The C.D. Howe Institute published a formal Intelligence Memo on August 18, 2026, authored by Associate Director of Research Parisa Mahboubi and Policy Analyst Tingting Zhang, titled "Canada's Childcare Plan: Affordable, but Still Out of Reach." The memo formalizes findings that appeared in an earlier Globe and Mail op-ed and adds institutional weight to a critique that is now part of the documented policy record heading into 2027 agreement negotiations.
For Ontario operators, the memo's fiscal analysis is the section that deserves the most attention. It is not simply commentary on whether the program has met its social goals. It is a data-grounded argument about whether the economic rationale that justifies the program's cost holds up. And if it does not, the implications for how governments approach the 2027 agreement are significant.
The Fiscal Underperformance Is Now on the Record
The memo states that C.D. Howe Institute analysis shows CWELCC has generated less than one percent of its cost back in tax revenue over its first three years. The rationale for publicly subsidized child care, as the memo frames it, is that lower fees encourage maternal employment, which generates tax revenues that partially offset the subsidy cost over time. Quebec's model demonstrated this dynamic clearly: before Quebec introduced its low-fee system in 1997, maternal employment rates for mothers with young children were 3.3 percentage points below the national average. Over time, Quebec moved approximately nine percentage points ahead of that average.
Canada's national program has not produced comparable results. Maternal labour force participation rose approximately 3.7 percentage points between 2019 and 2025, but the memo notes this increase reflects more than CWELCC. Pandemic-related labour market conditions and the rise of remote work independently drew more mothers into the workforce during the same period. The program's contribution to that 3.7 point increase is, in the memo's framing, difficult to isolate and likely smaller than the headline figure suggests.
The less than one percent fiscal return figure is not an argument that the program has failed families. It is an argument that the economic case for the program as currently structured is weaker than its architects projected, and that governments weighing the cost of a 2027 agreement will be doing so against that track record.
For operators, this matters because program funding levels, benchmark rate adjustments, and the scope of the cost-based funding formula for 2027 and beyond will be negotiated against exactly this fiscal backdrop. A government that cannot demonstrate adequate economic return on the current program design has a political incentive to restructure rather than simply renew.
The Access Data Confirms What Operators Already Know
The memo confirms several access statistics that operators are living daily. In 2024, more than three quarters of child care centres reported having an active waitlist. By 2025, nearly half of parents using child care reported difficulty finding care, up from 36 percent in 2019. The number of new licensed spaces remained well below the federal target of 250,000 by March 2026.
These numbers validate what operators across Ontario have been describing for two years: lower fees drove demand into a system that did not have the physical capacity or workforce to absorb it. The waitlists growing in Russell, Peterborough, Oxford County, and Grey County are not local anomalies. They are the measurable output of a national policy design that prioritized affordability faster than it built supply.
For enrolled operators this context cuts in a specific direction. The demand is real and documented at the highest research level. Operators who maintain licensed capacity, demonstrate quality compliance, and build strong eligible cost documentation are better positioned in a system where demand materially exceeds supply than those who do not. A licence in an undersupplied market has value. Protecting that licence through sound CWELCC administration is not bureaucratic compliance. It is asset protection.
The Non-Standard Hours Gap Is an Underserved Market Signal
The memo identifies one access gap that receives less attention than the general waitlist problem: fewer than two percent of licensed centres offer evening or weekend care, even though nearly two in five parents work non-standard hours. Disproportionately, these are lower-income and single-parent households for whom childcare aligned with work schedules is not a preference but a necessity.
For operators considering program expansion or differentiation, this gap represents genuine unmet demand that no policy change is currently addressing. The cost structure for extended hours programs is meaningfully different from standard day programs: split-shift staffing arrangements, different supervisor coverage requirements, and potentially different base fee structures all affect how the cost-based funding formula applies.
Before expanding into extended hours, the financial model needs to be built carefully. Your program staffing benchmark calculation uses the typical number of hours of service as an input. Your eligible child ratio and supervisor component calculations are affected by the age groups and operating hours your program covers. Understanding exactly how an extended hours addition changes your Program Cost Allocation before you make the operational commitment is the right sequence.
What the Memo Means for Your 2027 Planning
The C.D. Howe memo's policy recommendations, specifically a shift to income-tested fees and a dual-track system with a refundable tax credit for families outside the regulated system, are proposals not policies. Nothing in the memo changes your 2026 funding framework.
What it does is add a second authoritative research voice, following the same authors' Globe and Mail op-ed last week, to a specific structural critique of the current program design. That critique is now part of the formal policy record at a moment when federal and provincial negotiators are actively discussing the 2027 agreement terms.
The cumulative picture across recent weeks is consistent. The C.D. Howe Institute, the ACE 10-point framework, the FAO's Ministry of Education spending review, and Wellington County's $20 million funding return all point to the same underlying tension: the current CWELCC design is not producing the outcomes that would justify its cost at the pace and scale governments projected. Something in the 2027 agreement will reflect that tension, whether through restructured fees, revised benchmarks, adjusted space allocations, or some combination.
Operators who enter 2027 with a clear understanding of their 2026 financial position, clean eligible cost documentation, and a well-understood Program Cost Allocation are the ones who will adapt to whatever that restructuring looks like. Operators who have not managed their 2026 position carefully will be navigating a new framework before they have resolved the current one.
With four and a half months remaining in the 2026 calendar year, the time to run your mid-year reconciliation projection is now, not at year-end.
ChildcareFundingIQ gives you the visibility to understand your current eligible cost run rate, project your year-end reconciliation position, and model the financial implications of any expansion or program changes you are considering before committing to them.
If you need direct support working through your 2026 position or want strategic advice on how to prepare your centre for the uncertainty that the 2027 agreement will bring, our consulting services provide operator-side analysis from advisors who work exclusively for you.
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Learn More →Source: Mahboubi, Parisa and Tingting Zhang. "Canada's Childcare Plan: Affordable, but Still Out of Reach." Intelligence Memos. C.D. Howe Institute, August 18, 2026. https://cdhowe.org/publication/canadas-childcare-plan-affordable-but-still-out-of-reach/