Fixing the broken dream of $10-a-day child care

Many parents are signing their children up for daycare wait-lists before they are born. Even that is not always early enough. Some daycare centres now warn pregnant mothers that by the time they call, they are already too late, as they have filled all available spots and wait-lists continue to grow.

The federal government has spent billions of dollars subsidizing and creating thousands of child care spaces, reducing fees and improving worker wages. As a result, child care costs have dropped. Yet for many families, finding regulated child care is a struggle. That’s the central paradox of Canada’s $10-a-day child care 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 child care system similar to Quebec’s: subsidized, regulated child care 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 child care needs.

The Canada-Wide Early Learning and Child Care system, announced in 2021, has delivered on affordability. Eight provinces and territories now offer a significant proportion of regulated child care for $10 a day or less for children under the age of six, while the remaining provinces – British Columbia, Alberta, Ontario, New Brunswick and Nova Scotia – have reduced fees by about half. Families who secure a space are saving thousands of dollars annually.

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 remains well below the federal target of 250,000 by March of this year. At the same time, staffing shortages have limited centres’ capacity to expand, even when funding is available. Job vacancies for early childhood educators remain well above prepandemic 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 child care centres reported having an active wait-list. By 2025, nearly half of parents using child care reported difficulty finding care, up from 36 per cent in 2019.

The shortage is especially severe for families working outside standard office hours. Fewer than 2 per cent 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, child care that aligns with work schedules is a necessity.

The program’s economic payoff has also fallen short. The rationale for subsidized child 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 subsidized child care can significantly increase the number of mothers who are employed when it meaningfully lowers barriers to work. Before Quebec introduced its low-fee child care 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 alone: 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 child care 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 child care.

Canada’s child care 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 CWELCC. Other factors, including pandemic-related labour market tightness and the rise of remote work, also drew more mothers into the work force during this period. The fiscal story tells the same tale: Analysis by the C.D. Howe Institute shows that CWELCC has generated less than 1 per cent of its cost back in tax revenue over its first three years.

Expanding child care 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 is failing to reach many disadvantaged families, particularly low-income households that face the greatest barriers to accessing child care. Rather than offering the same heavily subsidized fee to all families, governments should introduce income-tested child care 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 child care, 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. This would help address capacity constraints, while giving families greater flexibility to choose arrangements that match their work schedules and needs.

Three years in, Canada’s child care plan has proven that affordability alone is not enough. Without better targeting, $10-a-day child care 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 serves as a policy analyst.