Negotiating the funding balancing act

Any fee increases mean the chance of services being able to pay for any pay increases is lowered

Pay rises. Government funding. Every Bedrock reader should know the two are interlinked. So it seems an appropriate time as the equal pay case moves ahead to look at what is happening with government funding of early education and care services, Early Childhood Consultant Lisa Bryant writes.

Did you know that in most OECD countries, government pays the majority of costs for early education? In over 50% of OECD countries, governments pay over 90% of the cost, with families coughing up the other 10%. In Australia, however, governments cover just 65%, with families covering a massive 35%. Because families already pay such a large share, pay rises are directly dependent on our governments increasing how much of the cost they fund.

Isn’t that what is going to happen with the new badly named Child Care Package starting on 1 July? Isn’t that supposed to tip another $3 billion or $1.5 billion or some number of billion (it changes depending upon who is giving the speech) into the cost of early education and care?

Maybe. But maybe not. Early in January the Labor Party received, after a Freedom of Information request, departmental calculations that show that 279,000 families will receive lower subsidies under the new package than they currently do.

Lower subsidies

This sounds bad, right? It sounds even worse when you realise that there are only 869,750 families in total with children in Australian Government subsidised early education and care. So almost a third of families will receive lower subsidies than they currently do. And when government subsidies go down, the percentage of fees paid by parents goes up. Is that pay rise now looking a bit unlikely?

Of course some of the families who have lost out are very rich. The ones that could probably afford to tip in a bit more to ensure the people educating their children are paid a reasonable wage. These are the families earning more than $350,000 a year. (To save you doing the maths that’s around $6700 a week!) In the Prime Minister’s own electorate for example, 47% of families will receive lower or no subsidies, with large numbers also in Warringah and North Sydney. But some of the electorates where families will lose a lot are not high income. Werriwa (a western Sydney electorate containing suburbs like Macquarie Fields) will also have 32% of families worse off.

Relief needed

So what we have about to hit us is a new government funding system for the majority of education and care services in NSW that we already know will reduce the amount of subsidy for a third of families. The other two thirds however will be getting either the same, or more money. Given that these families (primarily middle income earners) have been crying for relief from crippling education and care fees for a while, they may not be too keen to have fees increase again to cover pay rises for teachers and educators.

Fees have increased around 6.8% a year over the last decade. The new subsidy is going to be pegged to inflation (currently running at around 2% per year). Fees grow more rapidly than inflation.

One of the scarier parts of the new Child Care Package may indirectly have even more impact on educators’ and teachers’ wages in the long term. Under the Jobs for Families legislation (yes, that is the name of the legislation that now covers the cost of children’s early education) long day care services and occasional care services have been abolished. We now have instead ‘centre based day care’. Just a change of name you say? No real difference? Actually a big difference. Previously, all long day care services had to be open for a minimum of 10 hours a day. No more. Centre based day care centres can now open for as few hours each day as they want to.

Impact on wages

So how will this impact wages? To understand this, you need to understand the impact of the Activity Test on families’ eligibility for subsidies – especially the part that reduces low income families (those earning less than $65,000 a year) to 12 hours a week. Families who are using a preschool program are eligible for 18 hours a week. Still not two full days at most services.

Federal Education Minister Simon Birmingham is on the record as saying that he believes services will respond to the demand from families for shorter days.

So what will happen? Quite possibly some providers will establish preschool programs or more general sessions where children attend six hours a day. Preschool programs must be run by early childhood teachers. Will early childhood teachers be increasingly casualised, just brought in to run short days?

The likelihood of this may be increased by services now having to report children’s actual hours of attendance. The minister is asking questions about why families are paying for a whole ‘session’ of care when they do not use it. Are we being pushed towards hourly billing? Will this mean a much more casualised workforce who can be sent home when numbers of children drop? What will this do to actual take home wages?


What about NSW? Is the NSW Government funding under Start Strong any better? Given that 75% of all increased funding under Start Strong must be passed on to families as reduced fees, it could be seen as contrary to the intent of the funding increase if services then increased fees to pay increased wages bills. But on the other hand, the reduced fees could mean families could afford to face wage related fee increases.

In the end, what this analysis shows more than anything is that when we advocate for wage increases we also need to be aware of the need to simultaneously advocate for funding increases. And we need to advocate against any funding changes that increase fees for families, not just because some children will lose access to care affordable to their families, but also because any fee increases mean the chance of services being able to pay for any pay increases that are won, is lowered.

And given how badly early childhood teachers and educators need and deserve pay increases, we desperately need services to be able to fund them when they are achieved. (That will be in 2018 by the way!)