Download Childcare Markets

Commission 1.2 - Innovative financing strategies for
ECCE
Childcare Markets
Helen Penn
World Conference on Early Childhood Care and Education
27-29 September 2010
Moscow, Russian Federation
Childcare Markets – do they work?
Helen Penn
International Centre for the Study of
the Mixed Economy of Childcare
(ICMEC) Cass School of Education
University of East London, UK
Childcare Markets
•
Most ECCE provision in the USA, in Africa and
for the youngest children in many countries, is
provided by entrepreneurs, as a small for profit
business.
•
Often these small enterprises are not listed and
not formally recorded, and the quality of the
care and education they offer is very variable.
They tend to be ignored in policy making.
Quality and the childcare market?
•
The quality of the provision matters greatly in early childhood.
McCartney comments that “the importance of child care quality is
one of the most robust findings in developmental psychology.”
•
Good quality care enhances development; and may produce
significant long-term effects
•
Poor quality care, with untrained staff and high staff turnover
leads to poor outcomes in language, sociability and cognitive
abilities for children. The longer children spend in it the worse it is
for their future outcomes.
Price variation in the supply of
childcare
•
Good quality provision is expensive: the longitudinal studies cited as
evidence of good outcomes for children cost from $22,000 - $7,600 per
child per year
•
the quality of what small entrepreneurs offer is closely related to price.
The more parents can pay, the better the quality of the provision. The
very poorest parents who live in the poorest areas and who can pay
least get the worst service.
•
Relying on entrepreneurs as the main form of ECCE provision
exacerbates inequality. At the top end the provision matches the best
that is available; at the bottom end it may be repressive or stunting. The
children of the rich do well in good quality care, but the children of the
poor loose still more ground in poor quality care.
Demand for Childcare
The demand for childcare is from working mothers in the
informal or low-paid sector. In the USA and in the UK, as in
low-income countries, most of this poor quality
entrepreneurial provision is to be found in the poorest
areas, in the downmarket areas, slums, barrios or shanty
towns of large towns and cities. Poor women, many of them
migrants cut off from their family support networks, struggle
to survive in jobs that require long hours, as domestic
servants, market traders and other informal low paid
employment
Childcare Markets
Many USA economists (Becker, Blau) argue that a
free market is the gold standard and that ECCE
markets are like all other markets. They can
solve problems about the supply of childcare –
entrepreneurs will set up childcare to fill gaps in
supply. They can solve problems about the
supply of childcare – entrepreneurs will set up
childcare to match the demand from parents for
places. Parental choice is a paramount
consideration. Parents must be free to choose
and intervention is largely unnecessary
Intervention in Childcare Markets
Economists also accept that there are
acceptable grounds for intervening in markets:
• If the market is clearly failing and/or if
• It is necessary to achieve equity objectives, ie if
the level of inequality is unacceptable on moral
grounds or if the level of inequality represents a
waste of resources.
Intervention in Childcare Markets
•
Many OECD and EU governments intervene in ECCE on these
grounds –
•
Levels of inequality amongst citizens, especially children, are
morally unacceptable, and social cohesion and social integration
are desirable equity goals. All children deserve similar
entitlements.
•
If mothers cannot access the labour market easily because there
is an absence of childcare, this is inefficient and a waste of
resources ie of women’s education and labour (EU Barcelona
Agreement)
Intervention in Childcare Markets
• So some government intervention is almost always
necessary if quality, equity and gender equality are
important overarching goals. Four kinds of intervention:
• Regulation
• Subsidies
• Price Controls
• Direct provision/privatization
Regulation?
• Regulation is a way of controlling standards in a market.
Elaborating a working system of standards is highly
problematic even in rich countries and in low income
countries it is a minefield. Small entrepreneurs in lowincome countries are unlikely to be able to afford to upgrade
in any way to meet basic regulatory requirements, without
considerable financial support.
• In addition any system of regulation requires adequate
monitoring and a system of sanctions for those who neglect
the regulatory standards. In short, it requires some kind of
legal framework and a bureaucracy.
Subsidies
• Subsidies are an acknowledgement that low income parents
cannot afford to pay for childcare; the state must also offer
some financial support.
• Usually these direct or supply led subsidies are given with
two stipulations: first that the enterprise must be non-profit;
and secondly that regulatory requirements must be met. In
low income countries, so many small childcare enterprises
fall below regulatory standards that they cannot reliably be
used for subsidized programmes.
Price Controls?
Price Controls are also used by many European
countries to limit what parents pay for childcare.
Generally the nursery may not charge more than
15% of household income. This limits the profits
that entrepreneurs can extract. However this
would be unworkable in any country without
regulatory controls, and/or where income is not
formally declared for tax purposes
Direct Provision and Privatization?
•
A number of countries, including the ex-Soviet block and European
countries considered that ECCE provision should be partly or wholly
funded and delivered by the state.
•
In many of these countries that is still the case, particularly for children
over age three.
•
Other countries, particularly post-transition countries, have decided that
state provision is no longer sustainable, and services should be privatized
or sold off, so that entrepreneurs can bear some of the costs.
•
But privatization has not worked fairly. Firstly the regulatory systems
have not been in place, and secondly poor families have borne a
disproportionate amount of the costs.
Conclusion
•
In the absence of government funded provision entrepreneurial
childcare is an ignored but important aspect of ECCE services.
•
Although it may close some gaps in supply and demand,
entrepreneurial provision tends to be deeply inequitable, volatile,
and very variable in quality.
•
More research and information about the reach and scope of
entrepreneurial childcare is necessary
•
But there are considerable doubts that a childcare market relying
on entrepreneurs can offer any kind of solution to problems of
quality and equity in early childhood.
Contacts
• Further information can be obtained from the website of our
research centre, The International Centre for the Study of
the Mixed Economy of Childcare (ICMEC) .:
• http://www.uel.ac.uk/icmec
• Next year ICMEC is bringing out an edited book Childcare
Markets: Local and Global.
• For those who wish to pursue references or engage in
further debate on this issue, please contact me on
• [email protected]