Business benefits from investment in early childhood

It is not unexpected that in recent weeks, parts of the business sector are calling for the government to scrap the 1.5% levy that was earmarked to fund the Prime Minister’s proposed generous Paid Parental Leave scheme.

When the Prime Minister announced changes to his proposed scheme, there were suggestions that the levy could instead be used to fund the Government’s reforms to early childhood education and care as part of its soon to be announced ‘Families Package’.

So why should big business foot the bill for increased investment in early childhood?

Because everyone benefits – including business.

Access to affordable, quality early childhood education and care improves workforce participation which assists businesses to retain skills, corporate knowledge and their return on investment in their employees.

Investment in early childhood will build the foundation skills of Australia and big business’ next generation of employees.

Future productivity is not the only reason to invest in early childhood education and care. Social benefits arise from children’s participation in high quality programs that support lifelong learning, emotional wellbeing and resilience. There is substantial and growing evidence that quality early learning programs and family support are an effective way to reduce social inequality and overcome disadvantage that would otherwise result in some children starting school well behind their peers – an effect that can last a lifetime.

Early childhood development experts continually present the evidence that children build the framework of neural circuits that they need to learn more complex skills as they grow.

heckmanNobel Laureate and economist James Heckman outlines that investment in early childhood is more effective and efficient than investing in human capital later in life.

If the foundations of the first five years are poor, then the level of achievement of the child will be much lower when children transition to school, tertiary education and the workforce.

We now know from the Longitudinal Study of Australian children, that by year 3, children who attend a high quality early childhood program score much higher in NAPLAN than those that haven’t attended a quality early childhood program.

In fact, the research now shows that if Australia can get the early years right, the economic the benefits are profound.

New modelling from PricewaterhouseCoopers shows that:

  • The Benefits to GDP for children receiving a quality education and care program are $10.3 billion cumulative to 2050
  • The Benefits to GDP of increased participation of vulnerable children whose parents are in the lowest income bracket are $13.3 billion cumulative to 2050.

PWC findings

Despite the economic benefits, Australia continues to lag behind countries such as Romania and Latvia (as well most other OECD countries) in terms of our overall investment in early childhood.

According to MYEFO, Australia will spend $31 billion over the next four years on the Child Care Rebate and Child Care Benefit alone.

While this is significant, if Australia was investing the accepted benchmark of 1% of GDP – we would be investing well over $60 billion over the forward estimates.

Families also play an important role in investing in early childhood education and care for their children. According to the Productivity Commission’s Report on Government Services released this month, a family earning $115,000 with one young child spend up to 10.5% of their disposable income on child care, up from around 7% in 2011. Many families are willing to spend more for higher quality services that they believe will benefit their children long term.

But delivering of the economic and social benefits of early childhood education and care requires investment and reform of the Howard era early childhood subsidy system to improve access and affordability for all children and families.

The Productivity Commission’s proposal – which was constrained in reforming the subsidy system within the funding envelope,  would only achieve modest increases to workforce participation of 1.2%, and is patchy in terms of improving access or affordability.

In fact many families on all incomes are worse off, particularly those attending services which are higher than the proposed benchmark price of $72 per day.

If we genuinely want to increase access and affordability, and improve our nation’s prosperity, further investment will be required beyond current funding levels.

Any systemic reform of the early childhood education and care financing model should include investment by both government and families – but they are contributing their share already and it is time for business to pay their share too.

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Sam Page

Samantha Page is the CEO of Early Childhood Australia (ECA), the national peak advocacy organisation for children under eight, their families and professionals in the field of early childhood development and education. ECA was established in 1938 and works with Government, early childhood professionals, parents, other carers of young children, and various lobby groups to advocate to ensure quality, social justice and equity in all issues relating to the education and care of children from birth to eight years. ECA is a not-for-profit membership based organisation. It also has a successful retail and publishing arm, producing a number of very well regarded subscription based publications including the Australian Journal of Early Childhood. Samantha holds a Master’s Degree in (Community) Management from the University of Technology, Sydney and she is a Graduate of the Company Directors course offered by the Australian Institute of Company Directors. Her passion is for social equality and she has worked in the non-government sector for 20 years across roles encompassing service delivery, executive management, consulting, social policy analysis and advocacy. She has extensive experience in the development and implementation of social policy and sector development projects.

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