A new research note published by the Atkinson Centre at the Ontario Institute for Studies in Education in May 2026 puts hard numbers on a dynamic that has been quietly reshaping Ontario's child care system since CWELCC launched.
The question the research asks is straightforward: why are child care fee subsidies being underutilized in Toronto?
Toronto's 2026 Children's Services Operating Budget projected 2025 subsidy enrolment at 23,000 spaces - 25.1 per cent below the budgeted level of 30,700 spaces. That gap represents thousands of children from lower-income families who should be accessing subsidized child care but are not.
The conventional explanation - that these families left the subsidy system because CWELCC fees became low enough that they no longer needed a subsidy - turns out to be almost entirely wrong. And the actual explanation has direct implications for how you think about your centre's enrolment, your waitlist, and the families you serve.
What the Research Found
Researcher Petr Varmuza at the Atkinson Centre modelled the question using a 2020 subsidy dataset containing individual information for 21,210 families with 30,646 children - the last year subsidy utilization was close to budget targets. He then applied the CWELCC fee reductions that occurred from 2022 through 2025 to that dataset to estimate how many families would genuinely benefit from leaving the subsidy system in favour of paying the CWELCC flat fee.
The result: at the current $22 per child per day CWELCC cap, only 370 of the 16,240 CWELCC-eligible families in the dataset - 2.3 per cent - were assessed a subsidy copayment that exceeded what they would pay under CWELCC fees.
Put differently, for 97.7 per cent of families receiving fee subsidies in Toronto, the subsidy system was still more financially advantageous than paying the CWELCC flat fee. Most lower-income families did not leave the subsidy system because they got a better deal under CWELCC. They could not afford to leave.
The reason is structural. Subsidy copayments are calculated at the family level, regardless of how many children are enrolled. CWELCC fees are charged per child. For any family with more than one child in care, the CWELCC fee would be significantly higher than their subsidy copayment. In the dataset, 55.4 per cent of subsidized families had more than one child of child care age. Those families had no financial incentive to leave the subsidy system regardless of how low CWELCC fees got.
Additionally, 45.8 per cent of CWELCC-eligible subsidy families had a net taxable income under $20,000 and were assessed zero copayment. For those families, the CWELCC fee of $22 per day per child was not a better deal - it was an impossible cost.
If Families Are Not Leaving Subsidies, What Is Actually Happening?
The research points to the second explanation the author proposed: low-income children are being crowded out of the licensed child care system by increased demand from higher-income families who can now access CWELCC-priced spaces that were previously unaffordable at market rates.
The median net taxable income for the small group of families who would genuinely benefit from leaving the subsidy system was $82,486 per year. These are not low-income families. They are middle-income families who previously found licensed child care unaffordable at market rates and who now find the CWELCC fee reasonable.
When those families entered the system starting in 2022, they competed for the same spaces that lower-income families were waiting to access. In a system where supply has grown slowly - Toronto added approximately 4,800 net new spaces over four years - the result was predictable. Higher-income families with more resources to navigate waitlists, more flexibility in which neighbourhoods they could access, and no subsidy eligibility requirements crowded ahead of lower-income families in the queue.
The Atkinson Centre notes that this dynamic - reduced fees generating increased demand that displaces lower-income children - has been documented in Quebec and several European countries. It was, as the author writes, reliably predictable.
What the Research Says About the Subsidy System Itself
The Atkinson Centre is critical of the subsidy system's design on equity grounds, but not in the direction operators might expect.
The concern is not that subsidies are too generous. It is that the conditions attached to them are too restrictive. Lower-income families must meet activity requirements - being employed, in school, or participating in an approved program - to maintain subsidy eligibility. Higher-income families accessing CWELCC spaces face no such conditions.
The author makes a point worth sitting with: public subsidies have long been available to all families using licensed care. The difference is that some families - historically described as paying full fees and now paying the CWELCC fee - participate without conditions. Lower-income families who rely on subsidies must continuously prove their eligibility to access the same services.
The research recommends abolishing the subsidy system and replacing it with an income-tested version of the CWELCC flat fee - in effect, a sliding scale based on family income rather than a binary subsidy or no-subsidy determination. Until that change is possible, it recommends priority access policies and a requirement that all publicly funded child care providers accommodate subsidized children.
What This Means for Your Centre
If you operate a CWELCC-enrolled licensed child care centre, the implications of this research are specific and practical.
Your waitlist is longer than it would be without CWELCC - and the composition of that waitlist has shifted. The families at the front of your waitlist are increasingly middle and higher-income families who found CWELCC fees accessible when market rates were not. Families who depend on fee subsidies may be further down that list - or have given up entirely.
If you have subsidized children enrolled, the research suggests their access is more fragile than it appears. A family with two children in care and a low income cannot afford to lose their subsidy and pay $44 per day in CWELCC fees. Any disruption to subsidy eligibility - an activity requirement lapse, an income change, an administrative problem - removes them from the system entirely.
The fee subsidy revenue in your monthly planner is worth tracking separately from parent fee revenue. Subsidy payments come from your SSM on behalf of families and count toward your Expected Base Fee Revenue Offset calculation. If subsidy enrolment at your centre is declining, that affects your actual base fee revenue - and could affect your reconciliation position if actual revenue falls below the Expected Base Fee Revenue Offset in your allocation.
The policy environment is shifting toward access reform. The Atkinson Centre's recommendation for priority access policies and subsidy accommodation requirements for publicly funded operators may become part of the next federal-provincial CWELCC agreement. If it does, it would require enrolled centres to demonstrate that subsidized families are not being systematically displaced by families paying CWELCC flat fees.
The Broader Picture
This research adds another layer to the story of CWELCC's first four years. The program reduced fees significantly for families who could access CWELCC-enrolled spaces. It did not, however, ensure that the families who needed affordable child care the most were the ones who benefited.
The subsidy gap - 7,700 fewer subsidized children than budgeted in Toronto in 2025 - is not primarily a story of successful families graduating out of the subsidy system. It is primarily a story of lower-income families losing access to licensed child care in a system that grew slowly while demand surged.
The Atkinson Centre concludes with a call that has been consistent across nearly every major review of CWELCC's implementation: the affordability and access framework needs to be redesigned before the program is extended under a new multi-year agreement. Whether governments respond to that call before the December 2026 deadline is the open question.
For operators, the 2026 funding formula operates independently of these policy debates. Your Program Cost Allocation is determined by your operating plan, your CMSM's benchmark rates, and your eligible cost structure - not by whether the families in your centre hold subsidies or pay CWELCC flat fees. Understanding that allocation precisely, and tracking your actual base fee revenue against your Expected Base Fee Revenue Offset throughout the year, is the most direct thing you can do to protect your financial position regardless of how the access debate resolves.
Get Started Free →Source: Petr Varmuza, Ph.D., "Why Are Subsidies Underutilized (in Toronto)?", Atkinson Centre, Ontario Institute for Studies in Education, May 2026.