A reform designed to cut costs, not raise quality
Associate Education Minister David Seymour’s ministerial advisory group is consulting on how the government spends $3 billion a year on early childhood education, and the direction is unambiguous. The group has set out three options, none of which retains the current government-subsidised pay parity scheme unchanged.
The headline proposal simplifies the current five funding bands, based on the proportion of registered teachers a centre employs, down to two, and removes the 100% rate. That single change could save around $50 million a year. Current pay scale rates start at $57,358 for newly-qualified teachers and top out at $96,820 for degree-qualified staff.
The crucial detail is the mandate. The advisory group was asked to make cost-neutral recommendations, which ruled out any improvement to adult-to-child ratios that an earlier regulatory review had flagged as a quality problem. This is not a review designed to make ECE better. It is one designed to reallocate the existing spend more cheaply.
The culmination of a year-long trajectory
This is not a bolt from the blue. In May 2025, Seymour changed who decides how much newly certified ECE teachers can be paid, letting individual centres set starting salaries outside the pay parity scheme from 1 July that year. He described the regime as “putting enormous funding pressure on the centers.” The formal funding review followed, announced in June 2025, chaired by ECE centre owner Linda Meade with Early Childhood Council chief executive Simon Laube on the panel.
Ministry of Education advice in July 2025 showed the cost-cutting measures were expected to save providers up to $22 million over two years on teacher pay. At the time, Cathy Wilson, chief executive of Montessori Aotearoa New Zealand, warned the move “makes ECE teaching less attractive for those considering studying and entering the workforce” in the middle of an existing shortage.
NZEI Te Riu Roa’s ECE representative Sally Griffin put the current proposals bluntly: “It is disastrous for the entire sector and for all tamariki that pay parity for early childhood teachers is on the chopping block.”
A sector already running tight
The baseline matters, because there is no slack to absorb a shock. The 2024 ECE Census shows demand rising and supply contracting at the same time. Attendance reached 194,597 children in June 2024, up 2% year-on-year, while the number of licensed services fell to 4,409, down 5% from 2019.
Home-based educators have dropped to 3,534, down from 7,700 in 2018, more than halving in under a decade. Occupancy for education and care services sits at 78%. This is a system with rising demand, fewer providers and thin capacity, and the proposals would weaken the financial incentive to employ qualified teachers above the 80% threshold.
Why business should not treat this as a schooling debate
For employers, childcare is not a social nicety. It is workforce infrastructure. When care is unavailable, unaffordable or unreliable, working parents cut hours or leave the labour market entirely. In regions where ECE supply is already tight, a further squeeze on quality and staffing directly hits recruitment and retention.
Dr Sarah Alexander, chief advisor at the Office of Early Childhood Education, has been the sharpest critic. In May 2026 she said the government had made it easier for services to operate by “reducing teacher pay costs, freezing teacher pay-parity rates, removing and softening regulatory standards”. When standards fall, she warned, the result is “more serious incidents, more frequent sickness, and a workforce under significant strain.” In April 2026 she dismissed a related licensing reform as “essentially a re-numbering exercise, dressed up as a reform”.
A saving that may cost more than it recovers
The reform logic is internally consistent. Cut costs, simplify the bands, let the market find its level. The problem is that ECE is not a normal market. Parents cannot easily assess quality, regulatory minimums are being softened rather than strengthened, and demand is partly driven by the workforce participation goals the government itself wants to hit.
The $50 million band saving is 1.7% of the $3 billion spend. A cheaper, thinner sector reduces the fiscal cost of the subsidy while raising the economic cost through lost labour supply, most acutely in the lower-income communities where a two-tier system would bite hardest. For a business audience that cares about markets working, not just being cheap, that is the trade-off worth watching as consultation runs its course.
Sources
- Newsroom: Childcare proposals tip pay cuts and fewer qualified teachers (2026-07-07)
- Scoop: Advisory group proposes axing pay parity for early childhood teachers (2026-07-08)
- RNZ: Review of early childhood education funding announced (2025-06-17)
- RNZ: Seymour changing who decides how much ECE teachers can be paid (2025-05-29)
- ECNZ: MoE advice reveals cost-cutting takes priority over quality in ECE (2025-07-25)
- OECE: Risks are up, Budget 2026 must change course for ECE (2026-05-26)
- Newsroom: Early childhood sector doubts new reforms will bring significant change (2026-04-17)