Albanese government commits $3.6 billion to extend wage subsidies until 2028
Tens of thousands of child care workers will avoid pay cuts after the Albanian government agreed to double its $3.6 billion election pledge, which expires this year, to support early educator salaries.
Funding for the two-year deal, which would give early educators a 15 percent pay increase, announced ahead of the 2025 elections, was set to end in December. According to the United Workers Union, which is threatening to strike next month if the subsidy is not extended, 60,000 workers were facing pay cuts of 5 to 6 percent.
The cap on how much providers can raise fees was also set to expire in August, leading advocates to call for a new agreement to prevent further price increases for families.
Childcare costs have outpaced inflation, rising 9 per cent in the year to April, according to the latest data from the Australian Bureau of Statistics.
Child care centers that signed up for the subsidy were faced with the dilemma of either cutting salaries or increasing fees from 4.2 percent to 4.4 percent to make up the shortfall when state funding ran out. Other centers did not accept the subsidy, arguing that it would not cover their expenses, and instead increased staff wages.
Prime Minister Anthony Albanese has promised to fund a pay rise for childcare workers in 2024. The government had expected the Fair Work Commission to quickly monitor pay rises for female-dominated industries until the subsidy expired, but the commission instead spread the rises out to 2029 to help providers manage costs.
The government will fill this gap by extending the taxpayer-funded subsidy, also known as the worker retention payment, until 2028, costing taxpayers another $3.6 billion.
Increasing and stabilizing workforce numbers will be key to the prime minister’s goal of universal childcare; But sweeping reforms to the sector were left out of this year’s budget as Finance Minister Jim Chalmers warned the government could not afford it.
Albanese said primary educators played a crucial role in society and deserved to be paid fairly while the government tried to keep costs low.
“Only child care centers that agree to cap their fees for parents will be eligible to receive funding for this wage increase for workers,” Albanese said.
The family day care and home care sectors will be eligible for the first time starting in July.
The government will also link funding to providers that meet the National Quality Standard from mid-2027, in a bid to boost compliance following a series of child abuse revelations that have shaken the industry.
Education Minister Jason Clare said Labor had worked hard to improve safety over the past year and the next step was to link funding to standards.
“Nothing is more important than the safety of our children. This will help ensure that the safety and quality of early education is what parents expect and our children deserve,” Clare said.
Combined with the minimum wage increase this month, that subsidy means the typical full-time educator would get $255 more per week and early childhood teachers would get an extra $410 more than when the payment goes into effect in December 2024.
Since then, headcount in the sector has increased by nearly 8 percent, or 20,000 workers, and job vacancies have fallen by almost 31 percent.
Fees for centers that chose to pay increased by about half that of centers that did not accept payment, and the number of services operating with staff exemptions (i.e. staff shortages) fell from 8.9 percent to 5.1 percent.
The United Labor Union said last month that the pay increase recognizes that early childhood education and care work has long been undervalued and improves employee retention rates.
Carolyn Smith, the union’s director of early education, said when lobbying for the union’s expansion: “This pay rise has made a real difference to families and children who need quality early childhood education, by protecting passionate and committed staff who want to stay in the sector.”
Parenthood chief executive Georgie Dent has written to the prime minister calling for certainty for the sector.
Highlighting rising childcare costs, the parents’ lobby group said wages rose at three times the rate of inflation last year, while two in five families were paying out-of-pocket costs beyond the hourly wage cap.
“Early childhood education is essential infrastructure for families, children, communities and the economy,” Dent said.
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Brittany Busch is the federal politics correspondent for The Age and the Sydney Morning Herald.Connect via email.
