New US-based research indicates that private equity-backed childcare centres charge more, accept fewer subsidised children, and tend to target affluent areas, raising concerns about affordability and quality in Australia’s growing private, corporate, and profit-driven childcare sector.
New research into the United States childcare market suggests that centres backed by private equity charge more than other providers and are less likely to accept subsidised children or offer financial help to families. The findings have renewed scrutiny of private investment in early learning and are likely to resonate in Australia, where ownership of childcare services is increasingly diverse and public funding is rising.
According to the working paper “Big Daycare: The Growth of Private Equity in the U.S. Child Care Market”, researchers Jessica H. Brown of the University of South Carolina and Chris M. Herbst of Arizona State University examined business records, investment data, provider surveys, licensing files and accreditation material spanning 1997 to 2024. The paper, reported by the Detroit Free Press, found that private equity-backed providers employed just under 10 per cent of centre-based childcare workers in the US in 2024, after rapid growth through the late 1990s and 2000s.
The research also found that these providers were generally larger, generated more revenue and charged around 30 per cent more than the broader group of non-private-equity operators. However, that gap narrowed sharply when the comparison was limited to other large childcare chains, suggesting that scale and corporate structure may matter as much as ownership by private equity itself. The paper also found private equity-backed services were about six percentage points less likely to accept childcare subsidies and far less likely to offer scholarships or sliding-scale fees.
The study pointed to a pattern of private equity operators entering communities where demand is strong and alternatives are limited. These centres were more likely to be located in more affluent, capacity-constrained areas with higher rents, higher educational attainment and fewer single-parent households. The researchers said that may indicate investors are targeting markets where families have fewer choices and are less able to resist higher fees. They also found private equity-backed services were more common in states with looser workforce rules, including higher child-to-educator ratios and lower qualification requirements.
Quality was more complicated. The working paper found higher turnover among both educators and children at private equity-backed centres, which can be a sign of strain in staffing or family satisfaction. At the same time, these services were more likely to hold formal accreditation and score highly in state quality systems. Much of that advantage, however, was linked to KinderCare, one of the largest operators in the sector. Once KinderCare was excluded, the remaining private equity-backed centres looked more like other chains on accreditation.
For Australia, the key lesson is not that private equity is automatically harmful, but that ownership alone does not tell the whole story. Major providers include Affinity Education Group, owned by funds managed by Quadrant Private Equity, and Guardian Childcare and Education, which has been majority-owned by Partners Group. G8 Education is listed on the Australian Securities Exchange, while Goodstart Early Learning is a not-for-profit social enterprise. The mix matters because corporate, for-profit and private equity-owned models have different incentives, levels of transparency and accountability. The Australian Competition and Consumer Commission’s childcare inquiry concluded that current market and subsidy settings are not delivering affordable or accessible care for every family. It also found that childcare markets vary sharply by location, workforce supply and local competition. With the Child Care Subsidy delivering substantial public money to approved providers, questions about who owns services, how funds flow through corporate structures and whether investment is improving conditions for children and educators are becoming harder to avoid. A separate report by Public Services International, drawing on ABC News reporting, alleged serious safety and staffing failures at Affinity centres, underscoring why oversight matters as ownership becomes more concentrated.
Disclaimer: This content is for informational purposes only and is not intended to be a substitute for professional medical judgment, advice, diagnosis, or treatment.
