The Economics of Child Care Provision in Australia

  A recent article by posted on the ABC News website laments the high cost of child care to Australian parents, even though the provision of child care is subsidised by the government (Webb 2017). Despite high user costs, child care workers across Australia recently went on strike demanding pay-increases: they represent one of the lowest-paid groups of workers in the country. Another recent article posted in The Conversation describes how Australia compares to other countries in terms of access to, use of and quality of early childhood education (Torii, Pilcher and Fox 2017). While important improvements are observed in the proportion of children included in pre-school education programs, Australia still lags behind other comparable countries, particularly in terms of younger children (i.e. child-care). There is therefore an argument that Australia must make further improvements in this area. With this in mind, you are asked to write an essay discussing the market for child care services in Australia, drawing on the concepts covered in the first 5 topics of the unit. address the following elements:     a) With the help of the diagram, explain the welfare implications of a subsidy on child care services. What might be the economic justification for this subsidy? b) If child care workers are successful in bargaining for higher wages, how this would this affect the market for childcare services in Australia? For whom will this have the largest impact? Is there a good economic argument behind the claim that these workers are paid too little? c) If Australia’s use of child-care services currently is too low compared to what is considered optimal, what might be the economic logic behind this argument? Are we observing market failure or government failure? d) How might the government respond to the concerns raised with respect to affordability, usage, and better pay for child-care workers? Who are the winners and losers of such a policy?