The debate over childcare policy raged through the federal election of 2006. The already heightened tension reached new levels in December 2005 when Liberal spokesperson Scott Reid famously quipped that the Conservatives' proposed childcare transfer might be spent by parents on "beer and popcorn" rather than improving the child's welfare. Although the rhetorical heat of the campaign may have subsided since then, the role of parental choices remains central to childcare policy discussions and took a prominent place in the policies announced in Budget 2006.
Economists have a particular approach to analyzing questions of government vs. individual decision making. The advantage the economic approach can bring is to provide some clarity about the conditions under which government or individual decisions should be preferred. In this paper I analyze recent federal childcare initiatives in the context of efficient private and social decision-making. The analysis strongly suggests that the role of parental information and their capacity to make effective choices is central to determining which types of policies are desirable, and is the determining difference between the stances of the two main party positions.
I first describe the childcare policy of the new Government as well as the policy of the previous Government. I then proceed to examine the general arguments for and against undistorted individual decision making in the realm of childcare and provide a discussion of policies that may remedy weaknesses in the market for childcare. Finally, I explore future directions for the federal government in childcare policy.Draft, August, 2006: PDF.