Excerpts
Many of Australia's parents of school-aged children are this week dealing with the cost of outside school hours care (OSHC) — that is, getting the kids looked after before and after school as well as during school holidays.
And if you're among them, there's a fair chance you're dealing with private equity, the more-than-usually rapacious subset of modern capitalism.
The two biggest OSHC operators, Camp Australia and Junior Adventures Group (JAG), with about 20 per cent of the market between them, are owned by Bain Capital and Quadrant Private Equity, respectively.
Bain tried to take over JAG as well, but the Australian Competition and Consumer Commission (ACCC) knocked them back.
Private equity loves this business because you don't have to own any property — the businesses all run on school premises — and you don't even have to pay a fixed rent — the deal is a percentage of revenue, 10–15 per cent, paid to the school.
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The care and education of children under five years old is entirely private, and 70 per cent of the businesses are "for profit", many of them listed on the ASX or owned by private equity.
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The year your child turns five by the end of July, suddenly education is free, provided by the state government … but only until 3pm, after which you might have to pay a private company to show up at the school and look after your child until you get off work.
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About 37 per cent of primary and secondary schools are private — either Catholic (20 per cent) or independent (17 per cent) — and they are also subsidised by the federal government.
But unlike under-five education and child care, subsidies are only available to not-for-profit schools, which also get tax deductibility for donations. So, naturally they are virtually all not-for-profits.
Housing affordability and child care are two sides of the same coin, and are the core of Australia's intergenerational fairness problem, which Treasurer Jim Chalmers is fond of talking about these days.
The doubling of house prices as a multiple of incomes over the past 25 years has been accompanied by an equally rapid increase in the cost of having children minded while both partners work to pay the mortgage.
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So what can be done?
Last week, I floated the idea of nationalising the industry and making child care free, like education for the over-fives, and that piece on ABC News got a lot of support, as well as opposition from many appalled social media users who called me a communist, among other spicier names.
The good news for those free-market purists is that nationalisation definitely will not happen, even though data from the Australian Children's Education and Care Quality Authority clearly shows government-run centres are higher quality, safer and cheaper than privately owned ones. The primary and secondary school system is two-thirds government-owned and the rest is not-for-profit.
A more feasible idea would be to copy what Canada has done.
There, the government has flipped the script. Instead of giving parents the subsidy and leaving them to it, the Canadian government gives money to the childcare centres, in what's called the $10-a-day Canada-wide Early Learning and Child Care (CWELCC) system.
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Why bother giving private companies money at all?
The Canadian system is not without problems. Demand for $10-a-day care is basically infinite, but the number of spots is limited, so waitlists in cities like Toronto or Vancouver have exploded. Some parents are waiting for years to get into a $10-a-day centre.
Also, the demand for cheap child care is causing a workforce crisis — there simply aren't enough workers to keep up.
And of course, the owners of Canadian childcare centres are complaining bitterly that their subsidies aren't keeping up with costs, so a lot of them are threatening to close.
But private operators will never be happy unless they can charge what they like, get paid by taxpayers and have a captive market.
Why bother giving private companies money at all? It's perhaps far better for the government to nationalise them and extend public education to kids under five.