The kids business

Back in my mother’s day having kids seemed so much simpler. Then, wives were expected to stay home with their preschoolers and devote themselves to domestic life while the fathers worked. One-income families were the norm and, with the exception of kindergartens and playcentres, there were few childcare options.

Today, having both parents working has become commonplace, and a thriving, competitive childcare industry has emerged to meet the demand. The new trend is corporatisation of the business.

Accelerating the trend is recent government legislation requiring 50% of teachers in preschool centres to be trained and registered by next year, and new funding arrangements that pay higher government subsidies to those centres with more qualified staff. This is pushing up the cost of childcare as teaching staff become more expensive.

Good teachers are in short supply as older, experienced but unqualified staff leave the industry in droves, so competition is fierce to attract and retain new graduates. Property on which to build new centres is also difficult to access.

All these factors lend themselves to a corporate structure because only big players have the scale and sophistication to offer people the opportunities they want, says Wayne Couillault, chief investment manager for Fisher Funds Management which is a shareholder in the country’s only New Zealand-listed provider, Kidicorp.

New Zealand is in the early stages of the corporatisation that has already been the pattern for early childhood education providers in Australia, the UK and the US, he says.

“We will gradually see the number of small, local early childcare education providers diminish, just as supermarkets have led to the demise of the corner dairy. It’s inevitable.”

Sue Thorne, CEO of the Early Childhood Council, which represents early childhood educators, says a number of the bigger companies have been purchasing existing centres because the former owners found it was getting too hard to run a centre in some parts of New Zealand. “They were having to cope with a significant staffing shortage, and compliance is arduous. The people who have sold centres have just had a guts full.” But, she says, corporates are getting involved because daycare is a “good investment and a growing part of the infrastructure of the early childhood sector because more women are going back to work”. Around a third of daycare centres report they are 100% full with waiting lists.

Thorne’s also trying to persuade her members there’s money to be made in teaching parenting skills to the Mums and Dads of preschoolers — but in a way that meets the needs of busy working parents.
So who are the big players in the New Zealand daycare sector? Four companies now dominate the privatised sector, which has also grabbed the major slice of the early childhood education market.

The largest of those is the listed Kidicorp, founded by Tauranga businessman Wayne Wright five years ago. Chasing hard on its heels in the number two and three slots are two listed Australian providers — ABC Learning Centres and Macquarie Bank respectively. And the fourth biggest player is the unlisted Kindercare.

Not everyone is happy with the emergence of corporatised providers.

As Macquarie Bank says, there is a perception among opponents of corporate influence in early-childhood education that children may end up as nothing but numbers on a financial spreadsheet.

Hawera-based early childhood teacher Judith Nowotarski was quoted in the NZ Herald saying: “However much these chains say they are commit-ted to education, the fact is they are businesses that exist to make a profit. The first loyalty is to their shareholders, not the children.”

Thorne reckons she could take parents into a number of different centres and they wouldn’t be able to tell which were community owned, run by Mum-and-Dad operators, or by big corporates. Minimum standards are required in all and variances relate mainly to those running and staffing the centre rather than ownership, she says.

Kidicorp’s Wright also rejects claims that corporate ownership is a bad thing. Providing a good service for parents, having high-quality early childhood education and making a profit can coexist, he says.
The government may have its own ideological views on corporate ownership but it played into corporates’ hands when Labour announced — during the election campaign — that from July 2007 it would extend its 20-hours-a-week free childcare to private centres rather than just -community-based ones as it had initially announced.

The policy U-turn yields $90 a week more for all families with children aged three and four in early childhood education, at a total cost to the taxpayer of $105 million. It means another $53 million going to private daycare centres and an estimated extra 1,000 centres will benefit. Around 45,000 children are in privately owned centres and 65,000 in those that are community owned.

So more money is going into the sector, but the rules have changed, too.

All early childhood education services are licensed and receive greater direct government subsidies depending on the number of qualified and registered early childhood teachers they employ, as well as the proportion of under-twos and older preschoolers in each centre. Back in 1999, the National government indicated existing unqualified teachers would be grandparented — in other words, could remain in their jobs until they retire. But Labour changed the rules when it came to power, insisting those teachers would have to retrain or leave.

The government’s target is to have 50% of early childhood teachers registered by 2007 and 100% by 2012.

“There are a lot of different interest groups in the early childhood sector but it is important that all providers meet the same standards,” says Karl Le Quesne, the Ministry of Education’s senior manager of early childhood policy.

One of the government’s priorities, he says, is getting more children into quality early childhood education. But another motivation is making it easier for parents to be in the workforce or study.

Prime Minister Helen Clark raised a few hackles last year by commenting she’d like to see more mothers rejoin the workforce in a bid to help raise New Zealand’s productivity levels. Some parents want more flexible options and don’t want their children in daycare for long periods, but the growing demand for full-day childcare providers show there are plenty of others who do. The early childhood sector has grown at a rate of 2.8% per annum since 1990 but the biggest growth has been in ‘long day services’ — those most used by working parents — which have increased by an average 7% per annum during that time.

One of the criticisms of public kindergartens is that their hours don’t cater for working parents. Kindergartens traditionally operate on three-hour morning or afternoon sessions only, and close for school holidays. It’s one of the reasons their share of the early childhood education pie has dropped in recent years to 27%.

The government is now allowing kindergartens to operate for longer hours where their communities want it, and there are more changes to come, says Le Quesne. An Education Amendment Bill, currently wending its way through the parliamentary process, will put kindergartens on a similar footing to other early childhood services. They will no longer have to have all of their teachers qualified and registered, for example, if they operate all day.

There’s good and bad in changes to the sector, says Kindercare founder Glennie Wendleborn.
“Children deserve the very best, so it’s good that the government is demanding high standards. But some wonderful people are getting burnt out. The new requirement for 50% qualified staff by 2007 will be near impossible to meet. There just aren’t that many trained and qualified people out there.”
In her view, the sector is at crisis point.

“Some good, experienced people don’t want to go back and get qualifications after years at work, so they are being squeezed out. But a mature woman in her 50s can offer things to children and parents that a 20-year-old graduate can’t. We need a balance between the two.”

Thorne agrees the sector is in crisis. She points to a November survey of 262 of her members showing 42.2% had staffing positions they couldn’t fill currently. And some 51% had received just one or no qualified applicants for the jobs they had advertised. Thorne reckons the government has spent millions of dollars of taxpayers’ money on incentive schemes to attract qualified teachers but she’s seen no evidence these have had much impact.

The problem is worst in rural areas, she says, where there is only one daycare centre open, which could be forced to close if it couldn’t get a qualified teacher. “I’m not sure the corporates are that excited about setting up a new centre in places like Raetahi. It’s not their market."