|
TABLE 14.
The cost of welfare versus the cost of day care.
The following table was developed from a set of options and
basic assumptions about day care and welfare costs. The following facts should
be kept in mind when reading this table:
-
All dollar amounts are based on costs and wages in Metro
Toronto and all estimates are made in 1975 dollars.
-
It is assumed that family benefit allowances (FBA), costs,
and incomes will remain constant at 1975 levels throughout the time frame
used.
-
Each option assumes that each child will receive 5 years of
full-day day care services and 5 years of lunch and after-school
services.
-
Each option assumes that the mother will receive a wage of
$2.80 per hour for a 40-hour week and that she will remain employed throughout.
-
Each option assumes that Family Benefit Allowances would
have been paid to the mother until each child reached the age of 18 years, that
she would remain unmarried, unemployed, and in financial need.
-
Two options described are: Option I is for a single mother
with one child, aged 2 years in 1976 Option II is for a single mother with two
children, aged 1 and 2 years in 1976.
|
Total FBA |
Total gross |
Total |
Government |
Mother's |
% return to |
|
costs |
day care |
income tax |
net |
income |
government |
| |
1976-1992 |
costs |
if mother |
savings |
after |
on day care |
|
|
1976-1992 |
works |
|
taxes |
investment |
| |
(1) |
(2) |
(3) |
(1+3 - 2) |
1976-92 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Option I |
$64,476 |
$20,626 |
$8,004 |
$51,854 |
$100,386 |
251% |
| |
|
|
|
|
|
|
| Option II |
76,368 |
43,935 |
6,600 |
39,033 |
101,790 |
89% |
| Source: |
Social Planning Council of Metropolitan Toronto, "Is
there an economic case for public investment in high subsidy day care as an
alternative to welfare?" Research Bulletin #2. (Toronto: Social Planning
Council of Metropolitan Toronto, 1976). |
Comment:
A number of research papers develop the same argument using
different approaches. This was the explanation we found most understandable.
The figures are obtained by adding up the potential FBA costs for each option;
the potential day care costs; the potential income for the mother; and the
potential income tax revenue for the government. These amounts are used to
calculate how much it would have cost to keep the mother on FBA or to provide
her with full day care subsidies so that she could work. These data suggest
that the government would save 251% and 89% if it chose to provide day care
subsidies rather than welfare payments. The argument is largely hypothetical
but the point is valid -- day care subsidies are less expensive in the long-run
than welfare payments to low income families. |