Cheques vs. National Childcare

When the Harper government announced that it would pay households $100/month for each child under the age of six, some critics argued that parents could benefit more if the money were spent otherwise. A popular argument we've been hearing, for example, is that there's no way to be certain if households will in fact spend the monthly benefit on childcare. A second popular argument is that the new policy is a greater benefit to households that have a stay-at-home parent than households where the parents are working.

At this time, I have no opinion on the policy adopted; however, since the government's alternative choice was to implement a national childcare program, I thought it would be worth exploring some of the criticisms that we would have been hearing if “the multibillion dollar plan” had been adopted.

A NBER working paper by Michael Baker, Jonathan Gruber, and Kevin Milligan (Dec. 2005) highlights the following criticisms about national childcare systems:

1.

”...It is possible that publicly-provided childcare simply 'crowds out' the private provision of care, with no net increase in childcare use or labor supply to the market.”

2.

“Public systems require extensive public funding, which comes at a cost of higher taxes and therefore reduced economic efficiency.”

3.

“Finally, it is also possible that time spent in childcare, with many children per caregiver, is worse for children than time spent with parents at home.”

The authors observed that “Quebec's universal, highly-subsidized childcare in Quebec in the late 1990's”...”led to more hostile, less consistent parenting, worse parental health, and lower-quality parental relationships.”

So, there are some arguments against the flip-side. The NBER paper I cited from, “Universal Childcare, Maternal Labor Supply, and Family Well-Being."
I'm interested to learn more about the plausibility of the crowding-out effect, so I might post more on that subject later.