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Ontario’s Childcare Rebate Program: The Cost and The Impact

In this edition of Graphic Intelligence, we show the impact of the proposed Ontario childcare rebate program – which would reimburse up to 75 percent of the childcare expenses of low-income families – on mothers’ participation in the workforce, and the resulting reduction in the fiscal cost of the program.

In the first year, the proposed rebate would cost Ontario, at most, $945 million per year. Then, we expect the proposed rebate to induce some mothers of young children – whose decisions to take on paid work are sensitive to childcare costs – to enter the workforce. Over the first few years, we expect about 60,000 stay-at-home mothers to enter the workforce. Over the long run, we expect as many as 113,000 to enter the workforce. These additionally employed mothers would generate additional employment income which would generate extra fiscal revenues (due to income and consumption taxes) and reduce income-tested benefits. This would reduce Ontario’s net fiscal cost by about 38 percent, to $588 million annually.

To learn more about the fiscal costs of the childcare rebate program and its impact on the labour force, read “Mothers at Work: The Fiscal Implications of the Ontario Childcare Rebate” by Alexandre Laurin and Jacob Kim.