Looking at the Productivity Commission through the lens of the 2012 and 2015 childcare inquiries

Dr Gemma Carey (@gemcarey) & Dr Lara Corr examine the norms and values of the Productivity Commission and how this influences the way PC reviews are conducted and the advice that is given to government. The full article is available online.

The Productivity Commission (PC) has played an important role as a government advisory body since the 1990s, and over time we’ve seen them move more and more into giving advice and conducting inquiries into social policy.

The PC describes itself as an independent advisory body, that operates at arms length to government. But is it really? More likely, the PC has its own norms and values, which play out in the way reviews are conducted and the advice that is given to government.

In a recent study, we took advantage of a unique opportunity where two consecutive federal government-commissioned inquiries into childcare reform. This is the first time a Labor and Liberal government have done this in quick succession. It provides a window to look at the values and norms of the PC and how these intersect with more formal institutions – that is, governments in power. We analysed the terms of reference (TOR) set by each government, and then the reports and recommendations handed down by the PC using the concept of ‘problematisations’. What is seen as a problem, and what is not, can tell us a great deal about the priorities of governments (Bacchi, 2009).

The 2011 Productivity Commission Inquiry under Labor

The Labor Government initiated 2011 Inquiry into the early childhood development sector focused on workforce changes needed to implement the new National Quality Framework (NQF) for early childhood education and care.

The National Framework was a key part of the National Quality Agenda, which was the result of the Council of Australian Governments agreement to bring together early childhood development services (i.e. long day care, kindergarten, family day care) under one regulatory, monitoring and practice framework.

The overarching aim of this reform was to increase quality and, in turn, to boost human capital.

The 2011 terms of reference for the PC centred on ‘issues impacting on the workforces in the early childhood development, schooling and vocational education and training sectors’ (Productivity Commission 2011, p.IV). The scope included examining issues of worker supply and demand, and both short and long-term advice on ‘workforce planning, development and structure’ (Productivity Commission 2011, p.IV). The PC inquiry was specifically requested to support the implementation and outcomes of the COAG reform.

Overall, the Labor TOR focus on building the capacity of the early childhood workforce without requesting an examination of the childcare system reflects an underlying presupposition that the childcare system is working well, with the exception of quality, that needed to be increased.

What is left unproblematic in the these Terms of Reference

There is an assumption that the system met basic needs associated with childcare, such as accessibility and affordability (for parents and government). The heavily critiqued marketisation of childcare provision in Australia is also unproblematised in their focus on workforce capacity. Hence, government subsidisation of both not-for-profit (<40%) and for-profit providers (>60% of the sector) is assumed to be appropriate and effective (Productivity Commission 2011).

The TOR also focuses on the need for a stronger workforce that is more capable and effective through enhanced qualifications and skills (which was seen as a requirement for implementing that National Quality Framework). The TOR stated that the ‘significant shifts in skill requirements’ and the need for accessible and appropriate ‘qualification pathways’ to support experienced workers to gain formal qualifications

The concern with achieving COAG reform aims through increasing workforce capacity against a background of universal government subsidies for childcare purchasers (parents/caregivers) reveals three ways that Labor framed childcare. It demonstrates that: childcare was seen as an opportunity for increasing human capital; childcare work was viewed as a profession that requires particular skills and qualifications to be of high quality, and; childcare was an essential service.

2011 Productivity Commission recommendations

When we compare PC recommendations stemming from the inquiry with the TOR set by Labor a number of discrepancies emerge.  Firstly, the Labor TOR focus on building the capacity of the early childhood workforce and does not request an examination of government subsidisation or funding of childcare. Hence, within the TOR is the assumption that universal childcare subsidies will continue well as the additional support for disadvantaged families (Centrelink 2010).

In contrast, the PC report and recommendations positions childcare as a costly welfare problem that is best addressed through policy targeting.

Childcare subsidy structures, emphasising targeting to the most disadvantaged children and families, could deliver cost savings to the Australian Government while helping to ensure access to services for those who would benefit most (Productivity Commission 2011, p.XXII).

This positioning of childcare reveals an assumption that childcare is mainly important for children from disadvantaged backgrounds. However, childcare has evolved to be an essential service for most Australian families, regardless of background.

The TOR included neither budgetary concern regarding costs of universal subsidies nor indicated the need to explore alternative funding models to alleviate these costs. This shift from universal to targeted subsidies between the TOR and the report indicates that the PC’s recommendations are predicated on a residualist approach to social policy (i.e. one that favours minimal, targeted welfare rather than a universalist social safety net) (Titmuss 1958). This is consistent with the economic rationalist underpinnings of the PC that brings with it an neoliberal ideologies and values that are aligned with approaches to ‘social problems’ as a negative residue of society (that can be targeted by addressing problematic behaviour) (Jamrozik and Nocella, 1998).

The idea that childcare is not a essential universal service speaks to out-dated gender norms regarding women’s roles in society, at home and in the workforce . The PC highlights that the additional cost to services stemming from the COAG reform (i.e. due to lower ratios of childcare workers to children and higher qualifications/incomes) will be passed onto service users (parents) and that such cost increases may be untenable for families. The PC stated that parents (read mothers) will meet the care shortfall, framing women’s workforce participation as optional and the job market sufficiently fluid to allow entry and exit from the workforce to accommodate child care accessibility:

The anticipated increase in Early Childcare Educators fees borne by parents (under existing funding arrangements) is likely to reduce demand for some ECEC services. Some parents may choose not to return to the workforce or to work shorter hours in order to care for children at home, thus reducing workforce participation (Productivity Commission 2011, p.XLIII).

2013 Productivity Commission Inquiry under the Coalition

Following the 2013 election of a Coalition (Liberal and National Parties) government, a new PC inquiry into the ‘childcare and early learning’ system was launched. This new inquiry and subsequent report had greater scope than its predecessor. The second PC inquiry was associated with the Labor led COAG reform, particularly the NQF, which was regarded by the Coalition government as burdensome to the sector, costly to government, services and families (The Hon Sussan Ley MP 2014).

Beyond challenges related to COAG reform implementation, the goals of the 2013 inquiry were to review the entire early development system, and recommend improvements. These improvements were to focus on: affordability and accessibility through greater flexibility; access and outcomes for vulnerable children; and, efficacy and financial sustainability of childcare services and the system/’market’ as a whole.

In the 2013 Coalition TOR, the needs of the economy (as opposed to the workers, or families) were foregrounded, with the inquiry seeking: ‘…a sustainable future for a more flexible, affordable and accessible childcare and early childhood learning market that helps underpin the national economy and supports the community’ (Productivity Commission 2014, p.IV). The Coalition TOR set out three main issues to be examined by the Commission – ‘sustainable’ funding, flexible childcare for working parents and accessible childcare for vulnerable children.

In setting out these key issues, the Coalition TOR presents a particular worldview concerning the role of government in the delivery of formal childcare. The focus on sustainable funding indicates that childcare is seen, in part, as an economic burden to government.  The focus on flexibility demonstrates the government’s framing of caretaking responsibilities as a hindrance to workforce participation, related to which is that flexible childcare is a solution to promoting greater workforce participation (i.e. the priority of government is to maximize labour market participation). Lastly, the focus on vulnerable children, rather than all children, suggests that childcare is a welfare remedy.

The 2013 Productivity Commission recommendations

In contrast to the Labor TOR, the second PC inquiry recommendations followed the Coalition parameters (funding, flexibility and accessibility for vulnerable children) quite closely.  The PC’s concern with funding saw recommendations to encourage individual childcare services to be more self-reliant financially by operating as sustainable businesses, rather than community services that require ongoing government support, such as schools and hospitals. This supports the marketisation approach to childcare in Australian). Specifically, PC recommendations called for long-term dependence on non-mainstream government funding to cease.

For example, in cases where it was deemed that market failure caused providers to be financially unviable (i.e. low socio-economic areas where parents cannot afford to access childcare or remote areas with low demand). In this scenario, the PC recommended targeted funding for a limited timeframe and with repeated review processes.

“…This funding (a capped Viability Assistance Program for non-urban providers) would be”

·  accessed for a maximum of 3 in every 7 years, with services assessed for viability once they have received 2 years of support

·  be limited to funding the fee gap that arises from a decline in the number of children using the service relative to the previous three years…” (Pg. 45).

These recommendations demonstrate two important framings of childcare funding. It highlights the problematisation of government’s role in formal childcare as a financial burden that requires alleviation. The recommendations also shows an assumption that childcare is an ‘industry’ that operates according to market rules. In doing so, it assumes that the market will ultimately correct itself. This means that additional support funding will not be required to continue operation, or that an alternative, better service will be opened. For example:

‘Recommendation 15.9 Budget Based Funded (BFF) Programme services that are unable to transition (to mainstream funding only) even with on-going assistance should be reviewed every three years and closed if there are better alternatives available.” (pg. 49).  

However, childcare is a well-documented market failure.

Secondly, the PC recommended that the universal childcare subsidy be dropped in favour of means-tested subsidies.

‘The Australian Government should fund the Early Care and Learning Subsidy to assist families with the cost of approved centre-based and home-based care. The program should assist families with the cost of ECEC services: 

2. With a means tested subsidy rate between 85 per cent (for family incomes at or below $60 000) and 20 per cent (for family incomes at or above $250 000), with annual indexation thresholds” (pg. 44).

This shift from universal subsidies with additional targeted support to means-tested subsidies reflects a broader trend towards providing essential services to only ‘the most needy’ (Esping-Andersen 1990, Navarro and Shi 2001, Mendes 2008).

 What do these findings tell us about the norms and values of the Productivity Commission?

Our analysis of the childcare inquiries tells us a great deal about the PC more broadly. Most clearly, the PC takes an economic rationalist approach and positions childcare as a burden on the state, something that is only essential for the most disadvantaged children. We know from the international evidence that high quality universal childcare is good for men, women and children regardless of socio-economic background.

Critically, it also shows a very traditional notion of gender and family – where women are ‘optional’ additions to the labour market and if they wish to work, they should meet the financial shortfall of services. This is out of step with what we know about the costs of living in Australia and about the realities of women’s participation in the workforce, which is very high. Families can’t subsist on a single income

As the remit of the PC expands into areas of social policy we must examine its norms and values far more closely. The logic that the economic basis of the PC means it can provide ‘objective’ advice to governments does not hold when dealing with highly contested and often ideologically fraught social policy issues.


Bacchi, C., 2009. Analysing Policy: What’s the problem represented to be? Pearson, NSW.

Jamrozik, A., Nocella, L., 1998. The Sociology of Social Problems: Theoretical Perspectives and Methods of Intervention. Cambridge University Press, New York.