Deregulating Early Childhood Education and Care (ECEC) Services While Maintaining Quality: As part of the Growth Strategy

Deborah ROSEVEARE
The OECD tries to take a comprehensive approach to policy. The OECD's comparative advantage is our ability to take all the different policy aspects and challenges facing each country and look at them from the broader picture. The OECD strives to understand and take into account how policies interact, the trade-offs between different policy options and the effort to reconcile multiple objectives. In the particular case of Japanese early childcare education services, we are looking at issues that include raising the participation of women in the workforce, lifting Japan's national fertility rate, tackling child and family poverty, improving availability and access to high quality early childhood education, developing economic efficiency and competitiveness, and minimizing budgetary costs. The OECD emphasizes the importance of different sectors working together so as to better balance and understand the potential interactions and trade-offs that exist with different policy options.

One of the biggest challenges OECD countries face is discord between policies in different sectors. Such discord can often result in policies working against each other, rather than in tandem, towards a common objective. If policies have the effect of negating or cancelling another policy's potential benefits, economic losses will follow. It is thus very important to strive for policy coherence. When the OECD examines issues of early childhood education and care, it does so within an overarching economic and social policy framework. Such an approach has resulted in a variety of different findings.

Firstly, the OECD finds that giving all children a good start in life is crucial to promoting long-term economic sustainability and building stronger and fairer societies. Secondly, short-term spending cuts on children's education and health have major long-term repercussions for societies. Thirdly, reducing the economic costs of childrearing and education increases a country's fertility rates, making it more attractive for families to have children. Fourthly, it is vital for policies across different sectors to be designed coherently to obtain the best results, while keeping budgetary costs at their lowest possible levels. Policies that encourage women to combine work and family responsibilities boost economic output and competitiveness by bringing back into the labor force the important human capital – the knowledge, skills and experience – that women can contribute to economic output. Also, it seems that when both parents work, the additional family income helps to reduce poverty as long as fees for childcare remain modest and reasonable. Thus, the OECD has found that one of the best anti-poverty measures is ongoing and stable employment for the parents.

Lack of good quality early childhood education and care services, or the high costs of such services, can keep women out of work, or channel them into low-paid part-time jobs. These part-time jobs often fail to capitalize on women's potential to contribute their human capital to the economy. The OECD believes that policies improving prospects for disadvantaged children and their families in the early years deliver the highest return on public investment, particularly in comparison to expenditure in the later years of education.

Last year, the Secretary General of the OECD came to Tokyo and met with the new government, recommending that Japan should channel more resources into pre-primary education and childcare and that the government reexamine the purpose and scope of their child allowance proposals. If we compare Japan with the rest of the OECD countries, Japan spends less on early childhood education and care services than any other country except Korea. The Secretary General also recommended improving early childhood education and care through greater policy coherence. The OECD firmly believes that greater policy coherence will help improve efficiency and reduce problematic waiting lists.

The OECD has read Japan's recently drafted new Growth Strategy and commends the fact that it emphasizes the importance of reshaping the M-shaped female labor participation curve, a curve that demonstrates the tendency on the part of women to stop working when they have children. The draft also notes the importance of tackling childcare waiting lists that serve to obstruct women from reentering the labor force; to facilitate the reentry of women into the labor market after giving birth, or after child rearing; to integrate early childhood education and care (ECEC) services; and to encourage various providers to enter into the ECEC market. The OECD notes that a detailed strategy, with an action plan, is to be presented later this month. The OECD also notes how the Japanese Prime Minister is stressing the importance of job creation in daycare services for children and the elderly as the key to economic growth. The OECD thus looks forward to seeing the detailed strategy when it emerges.

TAGUMA Miho
The integration of early childhood education and care (ECEC) serves a number of purposes, and Japan's Growth Strategy aims to lift fertility rates and raise the participation of women in the workforce. After all, the percentage of employment for women with children aged 3 to 5 in Japan is as low as Turkey or Malta, one of the lowest among the OECD countries.

Deborah ROSEVEARE
There are three main issues that the OECD wants to focus on in this discussion. The first issue is related to the financial burden placed on parents for childcare and early childhood education.

TAGUMA Miho
As for the first issue, the cost of child rearing and early childhood education in Japan is extremely high compared to other countries in the OECD. The economic burden of child rearing for dual income families is, on average, 13% of the household budget, and that is high even within the OECD. Furthermore in Japan's case, early childhood education must be provided for separately, but when examining the ratio of the burden placed on the nation and on the family budget, the burden on Japanese families is the largest within comparable OECD countries.

Compared to countries with high birth rates such as France, cash provision to families as well as direct subsidies on ECEC services are scarce in Japan. The OECD proposes balance be kept between the two – cash benefits/ tax credits and public spending on ECEC services.

Deborah ROSEVEARE
What could Japan do to address the situation? The OECD's proposal would be to channel more spending towards early childhood education and care services in ways that reduce the financial burden for parents. The OECD sees this method as delivering a number of possible benefits. By reducing the cost of ECEC to parents, this could help encourage the participation of women in the labor force, adjusting the M-curve. OECD analysis, and that of our colleagues, shows that if aligned with other policies, a reduction in ECEC expenditure can have a positive impact on fertility rates. We also believe that reduced ECEC costs deliver important benefits by strengthening the effectiveness of human capital formation at later stages, a point that has been very clearly analyzed and developed by Professor James Heckman, who won the Nobel Prize for economics for work related to this field in 2000. Heckman links the economic aspects of investment in early childhood education and care with brain science regarding how learning processes occur, and the importance of early investment in strong early childhood development. Channeling more funding towards early childhood education and care services must be emphasized because of its importance for potential growth, for innovation and for economic and social development. The OECD encourages Japan to embed early childhood education and care policy into its new Growth Strategy.

The second issue that Japan must tackle is its three labor-related shortages, otherwise known as the "three lacks": the lack of opportunity for women to resume work, the lack of childcare places, and the lack of high quality staff.

TAGUMA Miho
In Japan it is often called the M-curve phenomenon. The reason behind it is that women have no incentives or there is no system in place for them to return to the workplace after temporarily leaving their positions, or that an environment where they can continue to work is not provided. On top of that, the disparity in wages for men and women (compared to the OECD average of 17.6%, it is above 30% in Japan) is another cause for women not to work. Also, there is a serious shortage of nursery schools in urban areas.

When increasing the number of nursery schools it becomes crucial that quality be ensured alongside quantity. In Japan, "Nursing" falls under the jurisdiction of the Ministry of Health, Labour, and Welfare, while "Learning" comes under the jurisdiction of the Ministry of Education, and there is a precise division between the two. Although brain scientists have pointed out that the learning process begins at age zero, in Japan, there is conflict in administrating the needs of children in that there are no learning opportunities given to them during that period.

Additionally, not only is it necessary to build nursery schools, but also to train high-quality childcare workers. However, currently incentives for childcare workers are too low. Apart from low wages, the absence of career paths and opportunities for new skill acquisition also factor in as disincentives. In Sweden, childcare workers can proceed along career paths to become principals or administrative officials, and in countries where such paths have been forged, male childcare workers are not uncommon. Furthermore, working conditions in Japan have been identified as severe. A single staff member at a kindergarten must handle 18 children, but at nursery schools, including unauthorized ones, that number rises to 30 children.

Beyond that, there is the problem of how to cope with the discrepancy between the needs of the parents and those of the children. Parents may require that their children be placed under care for long periods of time, but some research shows that such children may develop attention deficit disorders more easily later on in life. Even if deregulation is selected, from the child's point of view it is necessary that the minimum standards be secured or determined in advance.

As children cannot communicate their needs regarding these issues, the proposal of an evidence base is vital, and should include the opinions of the aforementioned brain scientists.

Deborah ROSEVEARE
Japan has a number of different policy options in addressing these issues. The first proposal is to set up a process of assessing and formally validating the competency women have acquired through their experience in caring for children - either for their own children or for children in a childcare setting. This could potentially provide a step on the pathway to upgrading the competency of the workforce in childcare centers. Secondly, we would encourage easing regulations on early childhood education and childcare services, and to do this without compromising the quality of the services. In doing this, Japan must distinguish between the regulations that are necessary for the quality of early childhood education and care and regulations that are simply red tape and bureaucratic. On a similar note, the OECD encourages the further integration of ECEC services so that existing infrastructures can be fully utilized. In order to help attain this integration, the OECD would like to make it easier for mothers to return to the workforce via the childcare sector, expanding the workforce in the care sector while maintaining quality. This could encourage a variety of high quality service providers and services better tailored to the needs of working parents, while helping to respond to unmet demand.

The third issue concerns the efficiency and transparency of ECEC services.

TAGUMA Miho
Compared to other OECD countries, the ECEC area in Japan is organized in a complex way. Various regulations such as authorized, unauthorized, certified, recognized, etc., all coexist. This, coupled with the problem of dual administration, because childcare is not unified, makes selection difficult for users.

For example, even if you want to use an empty classroom at an elementary school, it cannot be done because a nursery school would fall under the jurisdiction of the Ministry of Health rather than the Ministry of Education. I will introduce examples of unified childcare in foreign countries with the idea of eliminating vertical barriers like this.

In countries that have unified childcare and early education systems, such as Chile, Finland, New Zealand, Norway, Scotland, Slovenia and Sweden, one can see many cases of jurisdiction projected onto the Department of Education. Other country types include where childcare and early education remain split like in Japan and where state governments have their own way of dealing with this issue.

When you say "unification" in Japan, the focus is placed on jurisdiction issues, but in foreign countries the issues capture a wide range of aspects for discussion, including, policy objective unification, public finances unification, and curriculum or teaching/childcare methods unification, unification of qualifications, etc. Even in countries where childcare has not been unified, some aspects can be observed moving towards unification such as policy objective unification, public financing, qualifications, etc. For example, in Belgium the training of kindergarten teaching staff and childcare workers is in the process of unification, and furthermore due to the uniformity of kindergarten and elementary school teaching qualifications, it is a current attempt for childcare workers to gain employment even at kindergartens or elementary schools.

According to our country survey, countries that have completed the unification process identified the following five elements as success factors for the unification of childcare and early education: 1) public and political leadership, 2) stakeholder buy-in, 3) funding, 4) consistency in the needs of children and parents, and 5) a realistic timeframe. This last point is especially important. For example, Sweden and New Zealand have taken over 25 years to thoroughly unify their childcare and early education systems. As for Japan, on top of creating a strategic plan of action that touches on the priority and feasibility of each individual policy, it will be necessary to implement each individual policy over a span of 1 to 2 years.

Deborah ROSEVEARE
Japan again has a number of policy options to deal with these challenges. First of all, we propose integrating ECEC to tackle the problem of waiting lists, while improving efficiency and ensuring high quality. We would emphasize that it's very important to plan and implement an expansion of services to make sure that poor children do not miss out on opportunities because of capacity constraints. We would also encourage Japan to consider providing free ECEC for younger age groups. In most countries, ECEC is either free at age five or it is extensively subsidized for efficiency and equity. France, where the OECD is based, has provided free early childhood education to all children from the age of three, and has done so for many decades. Five years ago, New Zealand – which is my home country – introduced a new policy that provides 20-hours per week of free early childhood education for all three and four year olds. There is thus a big gap between Japan and other OECD countries.

The OECD also encourages Japan to monitor the existence of non-authorized childcare education in order to get a picture of the number of such institutions, their practices, and the level of workforce, etc., and to disseminate that information to promote further transparency. The expected benefits from this include significant efficiency gains. We also believe that efficiency gains could be made by integrating up to the higher quality services, not down to the lower quality services. What matters is value for money in terms of the educational outcomes for children compared to the cost. The OECD believes strongly in providing access to quality ECEC regardless of parent income status, and that increased transparency will aid parents in making well-informed choices regarding what's best for them and their children.

Q. Regarding your proposed reforms, I have heard all sorts of arguments in favor of deregulation and market-oriented solutions. Noting past precedent, the Japanese government tends to evaluate outcomes in terms of sheer numbers. How do you plan on giving Japanese government offices the incentive to increase not only the sheer amount of childhood educational services, but also the quality of such services? Can you maybe share insights garnered from experiences in other countries?

Deborah ROSEVEARE
For the OECD, a big concern is the development of early childhood education and care services that correspond to and meet the needs and preferences of parents, and also services that are responsive to the needs of children. The OECD repeatedly underlines the importance of approaching any early childhood education and care policy with an emphasis on quality. Quality is important for young children; children only live once, and if they get a high-quality start in life, it sets them on the road to economic and social success. Conversely, if they have a bad start in life, it is very difficult – although not impossible – for the school system and social services to overcome this disadvantage later on. This is particularly problematic for children who come from disadvantaged home environments.

What the OECD has discovered from research evidence and initiatives taken in various countries is that the factors affecting quality are often not necessarily the factors represented in the regulations. This sometimes means that the regulations contain elements that are not necessarily essential. One concrete example in Japan would be the current regulations regarding nursery schools. I understand that every nursery school must have a facility for providing meals on-site. This, in the opinion of the OECD, is clearly not essential in high quality early childhood education. You can still have good quality learning outcomes if children have lunch boxes, if parents provide the food, or if food is delivered. Japan must look carefully at each regulation and ask, "Does this regulation really affect quality?"

From research the OECD has done on factors that affect quality, the elements that stand out are the quality of the workforce, the skills of the workforce, and the ways in which adults interact with children to encourage and foster their self-confidence and curiosity. We also find that it's important to emphasize a pedagogical approach, including the ways in which teachers organize student's daily learning experiences. The third factor is the establishment of an early learning curriculum that sets out a clear set of objectives for the staff and center to pursue.

TAGUMA Miho
Just two quick notes in response to the first question: "Is it important to define what quality means in Japan?" To do this, we must identify quality indicators. In terms of these indicators, I have suggested some examples as options. There are different paths that can be pursued, and the OECD is not imposing them. We recognize that these systems can vary from country to country. We are aware that evaluation is still quite a new concept within ECEC. Countries often start by encouraging self-evaluation, which can lead to third-party evaluation if effective. But evaluation also depends heavily on the internal climate within a country.

Your second question pertains to the friction between regulation in quantitative terms and regulation in qualitative terms. Some countries already have a set of qualitative indicators that they use to rate, somewhat like a check-list. Other countries prefer that the institutions themselves evaluate qualitatively. Another dimension is whether the result of such monitoring should be linked to funding. In Australia, it is. In other countries, it is not. Japan needs to choose the best match for its own national situation.

Q: Payments of the child allowance started in June, and the system is already in the process of being implemented. If fully implemented, it will account for one percent of GDP. Do other countries, relative to Japan, spend more resources on early childhood care systems? For example, in France, how much do they spend in terms of GDP? Secondly, you spoke about how childcare is related to various different areas, and that it should be implemented in a comprehensive way. This will require an additional administrative framework. What types of agencies are integrated into this process in your country, New Zealand?

Deborah ROSEVEARE
In comparing the expenditure of various countries, the OECD finds that measuring the total expenditure as a share of GDP is not a relevant basis for comparison. If you take the contrast between Japan and both New Zealand and France, Japan has a fertility rate of 1.38. In the cases of New Zealand, France and Sweden, the fertility rate is about equal to the replacement rate, standing at roughly 2.1 percent. It is a simple fact that if you have a lot more children, you expect to spend more. As an extension, if you're spending the same amount per child, and you have more children, then the spending as a share of the GDP will be higher. The OECD thus tends to use the percentage of spending per child as a share of the median working age household income. That may be a much more complicated way to describe it, but we feel that it provides a more valid basis for comparison across countries on how much each nation is spending per child. This applies to all sorts of expenditure, from expenditure on the elderly, to tertiary expenditure, and so forth. The percentage of GDP is not a good basis for comparison.

On your second question, the OECD finds that the ECEC administrative responsibility varies according to the country. In some countries it is entirely under the responsibility of educational bureaus. In New Zealand, the Ministry of Education is primarily responsible for ECEC, but in New Zealand there is a cross-agency group that coordinates with the labor market policy and income support agency to ensure that all possible aspects are taken care of. In France, children from three upwards are under the administration of the Ministry of Education, while those under the age of three are governed by the Ministry of Social Affairs. The OECD emphasizes the importance of a coherent approach to policy. Such policies should focus on the early development of children to ensure they can go on to become happy and contributing members of society.

Q: You mentioned that in Japan this sector is highly privatized. My impression is to the contrary. In Japan, most providers of early childhood care services would consider themselves public providers. How would you respond to this assertion?

Deborah ROSEVEARE
Your first point regarding public versus private brings up a very difficult distinction. Looking again at New Zealand, I mentioned how a couple of years ago New Zealand chose to grant three and four year olds with 20-hours of free early childhood education. This provided a big subsidy to the early childhood sector. However, before the age of five, when children go to school, there are no "public" providers. In that respect, the sector is a mix of private non-profit organizations, such as kindergarten associations, and profit-making providers. However, they all have to comply with the same regulatory framework and all receive the same subsidy per child voucher on a payment scale that reflects the proportion of qualified teachers the provider employs. So while people may claim that it is fully private, it is still regulated and heavily subsidized by government.