The hidden cost of Australia's early childhood sector

A new report from Victoria University’s Mitchell Institute has found that Australia’s push to rapidly expand childcare has created a system characterised by provider turnover, workforce churn and growing risks.

The report, The price of a place: Instability, risk and the hidden cost of Australia’s early childhood education and care system, shows 32 per cent of all childcare centres have changed approved provider (the legal entity responsible for the service) since 2013, a figure that grows to over 40 per cent for-profit centres.

The high turnover staff and low pay mean the workforce has characteristics more like the retail and hospitality sector than education. The median hourly wage for educators is $34.30, compared to $62 for schoolteachers and below the median hourly wage of $42.40. Income tax data from 2023-23 shows that 52 per cent of jobs in the childcare sector were held for less than a year, compared to 25 per cent for jobs in the school sector.

The report finds that the large growth in childcare places - from 190,900 to more than 720,000 over the past 25 years – has been driven almost entirely by private for-profit providers, who now account for 74 per cent of long day care places. This shift has profoundly changed the early childhood education and care (ECEC) landscape in Australia.

Analysing recently published data by the Australian Government, the report found centres owned by large, private for-profit providers were more than three times as likely to have an enforcement action recorded than centres run by other large providers, such as not-for-profits. Enforcement actions are a broad set of actions ranging from quality measures to safety breaches. Centre-based services run by large private for-profit providers (those that operate 25 or more services) were over three times more likely (229%) to have an enforcement action recorded than all other large providers.

"Australia has used sophisticated approaches from the research on markets and economics to grow the number of places while keeping costs down,” Lead author and Mitchell Institute Director, Professor Peter Hurley, said.

“But these approaches bake-in the deficiencies of low-pay and high turnover and put enormous strain on the on the sector. They end up rewarding those providers who can produce an hour of care in the cheapest way possible while meeting the minimum standard.”

The report is the first to highlight why and how Australia must balance policies designed to grow places, keep costs down, while meeting the needs of children, families and the community.

Sherry, an early career teacher who spent four years working across two different long daycare centres recently switched to a role in sessional preschool due to unsustainable conditions. Sherry said she was not supported as a graduate teacher and struggled to access professional development. “I experienced the impact of poor management first-hand. I was left to work alone with 11 children, and six of them had additional needs.”

Co-author and Mitchell Institute Research Fellow Dr Melissa Tham said that “to get the most out of the ECEC sector, we need to look beyond short-term fixes and examine the fundamentals of how the sector runs. Children benefit from rich environments and trusted relationships. Stability should be recognised as an important feature of a high-quality early childhood education and care system.”

*Full report, including data and national overview: The Mitchell Institute