Dr Kelvin Seah suggested that profit-driven childcare centres would naturally raise fees as higher subsidies for parents increase market demand (What economics predicts about pre-school fees after subsidies, Oct 3).
The dynamics for profit-driven pre-schools described by Dr Seah are not wrong per se. However, Dr Seah had not taken into account the local conditions of Singapore's pre-school sector and other market dynamics at play.
First, while enhanced pre-school subsidies might increase demand, the Government is also increasing the supply of more affordable pre-school places. With increased competition from other pre-schools, operators will need to consider any fee increases carefully.
All pre-schools are required to inform parents of any fee increase by Sept 1 of the previous year, and parents have a choice to enrol their child elsewhere if they find the fee changes excessive.
Second, about 50 per cent of Singaporean pre-schoolers are in government-supported pre-schools that are subject to fee caps. By 2025, the government-supported market share will grow to 80 per cent, and fee caps further lowered from current levels.
Many pre-schools are also run by Social Service Agencies (SSA) which are non-profit and keep fees affordable to help the lower-income. Taken together, both government-supported and SSA operators run the majority of pre-schools in Singapore and strive to keep fee changes in check.
Lastly, the enhanced subsidies are means-tested and differ across income tiers. Hence, it is not so simple for profit-driven operators to raise fees across the board solely to take advantage of the enhanced subsidies.
For these reasons, four in five childcare centres will not raise fees next year. We also expect the median childcare fee to fall in 2021, when we expand the Partner Operator scheme to bring in more pre-schools, and lower their fee cap.
The Government, through the Early Childhood Development Agency, will continue to invest in the early childhood sector so that every child can have access to an affordable and quality pre-school.
Charlene Han
Director
Policy, Planning and Development
Early Childhood Development Agency
Source: https://www.straitstimes.com/forum/letters-in-print/why-most-childcare-centres-arent-raising-their-fees