Canada-Wide Early Learning and Child Care Plan: positive impacts on economic growth, but not sufficient to fully meet demand

The Parliamentary Budget Officer (PBO) today released an estimated cost of the provincial and territorial aspects of the federal national child care plan announced in Budget 2021.

“The gross cost required to meet demand would be $28.3 billion, $1.1 billion more than the $27.2 billion outlined in Budget 2021”, explained Yves Giroux, PBO. In addition to the costs related to increasing the number of child care spaces and providing fee subsidies, the analysis considered the impacts of the plan on Child Care Expense Deduction claims, income tax revenues, and Canada Child Benefit transfers. The PBO estimated the cumulative net cost of the Canada-Wide Early Learning and Child Care Plan to be $26.4 billion by the end of 2025-26.

PBO projected that in 2026, with 90% of gross funding allocated to subsidies, the 2021 budgeted funding would subsidize 678,800 full-time equivalent spaces, which is 182,000 fewer slots than required to meet the estimated demand at that time.

In terms of macroeconomic impacts, the PBO estimated that, as a result of the universal policy, the overall labour force participation rate would increase by 0.3 percentage points over the long term, which would result in a 0.4 percentage point increase in real GDP.

The cost estimate used the same set of parameters and assumptions for all provinces and territories, whether or not the province or territory had signed an agreement with the federal government at the time of publication with respect to the plan. Once all agreements are finalized, the PBO intends to publish a report with more detailed analysis for each province and territory.

The PBO did not produce detailed estimates of other elements of the plan due to a lack of policy details.