completely different paths financially, with women most often pushed into part-time work.
“Even without a pandemic, even without struggling on reduced incomes and unemployment, families were choosing for the mother to stay at home or work three days a week,” she says.
Come July 20, childcare workers, at least 90 per cent of whom are women, will become the first and only employees cut off the JobKeeper scheme, which is funded until the end of September for the rest of the workforce. The government will instead pay operators a transition payment of 25 per cent of their fee revenue until September 27.
“This is a workforce that is literally one of the lowest-paid cohorts and it is the first to have JobKeeper taken away,” says Dent. “A workforce who have been told to keep turning up to work even though the rest of us were told to stay home and stay safe.”
The announcement to end JobKeeper for childcare workers came just five days after the government – through the HomeBuilder scheme – allocated $688 million in stimulus to Australia’s construction sector, where more than 80 per cent of employees are men.
“I was genuinely gobsmacked,” Dent says. “Until I looked at the expenditure review committee that, at that point, had not a single woman on it.”
Anne Ruston, minister for Families and Social Services, was added to the committee in late June.
In Victoria, childcare centres are under extra pressure as the state’s number of active coronavirus cases soars and residents are forced back into lockdown, says Julie Price, executive director of Community Child Care, which represents non-profit centres in the state.
“The sustainability of some services will be under question,” Price says. “Centres are getting that 25 per cent transition payment, but it doesn’t equate to what many services were getting through JobKeeper.”
Uncertainty is rife in the sector, and not only when it comes to economic viability – Price says some of her organisation’s members are dealing with positive coronavirus tests from children or staff and have waited days for advice from the Victorian Health and Human Services Department on what to do.
Melbourne childcare worker Emily Dawson, who has been receiving JobKeeper payments, doesn’t understand why her industry was the first to be cut off from government support.
“We’re made to feel replaceable and we’re not valued like we would be if this was a male-dominated industry,” she says. “I am a single mum and it is a low wage, but I love my job and I’m good at it.”
She says JobKeeper kept some semblance of security for childcare workers during an intensely uncertain period. Now, that safety net is gone. “Everyone is assuming that the [enrolment] numbers will go back to what they were,” she says, “but a lot of parents have pulled their kids out and centres will close.”
Dani Dafoulis doesn’t want to sound cynical but says the decision to end free childcare before other support measures has confirmed her suspicions about this government always seeking to prioritise male workers.
“It is a shame really because it does men as much of a disservice as women in the long run,” she says. “I just feel like women’s work isn’t valued.”
This article was first published in the print edition of The Saturday Paper on Jul 18, 2020 as "Caring grievances".
A free press is one you pay for. In the short term, the economic fallout from coronavirus has taken about a third of our revenue. We will survive this crisis, but we need the support of readers. Now is the time to subscribe.