/Labors pledge to boost childcare wages a handout to big business

Labors pledge to boost childcare wages a handout to big business

Updated

May 13, 2019 15:15:56

Labor’s election promise to boost childcare workers’ wages using taxpayer funds risks being a “handout to big business”, according to a respected tax economist, as small childcare operators complain the policy will push them into paying payroll tax for the first time.

Key points:

  • Labor says it will increase the wages of childcare workers using taxpayer money if it wins the election
  • Professor Robert Breunig says this would be a handout to big business
  • Around two-thirds of long day care providers are for-profit private companies

Labor has promised nearly $10 billion over 10 years to boost early childhood educators’ wages by 20 per cent, starting from 2020.

“We leave our children for 8 to 12 hours a day in their care … at the same time they are one of the lowest paid workers in this country,” Labor’s Early Childhood spokeswoman Amanda Rishworth told 7.30.

“An average worker gets about $38,000 full-time wage.

“We think it’s time that they are properly recognised with professional pay.”

But Professor Robert Breunig, director of the Tax and Transfer Policy Institute at the Australian National University, warns if the money were to be paid to businesses to then pass onto their staff, “it’s going to be very difficult to track what companies do with the money”.

“In that case, I think the money would just be a handout going into the pocket of the firms,” he said.

“I don’t think it’s an appropriate use of taxpayer funds.”

Around two-thirds of long daycare providers in Australia are for-profit private companies, according to market researchers IBIS World.

The largest for-profit company, G8, which has 6.5 per cent of the childcare market, had a 19.6 per cent profit margin in 2017, netting $72 million. It is part-owned by a Hong Kong-based private equity firm.

Other large for-profit childcare firms include Guardian Early Learning, which is part-owned by Swiss-based private equity firm Partners Group, and Only About Children, which is owned by Bain.

How will it be delivered?

Labor is yet to work out the mechanism by which it will deliver its wages boost.

If elected to government, Ms Rishworth told 7.30 Labor will consult with businesses, unions and peak bodies on how to deliver the wages subsidy.

She said that will ensure that “every dollar of Commonwealth funding goes to early educator pay, and that parents don’t see any increase in fees as a result of the pay rise”.

Ms Rishworth also added that the policy will be voluntary for businesses to join and would only apply to long daycare facilities.

She said the policy would apply to 100,000 professional early childhood educators with a minimum qualification of Certificate 3.

However, according to the latest Early Childhood Education Census, there are nearly 130,000 educators with a Certificate 3 and above.

The Coalition has criticised the policy, saying it will set a precedent for other low-paid industries to demand government wage assistance.

“It is up to the market to make sure that wages increase because any other method will cause a distortion,” Education Minister Dan Tehan told 7.30.

Professor Breunig agrees.

“Policies where governments intervene to set prices don’t work and have tended to fail historically,” he said.

“What if workers from aged care now decide to leave aged care and they all flood into childcare because childcare workers are paid more than aged care workers are paid?”

But Emma Lewis, childcare centre director at not-for-profit Good Start Early Learning in Wynnum West in Brisbane, said anything which boosts the wages of early childhood educators would be welcome.

“A Cert 3 educator can earn maybe $23 an hour,” she said.

“How are they supposed to get a mortgage, live a life, have holidays, good holidays, which they need, on that much an hour?

“You can’t do it. It’s not enough.”

Childcare has very high worker attrition rates, with 38 per cent of qualified educators leaving the industry within three years of joining.

That figure has worsened over time — in 2010 it was 30 per cent.

Ms Lewis said many educators are living pay cheque to pay cheque and are not adequately paid for the important role they play in children’s’ lives.

“We’re educators, we’re doctors, we’re counsellors, and our advice and what we do means something, and should be appreciated and respected,” she said.

Unintended consequences

Professor Breunig told 7.30 that childcare workers deserve to be paid more, but “whenever governments try to set prices there are lots of unintended consequences”.

The Government has warned the policy could push more than 5,000 small childcare providers over the threshold for paying state-based payroll tax, ultimately costing firms $1.5 billion over the duration of the policy.

Ms Rishworth dismissed its modelling.

“We’re not accepting dodgy numbers from the Liberals that they aren’t prepared to publish,” she said.

But 7.30 spoke to several small-scale childcare providers that confirmed the policy could have payroll tax implications, and workers’ compensation insurance costs.

Paul Mondo, president of the Australian Childcare Alliance, which represents long day-care providers, acknowledged the policy could push some small providers above the payroll tax threshold.

But he said he takes Bill Shorten at his word when he says families will not be out of pocket.

“We believe the policy position should cover all costs, including payroll tax and superannuation,” Mr Mondo told 7.30.

Ms Rishworth did not respond to a written question about whether Labor would cover any payroll tax implications.

However, she reiterated under Labor’s policy, parents would not be hit for any cost of increased wages.

The second part of Labor’s childcare policy is a $4 billion boost to childcare subsidies, to make childcare effectively free for households earning less than $70,000 a year, and reducing costs for households earning up to $174,000 a year.

That has been welcomed by the Grattan Institute’s John Daley, who told the ABC the policy was a “really big deal for typical families” and would significantly improve female workforce participation.

The Coalition has not announced any new childcare policies during this election.

It is campaigning, instead, on the major changes it introduced to the childcare subsidy system last year, which saw a reduction in the average family’s out-of-pocket childcare costs by 8.9 per cent, cutting bills by about $1,300 a year.

Topics:

child-care,

children,

government-and-politics,

australia

First posted

May 13, 2019 14:44:36