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child care « Previous | |Next »
November 11, 2008

Child care is a tough one. It's necessary for two income middle class families to work. It is expensive---out of reach for many working class families---and the market has not really been successful in providing good quality child care, despite the substantial government subsidies. The demise of ABC Learning, the knowledge that many (up to 40%) of the child care centres were running at a loss, and the necessity for the government to protect service continuity until the end of the year indicate this.

Why are so many of these child care centres unviable given the demand? Where to next?

Some call for greater regulation of the industry. Others---Henry Ergas in The Australian--- call for greater competition whilst becoming all emotional over centralized planning Moscow style:

In short, it is not central planning we need but better and more effective markets. The collapse of ABC Learning creates serious short-term challenges but also offers an opportunity to take real steps in that direction. The Government says it is committed to using markets to meet social policy goals; here is the chance to prove it.

Others call for the government to help community based organisations to take over ABC Learning's centres as it is a central social service.

| Posted by Gary Sauer-Thompson at 4:30 AM | | Comments (6)


The pre-ABC model with a dominance in the market of small family CC operations seemed to work reasonably well. The market was, however, controlled by restricting CC places by location. Centres were smallish compared to the ABC model and their success was based on the role of the involved owner.
Centres with long waiting lists is a media creation. The figure of 40 % unviable centres is not surprising and indicates an oversupply of cc places in many locations.

It never ceases to amaze me how people like Ergas manage to wish non-profit organisations out of existence.

According to the latest ABS survey, at end June 2007 there were 41,000 not-for-profit organisations in Australia, employing 884,000 people plus 2,435,000 volunteers. Industry value added by them in 2006-07 was $35 billion.

While this is only a small percentage of our trillion dollar-odd GDP, there are sectors of the economy (and society) in which their contribution is very significant.

There are cases, such as building societies and life offices, that have moved from their former cooperative structure into the market economy (although it is arguable that most of them were already there in a de facto sense).

However childcare, like schools, is a sector where the non-profit model has chalked up many successes.

You'd think that if the market-based model was all that hot, many of the higher profile non-government universities would have adopted it but the only one I am aware of that has is University of Phoenix, owned by the NASDAQ-listed Apollo Group.

I see that Gillard is saying that the collapse of ABC learning could create opportunities for companies and non-profit organisations to operate centres that were not viable under the ABC business model.

So it is the business that is the cause of 400 child care centres being economically unviable?


Many of the ABC centres had a premises lease agreement with an associated company and a staff services agreement with another one and there may have been other linkage complications as well. On top of that the parent company had a huge debt to service as well. If you undid the corporate complications, you might well find that as centre that is allegedly running at a loss is actually a viable small business.

Can anyone tell me the difference between child care centres and kindergartens? They are not the same thing are they?

In The business of caring in The Age Deborah Brennan spells out the differences:

In most parts of Australia, services are split into "education" (state-funded) and "care" (Commonwealth-funded). "Educational" services such as kindergartens employ degree-qualified teachers, but their hours of operation do not suit most working parents and they do not cater for babies and toddlers at all.

Running in parallel, we have a system of child-care services intended to meet the needs of working parents. These generally do not employ teachers, and their working conditions are more onerous than those of preschools.

She adds that while staff in both systems do a wonderful job, this is an old-fashioned system that does not reflect contemporary thinking about children's development. These days we know that high quality care and education are inseparable. And the division into separate service types certainly does not reflect the reality of busy parents' lives.