This article explains the sources and methods used to compile the early childhood education subgroup of the consumers price index (CPI). Early childhood education had an expenditure weight of 0.25 percent in the CPI at the June 2008 quarter.
Position in the CPI structure
Early childhood education falls within the education group of the New Zealand Household Expenditure Classification used in the CPI.
Coverage
The early childhood education class contains preschools (eg kindergartens) and educational childcare (centre-based and home-based).
Expenditure weight estimation
About 85 percent of the weight of the education group was estimated from sources other than the Household Expenditure Survey (HES). This was due to concerns about the quality of education estimates from the 2006/07 HES, which is the primary source of weighting information for the CPI.
For early childhood education, information was obtained from the Ministry of Education on the number of children enrolled in early childhood education by age and type of provider, and on the distribution of hours children are enrolled for. This information was combined with CPI average fees for each age group and type of provider to calculate total expenditure on early childhood education fees, after removing the childcare subsidy administered by Work and Income New Zealand (WINZ).
Sample Selection
The sample of early childhood education providers was drawn statistically from the Early Childhood Education (ECE) directory available from the Ministry of Education (MOE). Each provider on the ECE directory was classified to a stratum based on region (five regional council area-based broad regions: Auckland, Wellington, Rest of North Island, Canterbury, and Rest of South Island), type of service (centre-based education and care, home-based education and care, and kindergartens), and ownership (private or community). A sample of about 70 centre-based education and care providers, 20 home-based education and care providers, and 30 kindergartens was then selected randomly from within each of these strata (ie within each combination of region, type of service, and ownership).
Price collection
Early childhood education prices are collected quarterly from service providers. Educational childcare providers are asked for prices of various care scenarios (9 hours per week, 24 or 28 hours per week, and 40 hours per week) and age of child. For each scenario, the standard fee (which must be paid by parents), any requested donations, and optional charges (which parents may agree to pay to receive additional services) are collected. Kindergartens are asked to provide the fees, any requested donations, and optional charges for a four-year-old attending mornings.
Requested donations and optional charges are considered part of the price of the early childhood education service. Optional charges must be for a service provided by the provider for services over and above the provision of the early childhood curriculum. Changes in the optional charge for a given service provided would be shown in the CPI. Changes in requested donations are shown provided the requested donation is usually paid.
Those educational childcare centres participating in the 20 Hours ECE (previously referred to as Free ECE) scheme are asked to provide prices for sessions including hours subsidised under the scheme for three- and four-year-olds (up to the maximum daily and/or weekly number of hours). Kindergartens are asked to provide prices for childcare with and without subsidised hours under the 20 Hours ECE scheme. Statistics NZ makes adjustments later to take into account the WINZ childcare subsidy. Please see the estimation section below for more details.
During the roll-out of Free ECE (as it was referred to at the time), the sample of service providers was reviewed to ensure that the take up of Free ECE by sampled providers adequately reflected the population of providers. On 1 July 2007, 20 hours of free early childhood education (Free ECE) was introduced for three- and four-year-old children who attend participating early childhood education services. This resulted in prices for early childhood education falling 32.4 percent in the September 2007 quarter, with prices for kindergartens down 54.9 percent, and prices for education and care services and home-based services down 22.2 percent.
The effect of Free ECE was partly offset by some Free ECE providers introducing optional charges and also reduced eligibility to the WINZ childcare subsidy for those hours now attributed to Free ECE.
Approximately three out of four of the childcare providers surveyed in mid-August 2007 participated in providing Free ECE care for three- and four-year-old children in education and care services and home-based services, representing 70 percent of children who were attending. Of these Free ECE providers, one in seven introduced optional charges for existing services that were previously included in the standard fee. Providers with these optional charges accounted for 34 percent of children participating in Free ECE, indicating that these centres were larger than average.
Estimation
Prices are combined for early childhood education for each type of provider and across the various hour and age scenarios. The price used in the estimation stage is the combined costs from fees, any requested donations, and optional charges.
Statistics NZ includes the WINZ childcare subsidy at the estimation stage, using summary childcare subsidy information provided by the Ministry of Social Development. This inclusion takes account of hours attributed to the 20 hours ECE scheme, which are not eligible for the WINZ childcare subsidy. The amount of the childcare subsidy depends on the number of children in the child's family, household income, how many hours a week the child attends at the service provider, and whether 20 Hours ECE hours are attributed to the provider. About one in five children participating in early childhood education receive the WINZ subsidy.
Changes in subsidy rates and income abatement thresholds are reflected in the CPI. More information on the childcare subsidy is available on the WINZ website.
Quality assurance
Changes to the quality of services provided, such as offering an additional service, are adjusted for in the CPI. The introduction of any optional charges for additional services not previously provided as part of the standard service at early childhood education centres is not treated as a price change, as they represent an increase in the quality of service being monitored.
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