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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.
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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.