Making Childcare Choices Real
Blaming the childcare crisis on the evil empire won't help. We need to provide real choices first.
What are the messages that need to get through loud and clear to the Senate Inquiry into the Provision of Childcare?
Is the collapse of ABC Learning proof certain that the corporate model is a disaster and Australia needs a universal, public childcare system?
That seemed the right place to start, and then the devil's advocate wandered past my desk, asked what I was working on, and threw his two cents into the mix.
Roughly speaking, here is what he said:
"The key point that needs to be made is that it is a dangerous mistake to equate the failure of ABC Learning with proof of an overall failure of the corporate model to provide childcare. The particular corporation failed; through fraudulent behaviour and mismanagement. It represents a failure of the board, the accountants, ASIC and a wider failure of our regulatory system. It's a disgrace that it was permitted to go so horribly wrong unchecked for so long, but it's still unclear whether the corporate model or the public model can offer better childcare".
Well that threw a spanner in the works…he had a point. Maybe it is foolish to discard the idea that the corporate model can bring the benefits of market efficiencies to childcare, if only it was well run and properly regulated?
An important distinction must be acknowledged between private and corporate providers. A profit motive as it functions for a small to medium enterprise is one thing, but publicly listed companies have an obligation to their shareholders to maximise returns at an ever increasing rate. This is fundamentally incompatible with providing the highest possible quality care for very young children.
Babies and toddlers just don't comply with economies of scale. The more of them there are the more they want; more food, more nappies, more space, more staff, more training. Granted there are small administrative savings to be made across multiple facilities but not enough to make a successful corporate model possible without cutting corners.
It seems inevitable that any corporate childcare provider of the scale of ABC Learning would lobby governments for help, either in the form of subsidies or the "relaxing" of regulation, or both. One way or another, without government intervention these types of business are likely to fail: either in the fiscal sense, or by failing to provide an acceptable standard of care.
So really, what is the point of handing yet another essential service over to the corporate sector if there is no fair expectation they will be able to manage the task?
Unfortunately the public model also has the potential for corruption, inefficiency, and valuing profits over services. Fears that a public system is doomed to be chronically under-funded are reasonable. One thing is clear whether public, private or fully corporatised; the childcare sector requires strict and careful regulation.
Many advocates for the corporate provision of childcare will tell you it's about offering choice. In reality what it created was a situation where parents had little choice at all about where to send their kids, because there were so few options and places were so scarce.
The private school sector is successful because it must compete with a very good public system. If an expensive private school was only offering a very basic service, then parents have the choice of the perfectly adequate public school down the road. Business is booming in private schools because there is a general confidence that they provide added value.
In a situation where a choice is not possible, we need to ensure that the facility available is up to scratch, and I'm still inclined to believe that a public system provides the best chance of achieving this.
If corporations want to have a go at making money out of childcare by appealing to the section of the market that desires and can afford to choose a specialist provider then fair enough: but handing them the market on a silver platter without any real public competition is ridiculous.
First priority needs to be to the public provision of a world standard universal childcare system. Once the basic provision of childcare is in place there is a role for private and corporate providers to offer other choices. As long as the government continues to maintain public services, so that amidst all that "choice", acceptable services are still available for those kids who's parents can't afford to choose.
Providing a solid public childcare sector will be unprofitable, but so are lots of things; schools, hospitals and defence. It still makes sense to spend public money on these things because they are essential services. Thirty years ago it might have been possible to argue that childcare did not fall into this category but times have changed and we need to deal with it.
Malcolm Crompton
January 13, 2009 at 3:54 am
Getting to the facts of the child care debate
Sally – a good robust start to this part of the child care discussion.
The discussion is in desperate need of objective discussion and critique. Quite justifiably, the topic raises emotional issues but if we want a better regulation response to the recent difficulties, we need to be cold & rational if we are to stick to some of the objectives such as espoused at the recent GAP Congress on Regulatory Affairs 2008.
On looking at your blog, we do need to separate out the problems arising from poor corporate regulation that appears to have allowed at least one company in the child care business to over rate its assets and get away with it until it collapsed versus those arising from the provision of child care by share listed corporates per se.
Hence the following observations.
First, the following remarks in your blog apply to any publicly listed company operating in any sphere, not just child care:
The following claim also bears reflection:
That may be the case but probably not for the reasons given preceding this point being made. Much more important is the presence or absence of competition, a point you make later. There is no fundamental incompatibility whatsoever. Competition is a much more important factor in forcing a company to offer services that customers want or it goes out of business. This can apply equally to child care as to anything else & is something you point out. We also have truly lousy call centres for example – lack of competition there too.
The following might be correct, but not on the basis of the facts as so far outlined.
I would agree that many sectors need regulation, from banks (ASIC & APRA), health (the professional bodies, standards bodies & hosts of others), aged care etc, etc. But it is a matter of analysis as to how much & what sort is needed. And most cannot be done on a ‘set & forget' basis yet this is what we do all the time. Whatever the rules of the game, players will game the rules: see "The curse of the rule maker. But there's a lesson in it" on Open Forum about a year ago. The debate being fostered by the GAP Congress was how to develop good regulation that is neither red tape nor protection of markets (the pharmacists & newsagents being two extreme examples of protected industries in this country) yet does foster innovation & does make sure we don't have quack pharmacists or doctors or back yard child minders who have aweful practices.
Finally, I would be careful about "handing them the market on a silver platter without any real public competition is ridiculous". Because one company in the sector appears to have got to where it was by over valuing assets, to say that it was handed to them on a silver platter is precisely the point of the remarks you quote at the beginning of the article: it wasn't handed to them on a silver platter; it was obtained by other means in an environment of what looks like poor corporate oversight.
Hence I think that there is something to be said for the argument that because of a lack of competition the child care sector needs to be regulated, although we might need more evidence even for this (via this Forum??). But if so, is this because the price is suppressed by government regulation? (any views in this Forum??) If that is the case, we are arguing 2 wrongs make a right – one layer of regulation causes a distortion so we add another layer likely causing more distortion. So, free up the price. If that means that those on lower incomes miss out, provide a subsidy & let them choose which provider they want to spend it on. Maybe that is a better way.
Another argument is that a decision maker who is vulnerable needs particular protection, for example the elderly, children, socially marginalised etc; or those lacking technical expertise (eg you & I making health & hospital decisions). In such circumstances the argument is about balancing knowledge & understanding asymmetries, sometimes fixed by qualification requirements (eg of doctors) or production standards (eg of motor cars).
It would be good to see these issues drawn out. The point of the debate ought to be to get to what is really the breakdown in the market place & to put aside the myths, then work out what is the most efficient & effective way of responding. One of the great risks in child care is regulation that protects operators of any size (from back yarders to large corporates) operating with poor standards of hygiene, poor standards of care & keeping out the competition let alone any arguments about super profits.
I hope this forum puts some of the facts & thoughts on the table.