Conversation Starters: Is Universal Childcare the Right Model for Millennials?

Evelyn Jacks

The $30 billion national day care initiative announced in the April 19, 2021 federal budget deserves a deeper dive, especially in conversation with your Millennial clients.  It is important, it will be expensive, but it may not be the right model for the times. The issue has already garnered some important debate that provides a 360 degree lens. There are lots of worries too, ranging from health and safety to financial affordability and tax deductibility. 

Tax and financial advisors who take the opportunity to discuss the issue have an opportunity to Know Their Millennial Client better. Here are some thought-provokers to get things started:

Last month Statistics Canada released the results of its  Survey on Early Learning and Child Care Arrangements, 2020.   It speaks to priorities of new parents and some of the supports, aside from child care that makes it possible for parents to stay home.  It also speaks to fears parents will now have, post-pandemic, to take their children out of home for child care

Here is what Stats Canada’s Survey found on the latter issue:

Parents reported specific reasons for not using child care during the pandemic. More than one-quarter (28%) of parents who were not using any child care said they did not feel it was safe during the pandemic, although there were differences by province and territory.”

While cost was a big factor otherwise, it was not the biggest factor for not using out-of-home child care. The reasons also largely mirrored those reported in 2019, according to the survey relating to both regulated and unregulated day care centres:

1. The parent or guardian reported that they had decided to stay at home (37% of those not using child care in late 2020, compared with 43% in 2019)
2. A parent was on maternity or parental leave (25% versus 28% in 2019)
3. A parent was unemployed (14% versus 16% in 2019).
4. Almost one in four parents (23% in 2020 and 25% in 2019) of children younger than 6 who were not in child care said that the reason was that the cost was too high.

Many parents may also want to have more control and decide for themselves how their taxpayer dollars are spent and where, given the dramatic changes that will determine the world of work in the future and where parents will actually work.  The survey found, for example, that just over half (52%) of Canadian children younger than 6 were in regulated or unregulated child care from November 2020 to January 2021, down from 60% in 2019. In June 2020, early in the COVID-19 pandemic, and at the height of many lockdowns and restrictions on child care, only 10% of parents who participated in a crowdsourcing survey reported using child care for their child aged 0 to 5.

These are dramatic shifts and reflect changes coming to the world of work, too.     

The McKinsey Global Institute study for example, found that jobs in “work arenas with higher levels of physical proximity are likely to see greater transformation after the pandemic, triggering knock-on effects in other work arenas a business models shift in response.  . . .in the longer term, work arenas with higher physical proximity scores are likely to be more unsettled. . .”   In other words, child care solutions that worked in the old economy may not be the right model for a new economy in which occupations will transform and workplaces could well be a hybrid on home and on-the-job assignments.   

This same study, for example, has found that before the pandemic, low-income jobs that were lost during the pandemic could easily be replaced by other low-income occupations. Service workers could become data entry operators or health care workers, for example.

But post-pandemic, many of these jobs are declining to higher income occupations that need different skills. Their study found that the largest net growth of jobs for these workers will be in healthcare and the largest declines will be in retail, hospitality, food services, customer sales and services, production work and office support roles.  

In fact, in Europe and the U.S., more workers with less than a college degree, members of ethnic minority groups and women will likely need to change occupations than previously.  This requires a “reimagining” of where and how work is done and childcare solutions need to align with this.

What is the right answer?  The issue is top of mind as your Millennial clients, in particular, respond to the pandemic crisis and its effect on their careers as well as their child care needs.  Thinking this dramatic shift through with your clients is a great conversation starter with regards to the important financial issues that come with change. A review of new tax deductions and credits based on income level of the household, and retirement planning for workers who will not necessarily be covered by employer-sponsored plans are important. The advisors who get this conversation right are taking the first step in scaling their tax and financial services business up for the next generation.

Portions of this article are excerpted from the Special Report on the 2021 Federal Budget. For more important details and interpretations, sign up to receive Knowledge Bureau Report in your inbox and you’ll have access to download the complete report.

Additional educational resources: RSVP now for an analysis of the April 19, 2021 budget and its impact on the future of our economy and financial planning at the May 20 Virtual CE Summit.