Child care 101: How do parents access and pay for child care in Ontario?

Child care 101: How do parents access and pay for child care in Ontario?

We have written about child care a lot in the past year. Our annual report, Strength in numbers, discussed the fact that child care in Ontario continues to be among the most expensive in the OECD and that failure to provide affordable child care hinders the labour force participation of women and drives down provincial GDP. In past blog posts we discussed Canada and Ontario’s child care plans, why child care is so expensive, and the $13 billion gap in national GDP that could be closed if Canadian women participated in the labour market at the same level as in Québec, where child care fees are lower and scaled to income.

While we have discussed the desperate need for more affordable, accessible child care we haven’t yet delved into how parents currently access and pay for child care. Ontario’s child care system is incredibly complex with a number of constituencies and incumbent providers, which makes the political class reluctant to take action to change it. Yet with a provincial election approaching, all three major political parties have promised to reduce child care costs.

The Liberal government has announced its intention to provide free full-day, licensed child care for children between two-and-a-half and kindergarten beginning in September 2020, but made no promises relating to more expensive infant and toddler care. They have also promised to invest $162.5 million over three years to increase access to licensed child care, support fee reductions, and reduce or eliminate fee-subsidy waitlists.

The NDP has committed to affordable, public, licensed, not-for-profit child care including free care for households earning less than $40,000 per year and care costing an average of $12 a day for those earning more. To meet the expected increase in demand they have promised to expand the number of non-profit, licenced child care spaces by 202,000—a 51 per cent increase—by working with school boards, community centres and public buildings to create new centres and spaces. They have also promised not to reduce existing subsidies.

Progressive Conservative MPP Laurie Scott announced that the party would offer a tax rebate covering up to 75 per cent of child care costs to a maximum of $6,750 per child. The plan—which did not include the commitment to fund 100,000 new licenced child care spaces in the former PC platform, the People’s Guarantee—is estimated to cost $389 million per year. The rebate would be means-tested and as a tax rebate, parents would be able to use the subsidy for all types of care, including unlicensed babysitters, nannies and independent providers.

Who provides child care in Ontario?

Child care in Ontario falls into one of three categories: licensed centre-based care, licensed home-based care, and unlicensed care. Both types of licensed care are regulated and inspected by the Ontario Ministry of Education at least once per year to ensure they meet specific health, safety and developmental standards. Unlicensed care, while legal, is not regulated or inspected by the government unless there is a complaint from the public.

Licensed child care is provided by not-for-profit, for-profit, municipal, or First Nations organizations. In 2017, there were 5,351 licensed child care centres (77 percent non-profit) and 124 home child care agencies (90 percent non-profit) in Ontario.[1] Home care tends to have a higher share of young children (Exhibit 1), while all the growth of total children in licensed care has been from child care centres (the number of children in homes has actually shrunk). We know almost nothing about the number of children in unlicensed care due to the lack of oversight.

Exhibit 1

It is estimated that 45 to 50 per cent of children age zero to four would be in child care if spaces were available and affordable, however in 2016 only 20 per cent of children within this age range were in care. In September 2017 the Ontario government committed to creating 100,000 new licensed spaces over five years, doubling capacity for children under four (as of April 2018 many of these spots had yet to be created and the City of Toronto has suggested it will be difficult to complete the required capital development to meet demand in the region in a few years).

So how do parents currently find and pay for child care?

It is important to increase the number of spaces, since the lack of supply often results in waitlists for both full price and subsidized care. In 2016 Ontario banned licensed child care centres and home child care agencies from charging fees or requiring deposits to join child care wait lists (this does not extend to unregulated child care). Parents are advised to explore options for child care early—typically before the child is even born—in order to secure a space and possible financial assistance.

Both high demand and low supply are behind the high cost of child care in Ontario—especially in the Greater Toronto and Hamilton Area, which dominates the top of the list of most expensive places in Canada to enroll an infant, toddler, or preschooler in care. Given the high prices, many parents rely on subsidies to help cover the costs of child care.

While parents can spend their provincial and federal child benefits on child care, these grants are relatively small and are intended to cover all child-raising costs.[2] The Ontario Child Care Subsidy is the only financial support available to Ontario parents specifically for child care. This can subsidize the cost of licensed child care, approved recreation programs or before- and after-school programs operated by a school board for children under 13 (or up to 18 if the child has special needs). In 2017 approximately 30 percent of children in licensed care—including 75 percent of children in home care—received a full or partial subsidy for child care fees (Exhibit 2).

Exhibit 2

Parents apply for the subsidy through their local child care service manager or First Nations band office. Households must contribute 10 percent of net income (minus the Canada Child Care Benefit) over $20,000 plus 30 percent of net income over $40,000, with the rest of the child care costs subsidized. However, this can still result in substantial costs: a single parent earning $51,040 (the median income of a lone-parent family in Toronto in 2015) would still pay $20.35 a day or $5,087.50 per year if the child is in care for 50 weeks a year. There is no income cap on receiving a subsidy as long as the cost of child care—which is set by providers—exceeds the parental contribution. Moreover, not everyone who qualifies for a subsidy is able to get one. Recent government commitments have reduced the fee subsidy waitlist in Toronto by 3,581 children but have not eliminated it. Additionally, not all child care centres accept fee subsidies, meaning that theoretically a space could be available for a child in a centre that is out of reach financially for a family.

After applying for the subsidy and meeting with a case worker to provide required documents, parents must still contact care programs to determine where there will be space for their child when they get off the waitlist. The process of applying for the child care subsidy is similar in many jurisdictions, including Kingston and Thunder Bay. In some smaller jurisdictions, such as Huron County, parents contact Children’s Services by phone to apply.

At this stage it is not clear how the proposed policy changes put forth by each party ahead of the Ontario election could impact parents accessing subsidized care through the current system. Nonetheless, each platform offers the possibility of increasing access to child care—and the associated economic benefits.

Written by Margaret Campbell

Photo credit: archideaphoto, iStock

[1] Institute for Competitiveness & Prosperity analysis based on data from the 2017 Licensed Child Care Survey

[2] The Ontario Child Benefit is a direct support for low to moderate income families is based on tax returns. For July 2017 to June 2018 the maximum annual benefit is $1,377.96 for a family with a net income below $21,037. Benefits are scaled to income based on tax returns. No application is required.

The Universal Child Care Benefit is a direct support for low to moderate income families is based on tax returns. For July 2017 to June 2018 the maximum annual benefit is $1,377.96 for a family with a net income below $21,037. Benefits are scaled to income based on tax returns. No application is required.

Category: Economic Progress, Education, Households, Public Policy, Social Policy