Canada’s national child-care program leaves many families out in the cold, and is not yet financially sustainable, a new report says.
“While [child-care] costs have fallen, demand has surged without a corresponding expansion in system capacity,” the report by the think tank C.D. Howe Institute says.
The report recommends the federal government prioritize creating new subsidized child-care spaces in underserved areas. It also recommends providing parents not in the program with an income-tested federal tax credit that they can use for their preferred child-care provider.
“We need to address the shortcomings, to make sure that the [program’s] benefit is not limited, and to make sure that those really in need of this type of support can benefit,” said Parisa Mahboubi, co-author of the report.
The report confirms what many child-care workers see each day.
“[The program is] not delivering on what it said it was going to,” said Krystal Churcher, chair of the Association of Canadian Early Learning Programs, who has long raised concerns about the program’s sustainability.
Hard to find spaces
Launched in 2021, the Canada-wide Early Learning and Child Care program promised to reduce parents’ child-care fees to $10 a day and establish 250,000 affordable spots by March 2026.
The long-anticipated program quickly drew criticism. Child-care operators warned it locked them into minimal funding increases that could jeopardize their businesses. They also raised concerns that many low-income families have been unable to access the program.
Last October, a federal auditor general report said that only 112,000 new child-care spaces had been created in the program’s first three years, less than half the government’s stated goal.
C.D. Howe’s report says parents still struggle to find subsidized child-care spots.
“Recent evidence suggests that the central challenge facing the [national child-care] system has shifted from affordability to availability,” it says.
Parents who work non-standard hours particularly struggle.
Less than two per cent of child-care centres offer evening, weekend or overnight care, the report says. Unlicensed home-based child-care operators were the most likely to provide care at these times.
Long waitlists are another issue.
Between 2022 and 2025, the number of children on subsidized child-care waitlists increased in every province, the report says. Nearly one-third of children not in child care were on a waitlist in 2025, while almost a quarter of children in child care were on a waitlist for a subsidized spot.
“This pattern suggests that unmet demand is not limited to first-time entrants but also affects families attempting to change arrangements, secure preferred locations or hours, or move into regulated care,” the report says.
Not yet sustainable
Proponents of nationally subsidized child-care have argued tax revenue from mothers’ increased workforce participation will cover the program’s cost. Ottawa budgeted $35 billion for the program between 2021 and 2026, and has promised additional funding.
But that day is a long way off, the report says. The C.D. Howe Institute’s analysis “suggests [the program] generates a substantial net fiscal cost for the federal government.”
Nationally, the workplace rate of mothers with children under age six increased by just under four percentage points between 2019 and 2025, the report says.
“[The program’s] not generating enough tax revenue to cover the cost of the program,” said Mahboubi. “But this is short term.”
The report recommends more affordable spaces be opened in underserved areas, noting nearly half of children live in “child-care deserts.”
But for that to happen, the program’s priorities need to change, says Andrea Hannen, executive director of the Association of Day Care Operators in Ontario.
In Ontario, only 30 per cent of subsidized child-care spaces can be for-profit, including both large and small child-care operators, she says. This discourages small businesses from opening, she says.
For-profit and non-profit centres can provide the same quality of care, she says.
“All licensed child-care programs have to adhere to the same ministry standards,” she said.
Tax credit
The report recommends Ottawa create an income-tested, refundable tax credit for parents whose children are not in subsidized child care to use towards their preferred child-care operator.
Churcher, a child-care operator in Alberta, applauds that recommendation. Right now, families who can afford higher child-care fees pay the same amount as low-income families.
“It’s not a sustainable model, and it’s actually not serving the families that it should in the way it’s structured,” she said.
Provinces should return to child-care subsidies for qualifying families, like they did before the national child-care program, she says.
Despite her critiques, Churcher does not think the national child-care program can be completely scrapped.
“It’s not going to be as easy as flipping a switch and giving parents child care back at market rate,” she said.
The program needs reform, not elimination, Mahboubi says. Enabling mothers of young children to stay in the workforce is necessary for Canada’s economic growth, especially as the population ages, she says.
“Immigration alone is not able to mitigate all challenges related to aging,” she said.
