Matthew Lau: Don’t count daycare costs as benefits

Stanford’s numbers on jobs and wages in the child-care sector prove nothing about economic benefits. All they show is that costs rose. Photo by Natalia Deriabina/Getty Images

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Government control of child care really must be expanded. I learned this by listening to an interview last week on the government-funded broadcaster (CBC) with a representative from an activist group (Ontario Coalition for Better Child Care) that has received significant government funding, talking about a report commissioned by her organization and written with input from the executive directors of two other child-care activist groups (Child Care Now and the Childcare Resource and Research Unit) that have also received large sums of money from taxpayers in recent years. Does anyone notice a theme here?

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The report, authored by Jim Stanford of the Centre for Future Work, argues there are massive economic benefits to governmental child care, a conclusion reached mainly by categorizing government costs as economic benefits. The report was published, in the words of the Ontario Coalition for Better Child Care representative, “as a way of trying to convince governments that if you expanded this program (the Canada-wide Early Learning and Child Care program, or CWELCC), it would be doing so many great things.”

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According to the report: Ontario’s GDP in 2024 was much higher as a result of expanded government child-care spending from CWELCC; female labour force participation increased; the GDP growth raised provincial government revenue by $2.25 billion; and more than 17,000 jobs have been “created” in Ontario’s child-care sector since 2019, with average weekly earnings for child-care workers up 39 per cent since then.

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Yet none of this means economic benefits were actually delivered to families. Massive government spending on child care may indeed have shifted some women’s work efforts from the type that is highly valuable but does not show up in GDP statistics — namely, caring for children at home — to other types of work that do show up in GDP statistics. But that does not mean families benefited overall. Moreover, Stanford’s numbers on jobs and wages in the child-care sector prove nothing about economic benefits. All they show is that costs rose.

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There is a famous, although perhaps apocryphal, story of Milton Friedman on a visit to China, where he found thousands of workers building a canal with shovels instead of tractors and other modern equipment. He asked his Chinese host, a government bureaucrat, why they were using shovels instead of modern machinery. The bureaucrat said, “You don’t understand. This is a jobs program.” To which Friedman replied, “Oh, I thought you were trying to build a canal. If it’s jobs you want, you should give these workers spoons, not shovels!”

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The number of workers required to build a canal in China is a cost of the canal, not an economic benefit. Similarly, higher government-subsidized labour costs at daycares are a cost of government childcare, not an economic benefit. The benefit is the value of the actual care delivered to children — and notably absent from Stanford’s report is any good evidence that under CWELCC children are getting better child care. The report simply shows that costs have risen, and then labels the costs as benefits in order to conclude that massive benefits have been delivered.