Market Failure in Child Care

Congratulations to The Age for presenting a series of informative articles and opinion pieces about our crisis in child-care (The Age, 4/4/05, 5/4/05). Quality journalism is crucial to explain the issues to those of us outside the system.

It's clear that there is an ongoing, systemic "market failure" to meet supply with demand. Frustratingly, none of the reporting pin-points the reasons for this. Why, for example, are cheap child-care places rationed by placing tens of thousands of parents in queues for months or years, rather than the fairer and cheaper solution of different prices?  Why aren't new child-care places provided to well-known areas of unmet demand?

Contrast the situation with, say, health clubs and gyms. The market manages to deliver a huge range of service/price/location mixes - why not for child care? What's holding it back? Is there a shortage of staff, onerous government regulations, lack of marginal votes or anti-competitive behaviour? Or is everyone - regulators, parents and operators - simply stalled, waiting for a major policy overhaul?

These "big picture" questions, essential for fixing the mess, are best asked of policy wonks and professional economists. To further public understanding, could The Age please seek their expert comment next time?