Monday, January 09, 2006

Daycare subsidizes big business?

Stephen Harper recently announced the Conservative Party's daycare plan. Both the Liberals and the NDP have also promised childcare (well, the Libs promised it again) through publicly funded and run programs. The NDP in particular have been clear that it will be non-profit only daycare. Harper, of course, has a different idea.

He plans to dole out cash directly to businesses and non-profits that provide daycare spaces for employees children. Specifically, it's a $10,000 tax break/subsidy per childcare space created. That's a hell of a lot of money ($250 million a year). This is a bad plan on a couple of levels, but I'll just look at one here. That is the massive subsidy this will provide to large companies, while doing little for small firms.

It's worth quoting here from the Tory backgrounder:

A Conservative government will also help to create new child care spaces by establishing a Community Child Care Investment Program. The program will provide assistance to employers – both businesses and non-profit institutions – when they create new child care spaces for their employees and the surrounding community. A tax credit of up to $10,000 will be granted for each child care space created. The cost is estimated at $250 million a year. [Italics and bold mine.]

As a thought experiment, imagine two businesses. One is a Wal-Mart style superstore, the other is a coffee shop. The superstore has dozens of full time employees and many more part-timers. The coffee shop has perhaps a tenth the number of employees. The superstore is open from about 9 a.m. to 9 p.m., the coffee shop is open from 6 a.m. to 9 p.m. The superstore occupies a large area of land, the coffee shop is crammed into a small storefront space with a small storage room packed to the rafter with boxes. I've worked in both environments (a small, local coffee shop/bookstore and a large supermarket) and I think that's a pretty fair description of each.

In which do you think it will be easier to find space for some kids?

Even if the coffee shop owners are smart and work with other local small businesses, it will be harder for them to run such a daycare program. The coordination efforts and associated costs will be greater. Finding a site near enough to all the businesses will be difficult, and there will be problems sustaining the service if one or two of the businesses opt out or go broke.

The large business, on the other hand, will be able to either set aside existing space or to create a new space relatively easily. More pernicious, I suspect that with the economies of scale it can bring to bear; it will likely be able to actually make a profit off the $10,000 per kid. Remember, that money comes through whether you spend it all on the children or not. That will be a powerful incentive to warehouse the kids as cheaply as possible while keeping the rest of the money as pure profit.

Meanwhile, small business owners will be lucky if $10,000 a kid is enough to keep their systems running; they'll likely have to chip in a bit more.

And remember that bit about "and the surrounding community"? What are the odds that the big-box daycare program won't just offer to take in other kids, say, from nearby small businesses - in exchange for the owners handing over the $10,000 per child? Even more profit, the small businesses get nothing.

Why don't we just cut regressive taxes, especially those on the working poor? Or refuse to tax non-profit (especially cooperatively run) daycares and preschools. If you want flexibility, you can't get much more flexible than that.

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