'I can't afford to work': 'Free' childcare is a myth, and costs for parents are high

Friday, 23 September 2022

A policy that promised free early childhood education (ECE) for kids aged 3 to 5 has faded so far that parents are routinely paying $65 a day. In the first of a series investigating the state of childcare, National Correspondent Michelle Duff reveals government subsidies have been effectively completely swallowed up, and parents are back to paying what they were before '20 Hours Free' was introduced.

Parents are routinely paying more than $300 a week for childcare for over 3-year-olds even with the 20 hours subsidy, with the promise of a child’s right to access “free” care now completely swallowed up.

Dozens of women spoken to for a Stuff investigation talked of being forced to leave their jobs, change careers, cut back hours, bring their babies to work or ferry family members from other parts of the country to look after their children.

Working parents are confused and overwhelmed by the cost, having little idea how fees for their little ones are charged and where they are spent. Many families struggled to find quality child care in their area, only to be thrown into debt by the fees.

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“If we were on an average wage we couldn’t afford to send our kids to daycare, no way,” says Wellington mum Jennifer Ross,​who pays $1007 a fortnight for her 3-year-old twins to be in full-time day care.

“We pay the same for the mortgage, which to me is absolutely insane.”

Overall, fees paid by parents have risen by 50% since the policy that spoke of the universal right to quality preschool for 3-5 year olds was introduced.

In 2018, Education Minister Chris Hipkins committed to “putting the free” back in ECE for 3-5 year olds. But four years later, parents say they are struggling to pay.

In debt to pay for childcare

Most parents spoken to by Stuff said the 20 Hours policy is a help, typically driving down the cost at a for-profit service by about a third compared with an under-3.

But with the rise in fees and cost of living, it isn’t enough, particularly with more than one child.

For Wellington mum Ross, a public servant, finding good quality child care and deciphering the fees was a struggle. “There’s no consistency, it makes things really difficult because you have to contact every daycare and ask, it’s like a bidding war more than anything.”

Ross initially went back to work part-time three days a week, but after paying for childcare, only $60 of her salary remained. “From a financial perspective it didn’t really make sense for me to send them to daycare, but for my own mental health it did.”

She ended up going back to work full time, so she could afford it.

Fellow Wellingtonian Sarah McCawe did the opposite – with her second child, instead of paying for both kids to attend the only daycare she liked with spaces available that charged $90 a day with no discount at 3, she left work entirely.

“I wanted to go back two days a week - my salary was $95,000. I would have been making $100 a week. It’s kind of an all or nothing scenario, it doesn’t work if you want to do a little bit. Daycares don’t want to offer half days or bitsy kind of flexible days.”

Another couple, who asked not to be named, is in $3000 of debt with their childcare provider after struggling to pay $500 a week for their two children.

Once the oldest turned 3 his costs reduced to $170 a week, with $245 for the younger child. But the middle income couple, who work as a painter and a legal secretary and earned $107,000 combined last year, struggled to pay, the mother said.

While Work and Income subsidies exist for low income parents, the limit for a couple with two kids is $87,100. “It was extremely hard, we went to WINZ multiple times … I asked my employer ‘What can I do? It’s so expensive I can’t afford to work but I can’t not work because we wouldn’t get enough to live on.”

She and her husband eat a lot of noodles and potatoes, to keep the boys fed. “I don’t think the Government realise how hard it is for working families and the majority of money goes on rent and daycare. Mentally, it is frightening to make sure everything is paid and you have enough food.”

’We haven’t got there yet’

Hipkins rallied the sector around a much-praised Early Learning Action Plan which promised better teacher child ratios, higher teacher salaries, more qualified teachers, better oversight of services to match need, and turning the tide on profit-driven services.

But critics say progress has been slow, and basic promises have gone unfulfilled.

In an interview, Hipkins says the Government’s focus on paying teachers better will mean centres have more money for staff, and to attract more qualified staff, so those costs would not be passed on to parents. Pay parity was funded $265.6 million in Budget 2022.

“We reinstated a 100% funding band, which means centres that employ qualified teachers get a higher rate of funding. We've made inflationary adjustments every year that we've been in government to keep up with increasing costs,” he says. “And we're working on pay parity for teachers in the funded sector, because that's actually the biggest driver of their costs.”

(Sector groups like Te Rito Maioha Early Childhood New Zealand and the Early Childhood Council say pay parity is a half-kept promise, and complicated funding formulas don’t cover true costs.)

When it comes to the 20 Hours policy, there are challenges around how centres “bundle” hours for parents, Hipkins says. “Very few services would be offering only 20 hours a week for the maximum 6 hours on any given day. Most of them would be bundling other services, so they'll be charging for hours that are outside of the 20 hours – that’s often where parents are facing the bigger costs. They can’t access the 20 Hours without accessing paid hours as well.”

A review is underway to see if more targeted funding is needed to improve pay and conditions for teachers and support community centres, while not adding to the profits of big commercial chains who often have economies of scale to spread costs. “It’s a product of a market that's not operating particularly well, and that's why we're introducing [a] network management function, because we recognise that the market isn't serving all families well here.”

But what did he mean by “putting the free” back into ECE? “Making sure that parents can access 20 hours of free early childhood education. And we haven't got there yet because the sector has been under a lot of financial pressure. We've got 10 years of funding freeze to make up for and then an increase in costs on top of that.”

Pressed on exactly how he would turn charging practices around, he could not say. “Look, we haven't actually canvassed exactly how we would do that yet. At this point the number one priority is to deal with the overall issue of funding sufficiency for the sector. And then once we've done that, then we can look at those other things.”

The Government has incrementally raised subsidy rates since 2018, but barely to cover inflation - this year’s rise of 2.75% takes effect in January, while inflation till the end of June was 7.3%.

The hidden cost

New Zealand has one of the highest childcare costs in the Western world. A typical couple with two kids spends a third of their income on childcare according to the latest data from the OECD, from 2018.

Stats NZ’s Consumer Price Index shows the 20 Hours policy had a clear impact on fees when introduced in 2007, driving them down by more than a third.

They’ve steadily risen since, by 50%. Using the household living-costs price index, another more targeted inflation measure, this rise can be seen to have hit lower-income parents harder – costs for them have risen 57%, compared to 40% for middle and high income earners.

The true prices to parents though are mostly hidden. The Ministry of Education does not know the fees parents are charged, as they don’t keep tabs on it. In a response to an Official Information Act request, the ministry said it audits 20-30% of services every year.

In the past five years, it has identified 45 services “charging fees” for 20 Hours ECE.

“The ministry does not … monitor costs. All services are privately run, and the costs incurred by services and passed onto parents are set by local market conditions and service provider preference.”

Childcare providers, many of whom are trying to run profitable businesses in a competitive market, often do not publicly display fees - providing them on a parent’s request, sometimes only in hard copy. The majority of the country’s 195,000 early learners attend education and care services, which are increasingly privately owned.

While the rules say centres must only charge “optional” fees for additional extras, this is rarely presented as a donation. The subsidy is for six hours each day, so another loophole is to require a minimum period of enrolment, like 6.5 hours, then charge a flat fee for the day - like Little School in Auckland, who charge $64, Best Start in Wellington Central, where it’s $57, or The Park in Wellington, $60.

Little School managing director Maria Johnson ​says children have to be enrolled for a minimum of eight hours, and the centre offers “additional programmes” around reading and motor development that reflect the $64 rate.

The 20 Hours subsidy “doesn’t cut it,” for covering costs, she says.

“It was a great concept, but if it's not funded properly the costs have to be passed on to parents for centres to break even.”

That’s not to say lower-cost care doesn’t exist. Parents whose children attend kindergartens, not-for-profit childcare centres and kohanga are still able to access relatively low-cost or free care.

But cheaper options might not have space, are not in all areas, and some aren’t flexible enough for working parents – most kindergartens don’t take under-2s, for example, and often finish at 2.30pm.

And the numbers of these community-based centres have declined, at the same time for-profit centres have boomed.

The forgotten toddlers

The ‘20 Hours Free’ policy was meant to help parents pay for childcare in the important preschool years - and provide more access to quality care for all 3-5 year olds.

Initially, it did make a difference. Parents noticed a drop in fees, and there was a boom in enrolments. One study found it also increased mothers’ workforce participation, but only when they had two children eligible for the policy at age 3.

The National Government the next year kept the policy but took the “free” out of the 20 Hours, and froze funding or increased it at less than inflation. Its other initiatives, including loosened rules around what parents could be charged for, expanding licences from 50 to 150 children in a space and removing incentives for more qualified teachers, led to unchecked growth in childcare businesses.

And many say the policy is antiquated, as workplace patterns – and the cost of living – have changed, and more women seek to re-enter the workforce when babies are younger.

The outcome has been a perverse funding gap, into which many of the country’s 2-year-olds have fallen.

Because 2-year-olds were considered too young for the 20 Hours funding, but too old for infant subsidies, they have landed in a hinterland where they get $5 an hour less than any other child.

Education Ministry subsidies for childcare providers are based on funded child hours, in three bands - under twos, two and over, and 3-5 year olds.

Each child is funded for up to 30 hours a week, but the base rate differs depending on the age of the child. (It also depends what type of daycare it is, and how qualified the teachers are, but we will look at an average childcare centre with mostly qualified teachers.)

The under-2 rate is the highest, at $13.20 ​an hour, based on the logic that this group has the highest teacher-child ratios of 1:5 and needs more intensive care. Parents don’t notice this funding in fees, as it is mostly sucked up by staffing.

The rate for children 2 and over, when the ratios switch to one teacher per 10 children, is the lowest, at $7.30.​

With the 20 hours policy, a new band was created for 3-5 year olds, with higher subsidies of $12.45.​ (Between 20 and 30 hours, that age group defaults to the base 2 and over subsidy rate of $7.30.)

But educators say in reality, 2-year-olds - who are mostly still in nappies - require a higher level of care and attention than older preschoolers, yet somehow qualify for less support.

Centres end up having to prop up 2-year-olds with subsidies from other ages, and fees rise for all.

And this has all happened at the same time as the number of under-3s enrolled in ECE has boomed.

“It is one policy plastered over another, written at a time when it was expected women would stay at home with their children and then enter the workforce when they were three,” says Te Rito Maioha Early Childhood New Zealand chief executive Kathy Wolfe. “The funding system hasn’t caught up with the choice of parents, who want to put their children in ECE younger.”

The New Zealand Educational Institute, the Early Childhood Council, and the Office of Early Childhood Education are among those united on expanding 20 Hours to under-3s. “It’s such an obvious thing to do,” Simon Laube, the ECC’s chief executive, says. “Why do they persevere with these policies that don’t serve children? They don’t serve anybody.”

Hipkins says the funding gap is an “unsustainable anomaly,” that it is his priority to address, along with bringing down the current 1:10 ratios for that age group to 1:5.

Does that mean extending 20 Hours to 2-year-olds?

“Not necessarily, no … I'm certainly not making that commitment, but it does involve looking at the overall sufficiency of funding for 2-year-olds.”

Valuing all tamariki – and women’s work

Parents, head down in the childcare juggle, keep doing what they can.

Kelsey Ellery-Wilson, 30, Ngāpuhi, struggled to find childcare in her small town while looking for a job to get ahead in her finance career, settling on a daycare she was not completely happy with that charged $6.50 an hour and required an 40km round trip.

She pulled both her children out after realising her older son was being neglected. “It wasn’t like horrible abuse or anything, but he had quite a speech delay and if they didn’t understand him immediately they’d just ignore him, and it really destroyed his confidence. I don’t think it was them trying to be cruel or anything, they were just so busy.”

She now has a job with flexibility, so she can send her boys, aged 3 and 4, to the local kindergarten where they attend for free. “It would be good if there would be more flexibility and support for parents to get jobs in kindy hours - I want to spend time with my kids and have money to feed them.”

She wishes unpaid care work was more valued by employers.

“It’s not easy looking after kids, and I wonder how many people in charge of hiring have never been alone at home with small children for any period of time? They don’t appreciate how hard it is. It’s relentless. You can’t tell your kids ‘Oh you guys can stop needing stuff now, I need a break’.”

Barriers to childcare are higher for Māori, who are two to three times more likely than Pākehā to report their child is not in care due to cost or other access issues. Education Ministry data shows 10% fewer Māori and Pacific Island 3-year-olds attend ECE for more than 10 hours a week than Pākehā children.

And while there are often more spaces in low-income areas, they are less likely to be high quality. Several educators emphasised the point. “Participation at any cost doesn’t necessarily make things good for children,” Victoria University School of Education Associate Professor Sue Cherrington says. “High quality early education and care makes a positive difference to children. Bad quality, on the other hand, is bad for children,” says her colleague, Professor Carmen Dalli.

All express frustration that ECE, and the lives of women and children, is so undervalued.

“In early childhood you’re working with really vulnerable children who are going through a critical time in their development, and it’s hard work,” Cherrington says. “We know if we give them a good start now, they’ll do better later in life.

“I think the pandemic provided a window into that, and then people just picked themselves up and went back to work and forgot about it.”