Canada’s Childcare Plan: Affordable, but Still Out of Reach 

From: Parisa Mahboubi and Tingting Zhang 
To: Childcare watchers  
Date: August 18, 2026 
Re: Canada’s Childcare Plan: Affordable, but Still Out of Reach 

Many parents are signing their children up for daycare waitlists before they are born. Even that is not always early enough. Some centres now warn pregnant mothers they are already too late, as all available spots are gone and the waitlist continues to grow. 

The federal government has spent billions subsidizing and creating thousands of childcare spaces, reducing fees and improving worker wages. As a result, childcare costs have dropped. Yet for many  families, finding a regulated centre is a struggle. 

That’s the central paradox of Canada’s $10-a-day childcare plan: It has made care more affordable, but less accessible. 

Rather than relying solely on a single overloaded model of care, Ottawa should adopt a dual-track system similar to Quebec’s: Subsidized, regulated spaces for families most in need, combined with a refundable, income-tested tax credit for those using private or non-standard care. Effective policy requires moving beyond a one-size-fits-all fee reduction and recognizing that different families have different needs. 

The Canada-Wide Early Learning and Child Care system has delivered on affordability since 2021. Eight provinces and territories now offer a significant proportion of regulated childcare for $10 a day or less for children under six, while the remaining provinces – British Columbia, Alberta, Ontario, New Brunswick and Nova Scotia – have reduced fees by about half. 

But lower fees have driven demand far faster than supply can expand. As fees dropped, more families sought licensed care, including many who previously relied on informal arrangements. The system has not kept up, and too many families simply cannot get in as the number of new, licensed spaces was still well below the federal target of 250,000 by this March. At the same time,  staffing shortages  have limited any expansion, even when funding is available. Job vacancies for early childhood educators remain well above pre-pandemic levels. Low wages and limited benefits have led to high turnover across the sector. 

What was already a challenge of access has become more acute as fees dropped: In 2024, more than three-quarters of centres reported an active waitlist. By 2025, nearly half of parents using reported difficulty finding care, up from 36 percent in 2019. 

The shortage is especially severe for families working outside standard office hours. Fewer than 2 percent of licensed centres offer evening or weekend care, even though nearly two in five parents – disproportionately lower-income and single-parent households – work non-standard hours. For them, childcare that aligns with work schedules is a necessity. 

The program’s economic payoff has also fallen short. The rationale for subsidized care is that it encourages maternal employment, boosting the economy and generating tax revenues that at least partially offset the initial subsidy costs. 

Quebec’s model demonstrated that subsidies can significantly increase the number of mothers who are employed when they meaningfully lower barriers to work. Before Quebec introduced its low-fee system in 1997, the employment rate for mothers with young children was 3.3 percentage points lower than in the rest of Canada. Over time, however, Quebec moved ahead of the national average by approximately nine percentage points, marking a sustained reversal. 

More recent  evidence  also suggests that the benefits extend well beyond participation: Mothers’ earnings rise over time, their employment becomes more stable and the resulting increased tax revenues, alongside reduced reliance on income supports, may offset a large share of the program’s upfront cost over the long run. 

But Quebec’s experience also highlights an important lesson. The largest labour-supply gains occur when subsidies reach families for whom cost is a genuine barrier to employment. Once maternal participation rates are already high, additional universal subsidies tend to generate smaller gains because many recipients are already working or using paid childcare. 

Canada’s childcare system, so far, has not produced comparable results nationally. Maternal labour force participation rose about 3.7 percentage points between 2019 and 2025, but that increase reflects more than just the federal program. Other factors, including pandemic-related labour market tightness and the rise of remote work, also drew more mothers into the workforce during this period. The fiscal story tells the same tale: Analysis  by the C.D. Howe Institute shows that the scheme has generated less than 1 percent of its cost back in tax revenue over its first three years. 

Expanding childcare spaces – including by addressing work force shortages – is essential, but it will take time to deliver results. 

In the meantime, the more pressing problem is how governments are allocating and using funding. 

As it stands, the program fails to reach many disadvantaged families, particularly low-income households that face the greatest barriers. Rather than offering the same heavily subsidized fee to all families, governments should introduce income-tested fees. A sliding scale would ensure that lower- and middle-income households receive the greatest support, while requiring higher-income families to contribute more. 

Evidence shows that low-income and vulnerable families benefit most from affordable, accessible childcare, both through increased maternal employment and improved child development. These early investments reduce future costs in remedial education and social services, making targeting not just equitable but economically sound. 

Targeting should also extend beyond the regulated system. For families relying on private or non-standard care or those unable to access the licensed system at all, the federal government should introduce an income-tested refundable tax credit, similar to Quebec’s.  

Three years in, Canada’s childcare plan has proven that affordability alone is not enough. Without better targeting, $10-a-day childcare risks becoming a well-intentioned policy that delivers too little, to the wrong people, at too high a cost. 

Parisa Mahboubi is an associate director of research at the C.D. Howe Institute, where Tingting Zhang is a policy analyst. 

To send a comment or leave feedback, email us at  blog@cdhowe.org. 

The views expressed here are those of the authors. The C.D. Howe Institute does not take corporate positions on policy matters. 

A version of this Memo first appeared in The Globe and Mail.