1. ©2010 The Centre for Spatial Economics Socioeconomic Benefits and Labour Market Developments for New Brunswick Robert Fairholm The Centre for Spatial Economics April 2010

2. Effects Of Quality ECEC On Children Effects on social outcomes generally found to be positive, particularly for disadvantaged Effects on cognitive abilities generally found to be positive, particularly for disadvantaged Mixed results for effects on socio-emotional development  Quebec  Quality  Meta analysis suggest on balance quality ECEC positive Parent have hard time determining quality ©2010 The Centre for Spatial Economics

3. Effects Of Child Care On Parents Labour supply of mothers  Participation rates  Average hours worked  Access to quality ECEC can be more important than price ©2010 The Centre for Spatial Economics

4. Economic costs and benefits Short and long-run effects  Short-run stimulus multiplier  Long run benefit-cost ratio Growth theory demonstrates that investing in people is crucial in determining long- term success for a province like NB Investing in education increases labour productivity and boosts real incomes, so might as well start when they are young ©2010 The Centre for Spatial Economics

5. Multiplier - Definition Multiplier: Number of extra units of output per unit increase in input If there is a direct $100 increase in spending on cars The car industry will need to increase production by $100 There will be an indirect increase in production by all the suppliers to the car industry (e.g. Tires) by $20 Their suppliers will need to increase production, etc. e.g. $2 Multiplier = $122/$100 (or 1.22) ©2010 The Centre for Spatial Economics

6. Short-Run Multipliers - Types Direct Multiplier—industry directly experiencing the increase (or decrease) in spending/production Indirect Multiplier—sum of the supplying industries that experience an increase in production Gross Output (GO) multiplier Gross Domestic Product (GDP) multiplier Employment multiplier:  Number of additional jobs for each million dollars spent ©2010 The Centre for Spatial Economics

7. Direct & Indirect Short-term Multipliers ©2010 The Centre for Spatial Economics

8. Employment Multipliers ©2010 The Centre for Spatial Economics

9. Induced Effects The previous estimates do not take induced effects into account Induced effects capture the impact on the economy from increased employment, income and household spending caused by the direct & indirect impacts The ECEC sector has a high induced multiplier because labour costs are a large share of total costs and workers earn low wages so every extra dollar is spent ©2010 The Centre for Spatial Economics

10. Total GDP Multiplier ©2010 The Centre for Spatial Economics

11. ECEC Affects Jobs Via Mothers Too ©2010 The Centre for Spatial Economics

12. Government Revenue Affected by ECEC ©2010 The Centre for Spatial Economics

13. Long-Run Benefit Cost Ratio Long-run benefits to society Long-run costs to society Benefit/Cost Ratio = (Benefit to children and parents)/(cost of program) Used observed academic gains from Carolina Abecedarian program Results adjusted because Abecedarian program was for disadvantaged children using highly trained educators Results further adjusted to reflect average Canadian child ©2010 The Centre for Spatial Economics

14. Benefits To Children - Results Higher future earnings Benefits from decreased smoking Savings on primary education  Lower rate of grade retention  Lower rate of special education  Higher high school graduation Does not take all possible effects into account  Crime rates  Multi-generational effects  Impact of smoking on other outcomes ©2010 The Centre for Spatial Economics

15. Benefits To Parents Immediate wage gains  Working more Future wage gains  More experience if mother works Does not take all possible effects into account  Higher future income stream if mother gets more education  Higher productivity of workers with access to child care ©2010 The Centre for Spatial Economics

16. Benefit-Cost Results ©2010 The Centre for Spatial Economics

17. Demand for ECEC Services Many factors influence demand for ECEC  Demographics,  Family characteristics,  Government programs,  Availability and accessibility  Other factors- egg. Quality Higher fees reduce demand Higher mothers’ wages increase demand Canadian parents found to be more price sensitive and less wage sensitive than parents in other countries Implications for workforce and ECEC quality ©2010 The Centre for Spatial Economics

18. Demand for Child Care Quality Parents value quality, but they have difficulty in assessing the quality of child care they are purchasing Parents may be interpreting the signals of quality incorrectly US study finds evidence of “moral hazard” where the centres with positive observable traits tend to produce a lower level of quality for unobservable items ©2010 The Centre for Spatial Economics

19. Market Failure In Provision of Quality If parents cannot distinguish between high- quality and low-quality services, then demand for quality ECEC is curtailed This can be described as a market failure Market failure is a reason for government involvement to encourage a more socially optimal outcome ©2010 The Centre for Spatial Economics

20. Government policies and ECEC Training requirements and staff-child ratios for ECEC workforce Direct delivery of ECEC services Direct and indirect financial subsidies  Private providers,  Grants,  Contracts,  Tax incentives Financial subsidies to parents  Cash benefits and allowances for ECEC  Tax benefits to offset the costs  Cash benefits to remain at home ©2010 The Centre for Spatial Economics

21. ECEC Workforce The quality of ECEC is influenced by the quality of child care workers, which in turn is influenced by level of ECE education Employer characteristics & HRM can influence the quality of workers NB has a below average number of early childhood educators and assistants (ECE&A) relative to children as per 2006 census NB has a below average share of workers with ECE education according to 2006 census ©2010 The Centre for Spatial Economics

22. Concentration of ECEC workers ©2010 The Centre for Spatial Economics

23. Qualifications in ECE&A: Canada

24. Qualifications in ECE&A: NB

25. ECEC Workforce More than half of ECE qualified workers in Canada and NB do not end up working in the sector according to the 2006 census Difficult to pull workers from higher wage sectors Must recruit those not in the labour force (NILF) & encourage new entrants Those not in the labour force are already not enticed to work in sector, wage must exceed their reservation wage ©2010 The Centre for Spatial Economics

26. Canadian ECEs Mostly Not In ECEC

27. NB ECEs Even More Outside ECEC

28. Four Main WFS Questions Why do workforce shortages occur? How to define a workforce shortage? How long do workforce shortages last? Does a workforce shortage exist?

29. Why Do WFS Occur? Workforce shortages occur when wages remain below the wage necessary for the supply of workers to meet the demand for workers ECEC employers may not be willing/able to pay the wage necessary to attract enough qualified child care workers ECE qualified workers might have higher wage prospects outside sector

30. How To Define A Workforce Shortage An occupation specific workforce shortage occurs when there are not enough potential employees with the skills sought by employers to fill the available jobs

31. How Long Do WFS Last? Workforce shortages (WFS) can be short- term reflecting the business cycle or long- term reflecting structural factors Structural factors include globalization, technological and demographic change Changes in government policy can also cause or alleviate WFS Recent ECEC workforce shortages are due to both cyclical and structural factors Falling WFS caused primarily by business cycle. Unemployment rate in sector highly correlated with overall unemployment rate

32. Does A Workforce Shortage Exist? Most methods of determining if there is an occupational workforce shortage looks at unemployment rate, wage growth and employment growth vs. average COPS Unemployment Rate 30% avg. & Employment growth 50%>avg. ECEC salaried (qualified) ECEC workers are experiencing a workforce shortage Hourly paid ECEC (lower qualified) workers are not experiencing a shortage ©2010 The Centre for Spatial Economics

33. No indication of WFS using LFS data Data issues given size of sample Census data suggest there may be a small absolute shortage for ECE trained staff in 2006, but not a shortage for staff in general. These estimates understate the situation faced by employers because of the high rate of staff turnover NB Labour Shortages ©2010 The Centre for Spatial Economics

34. NB Labour Shortages for ECE Qualified ©2010 The Centre for Spatial Economics

35. Effects of High Turnover Turnover rates in the Canadian ECEC are much higher than general turnover rates Replacement demand is very high Implies recruitment and retention crisis is really retention crisis High turnover can decrease the quality of care that children receive, increase employer costs and cause vicious cycle Number of provinces have instituted direct or indirect wage subsidies for workers in the ECEC sector in recent years Improvements in HRM can improve job satisfaction and reduce turnover ©2010 The Centre for Spatial Economics

36. Job Satisfaction, Wages & Quits As wages rise the quit rate falls Importance of non-wage factors diminishes as wages rise At low wage levels there is a very large dispersion in quit rates that seems to be related to job satisfaction Changing the job satisfaction rate from the lowest to the highest rating at the lowest income level lowers quit rate by over 20% Equivalent to a huge increase in pay HRM practices affect job satisfaction ©2010 The Centre for Spatial Economics

37. R&R – Job Satisfaction And Wage ©2010 The Centre for Spatial Economics Source: Lydon and Chevalier (2002)

38. To have the full benefits of early childhood education and care the ECEC sector must have trained staff Policies should encourage improved training of ECEC workforce NB should institute training requirements Any wage subsidies should be linked to training in order to encourage retention of trained staff Revamping of HRM practices can deliver large gains in job satisfaction & retention Conclusions of Research ©2010 The Centre for Spatial Economics