Care economy must not be bottomless pit for taxpayers

Two years ago, when Labor, then in opposition, promised that taxpayers would fund a 15 per cent pay rise for aged-care workers if it won the May 2022 election, The Australian was sceptical. We warned of unintended consequences in other spheres of the care economy, including childcare and disability care. Now that the precedent of taxpayers funding pay rises for workers not on the public sector payroll is well established in the aged-care sector, it is no surprise that taxpayers have been tapped to fund a hefty pay rise for childcare workers from July, as daycare centres struggle with serious staff shortages.

Last week, as Natasha Bita reported, United Workers Union early learning director Carolyn Smith called on the Albanese government to fund a full 25 per cent pay rise for childcare staff. Based on wage costs calculated by industry research company IBIS World, such an increase would cost taxpayers and the budget bottom line up to $2.3bn a year for 216,000 staff. Jim Chalmers has promised restraint in next month’s budget. Clamping spending is essential if the government is to post another surplus, allowing for more debt to be repaid and defence spending expanded. The government has already committed to spending $3.3bn over four years to pay for the 15 per cent rise granted to aged-care staff.

In the childcare sector, however, the practical and political problem is that parents can’t afford to pay higher childcare fees but staff need a pay rise, Australian Childcare Alliance vice-president Nesha Hutchinson told The Australian. The Alliance, which is representing some employers in Fair Work Commission pay negotiations, said staff shortages, caused by workers leaving to take up better-paid jobs in other sectors, were biting. High staff turnovers of carers are unsettling for children. New data shows that last month half the nation’s daycare centres turned children away due to staff shortages. “There are centres all over the country that have had to close rooms or shut down completely, because they simply couldn’t find staff,” Ms Hutchinson said. “In order to attract people to our workforce, a significant pay rise needs to be implemented and government-funded.” That is a matter of judgment.

Taxpayers are entitled to wonder whether wage subsidies, paid to childcare operators as they are to aged-care providers to cover higher wages, will lead to further increases in childcare fees. That has been the case following previous efforts by governments to increase childcare subsidies. Childcare centres provide an important service in freeing up parents to work and to pay off homes or student fees. They also set many children on the road to early learning. But many of them are businesses.

In July last year, the government increased the childcare subsidy from 85 per cent to 90 per cent for families with a combined income of less than $80,000. The subsidy drops by 1 per cent for each additional $5000 of annual income up until hitting zero at a combined family income of $530,000. When the improvement was about to kick in, parents received letters from providers, we reported, announcing fee increases due to the rising costs of energy, wages and food. Many centres increased fees by $10 a day per child, with some in the major cities lifting fees by $13 a day, up to as much as $188 a day. Quality, especially of staff, is of paramount importance. But some centres provide facilities and experiences such as excursions beyond what many children are used to at home.

More than a decade ago, the Gillard government established an Early Years Quality Fund to fund pay rises for early childhood educators, a move scrapped late in 2013 by the Abbott government. The Albanese government is intent on expanding the care economy, which it sees as a big contributor to productivity. But the sector is a growing burden on taxpayers. Publicly funded pay rises for childcare workers begs the question: Who next? Disability workers? Taxpayers are not a bottomless pit.