Ontario has the potential to see nearly 100,000 more women enter the labour market due to $10-a-day child care, but only if the province creates more daycare spaces, a report from the Financial Accountability Office said Tuesday.

Labour participation rates for mothers with children under six years old, the ages covered by the national child-care program, increased by 2.4 percentage points just from 2021 to 2022, the first year the reduced fees started taking effect, the report said.

Once fully rolled out, the $10-a-day child-care program in Ontario could increase labour market participation for women aged 25 to 54 from 84 per cent in 2022 to between 85.6 per cent and 87.1 per cent by 2027, adding up to 98,600 women to the workforce, the FAO said.

However, the 71,000 new child-care spaces promised by Ontario under the federal agreement won't nearly be enough to meet the demand for care, and if the government doesn't create more spaces it will offset some of the positive labour market impacts, the report warned.

Education Minister Stephen Lecce said that's why the deal with Ottawa includes an agreement to review any deficits that emerge halfway through the rollout, which will allow Ontario to ask for more funding in order to create more spaces and meet demand.

"You may recall, before we signed the deal with the federal government, we said, 'Look, we do think there's going to be some shortages to the federal contributions,'" Lecce said.

He believes additional funding from Ottawa would allow the province to create enough child-care spaces to accommodate the rising demand.

"We've had a constructive relationship with the federal government on this issue," he said. 

"At the end of the day, this has to be a bipartisan priority, when it comes to creating more affordability and reducing barriers for women to work in the economy." 

The FAO has calculated that increased demand for affordable care will leave the province short more than 220,000 spots.

Child-care advocates, operators and early childhood educators say a key component of expansion will be addressing current staff shortages and introducing stronger recruitment and retention policies. 

Lecce said he has completed a workforce stabilization strategy that he will unveil "in due course" that includes "more competitive packages." 

"We've got amazing early childhood educators and I'm thrilled that we're going to provide them even more incentives to stay."

The ministry estimated in documents from the beginning of the workforce consultations that Ontario would need about 14,700 new registered early childhood educators by 2025-26 but would fall about 8,500 short without further actions on recruitment and retention.

As part of Ontario's deal with the federal government, the province set a wage floor for RECEs — $18 an hour in 2022 and increasing by $1 a year up to $25. 

The Association of Early Childhood Educators of Ontario has called for an immediate $30-and-hour minimum wage for RECEs and $25 for the many non-RECE child-care workers. They would also like to see the implementation of a wage grid as an incentive to keep workers in the sector.

The FAO report also finds that labour market participation for women with young children lags significantly behind that of men with young children — a gap more than four times wider than among workers without young children.

As well, the FAO says that the gender wage gap, which sees women earn on average 87 cents for every dollar earned by men, has not improved in a decade.

This report by The Canadian Press was first published May 16, 2023.