Why childcare is so damn expensive…

There are a lot of parents and policy makers wondering how we can simultaneously have childcare that is extremely expensive for parents while childcare workers don’t get paid enough to keep them in the industry.

I have two children and I served on the board of our local not-for-profit childcare centre that my children attended. We constantly balanced the need to increase annual fees to cover our costs with maintain reasonably priced access to our centre.

Here are some of the things that factor into childcare costs.

• Rent. In our state each child is required to have 3.25m of unencumbered play area. This comes with a rental cost that tends to be higher in the areas that are close to work places, which means the convenient childcare centres often have a hefty rent bill. In my city (Perth, WA) this can run up to $800–1000/sqm pa which means each child has a minimum rent bill of $3000 per year for their child care not accounting for shared spaces such as foyers and offices. In the outer suburbs this can be much lower, more in the range of $300 per year.
• Administration. We had a relatively small centre but had 2 administration staff including the director. Their tasks including working out rosters, paying the staff, ordering goods for the centre, performance management on the staff, sorting out social issues between staff, dealing with parent enquiries (new and existing), invoicing parents and organising audit compliance with the government licensing agencies. These staff roles added somewhere in the range of an extra $100,000 of costs to the centre each year, split over the 50–60 children who attended. That’s another $2000 per child annually.
• Resources for the centre. Whilst children’s toys seem indestructible at home, in a heavy use centre they can quickly get worn down and tired in a centre environment. Equally, in order to send home crafts and do fun activities during the day can be very expensive. 
  Staff also needed regular replenishment of resources such as pens, pencils, logbooks, and wanted to print out pictures of the kids to send home. The adminstrators also had a basic computer each and a printer to complete their work. We would budget $600 per month for this, or $7200 per annum ($130 per child).
• Cleaning chemicals. Children are, bless them, gross. We would budget another $600 per month in cleaning chemicals which accounted for disinfecting sprays in the change/toileting area, toilet papers, washing liquid to clean the commonly chewed toys in the younger children’s area, floor cleaner and so on. Any centre that cuts back on this too much is likely to have a higher rate of viruses and diseases being passed between children and staff, and eventually back to parents. That’s another $130pa per child.
• Running costs of the centre. The centre costs money to run including power, gas and water bills. Additionally if there are nice facilities such as a yard then the centre may pay a gardener to come in to service. Centres also need to be full cleaned after hours in order to keep all surfaces fresh. These costs can easily run to $10,000 annum depending on how the centre manages them. Some centres cut costs by letting the staff do cleaning while looking after the children but this can have other consequences.
• Staff benefits. In Australia all staff would get 10 days a year of sick leave which they would reliably use as they were in constant contact with the same children bringing home the viruses to us. This meant we needed to pay them when not working, as well as annual leave. We would also give them certain training course top-ups such as first aid and specialist childcare topics to try and keep our older staff aligned with modern thinking on children. This came to about $2500pa, or per child.
• Direct labour costs. Finally we come down to the big line item which is direct labour costs. Another important thing to remember when you look at the direct labour costs is the hours that the centre is open. Even though you might often not use your centre for the full time that it is open, the centre still needs to staff those hours for the days that you do run late or require some flexibility.
  If the centre do not have adequate staff-to-child ratio they risk being shut down. Our centre had an 11 hour opening range which meant we needed to staff for 11 not 8 hours per day, and roster permanent staff for early and late shifts with some casual coverage in between. This means that hourly rate for labour costs for the centre is lower than many parents estimate when they say they pay “$11/hr for childcare” or similar. The direct labour costs decrease over time as mandated ratios change when the children get older.

This means that the cost of child care in an more expensive location, before direct labour is included, is about $5600pa per child. The direct cost of labour then adds about another $10000pa. (If your centre also organises food and/or nappies you need to add up an extra $20 per day for these). For many centres the operator then adds a profit margin.

As you can see it’s all too easy for the cost of childcare to head up to $100+/day, whilst the staff don’t get paid more than minimum wage. Fixing the issue of pricey childcare requires a lowering of the administration load and the ability to negotiate lower costs for inputs such as rents and resources.