High-Quality Public ECEC Would Lift GDP, Government Revenues

Australia’s economy would get a powerful boost from stronger public early child education and care services, according to new research from the Centre for Future Work at the Australia Institute.

Accessible and affordable child care services would support improved labour force participation and more full time work by women – converging with trends in other industrial countries (especially the Nordic countries, where women’s labour supply is much stronger than in Australia).

Combined with jobs directly and indirectly created through the expanded provision of early child education and care (ECEC) services, this would drive major increases in employment, GDP, and government revenues. In fact, new government revenues resulting from increased economic activity would exceed the cost of the universal ECEC system. In essence, a universal public ECEC system literally pays for itself.

The report, The Economic Benefits of High-Quality Universal Early Child Education, by Matt Grudnoff (Senior Economist at the Australia Institute), compared ECEC funding levels in Australia and other OECD countries. Overall ECEC spending is lower in Australia than other countries (and much lower than the Nordic countries) – yet private revenues (mostly paid by parents) are higher than in other countries. In short, Australian parents pay more, but get less.

Because of these inadequate child care services, women’s labour force participation and full-time employment are suppressed. Australian women of prime parenting age are 25 percentage points less likely to participate in paid work than their Nordic counterparts, and far less likely to take full-time work.

The report also finds that:

  • If Australian women had the same participation rates and opportunity to work full-time as Nordic women, Australia’s GDP would be some $132 billion per year higher.
  • Government funding for public and non-profit ECEC centres generates one-third more employment and GDP than funding for private for-profit firms – which divert revenues into profit payouts and high executive salaries.
  • By matching Nordic funding levels, with new funds channelled to public and not-for-profit centres (rather than private firms), GDP would grow by another $35 billion.
  • A Nordic-scale public and non-profit ECEC system would generate 292,000 new jobs in ECEC centres, related supply industries, and downstream consumer industries (on top of increased employment from increased female labour supply).
  • Higher GDP supports an additional $48 billion in government revenues, based solely on existing taxes – much more than the cost of providing the ECEC services in the first place.

This table summarises the combined impacts on GDP and tax revenues (for all levels of government) from the increase in female labour force participation, the greater opportunity for paid full-time work by women, and the direct and indirect jobs associated with ECEC supply.

ECEC Benefits Table

Expanded ECEC services would provide a strong and lasting boost to Australia’s economic recovery after the COVID-19 pandemic. Matching the ECEC investments of other industrial countries would create hundreds of thousands of new jobs in child care centres and related industries, tens of billions of dollars in new GDP, and billions of dollars in government tax revenue. It would facilitate the expanded paid work effort of hundreds of thousands of Australian women, and help to close the gender income gap that so constrains their life chances. However, expanded ECEC must be done right, to maximise these potential economic and social benefits. That means channeling new resources into not-for-profit and public centres which put top priority on quality – rather than subsidising profits of private investors in an ECEC system which views children as an avenue for profit.

Please read the full report, Economic Benefits of High-Quality, Universal Early Child Education, by Matt Grudnoff.


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