Babies and Bosses - Reconciling Work and Family Life, Volume 3: New Zealand, Portugal and Switzerland (Babies and Bosses: Reconciling Work and Family Life)

« Babies and Bosses RECONCILING WORK AND FAMILY LIFE Finding a suitable work/family balance is a challenge that all par...

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Babies and Bosses RECONCILING WORK AND FAMILY LIFE Finding a suitable work/family balance is a challenge that all parents face. Many parents and children in New Zealand, Portugal and Switzerland are happy with their existing arrangements. However, many others feel seriously constrained in one way or another, and their personal well-being suffers as a consequence.

This study considers how a wide range of policies, including tax/benefit and childcare policies, and employment and workplace practices help determine parental labour market outcomes and may impinge on family formation. This volume also includes some options for policy reform towards a better reconciliation of work and family commitments in the three countries in question.

See the OECD website: www.oecd.org/els/social/familyfriendly.

OECD's books, periodicals and statistical databases are now available via www.SourceOECD.org, our online library. This book is available to subscribers to the following SourceOECD themes: Employment Social Issues/Migration/Health Ask your librarian for more details of how to access OECD books onl ine, or write to us at

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RECONCILING WORK AND FAMILY LIFE

RECONCILING WORK AND FAMILY LIFE

This book is part of the Babies and Bosses series, consisting of comparative studies of work and family reconciliation policies. To get a more comprehensive picture of reconciliation policies, please consult the initial Babies and Bosses volume on Australia, Denmark and the Netherlands, which was published in 2002, and the second volume on Austria, Ireland and Japan, which was published in 2003. The final volume in the series, to be published in 2005, will cover Canada, Finland, Sweden and the United Kingdom.

Babies and Bosses

If parents cannot achieve their desired work/family balance, economic development is curtailed through reduced labour supply by parents. Meanwhile, a reduction in birth rates has obvious implications for future labour supply and the financial sustainability of social protection systems. As parenting is also crucial to child development, and thus the shape of future societies, policy makers have many reasons to help parents find a better work/family balance.

Babies and Bosses

www.oecd.org

ISBN 92-64-10834-3 81 2004 16 1 P

-:HSTCQE=VU]XY^:

Volume 3 New Zealand, Portugal and Switzerland

Babies and Bosses: Reconciling Work and Family Life New Zealand, Portugal and Switzerland

Volume 3

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into force on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promote policies designed: – to achieve the highest sustainable economic growth and employment and a rising standard of living in member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; – to contribute to sound economic expansion in member as well as non-member countries in the process of economic development; and – to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations. The original member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries became members subsequently through accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996), Korea (12th December 1996) and the Slovak Republic (14th December 2000). The Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD Convention).

Publié en français sous le titre : Bébés et employeurs : Comment réconcilier travail et vie de famille Nouvelle-Zélande, Portugal et Suisse – Volume 3

© OECD 2004 Permission to reproduce a portion of this work for non-commercial purposes or classroom use should be obtained through the Centre français d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, tel. (33-1) 44 07 47 70, fax (33-1) 46 34 67 19, for every country except the United States. In the United States permission should be obtained through the Copyright Clearance Center, Customer Service, (508)750-8400, 222 Rosewood Drive, Danvers, MA 01923 USA, or CCC Online: www.copyright.com. All other applications for permission to reproduce or translate all or part of this book should be made to OECD Publications, 2, rue André-Pascal, 75775 Paris Cedex 16, France.

FOREWORD

Foreword

T

he reconciliation of work and family life directly involves two goals that are

important both to individuals and societies: the ability to participate fully in the labour market, generating income but also seeking fulfilment in the most important social activity of modern life, and to provide the best for one’s own children, giving them the care and nurturing they need. These aspirations need not be mutually exclusive. However, all too often parents cannot achieve their preferred balance of work and care commitments. As a result, (potential) parents may adjust their family behaviour and decide to have children at a later age, not as many as desired, or not have children at all. Alternatively, parents (usually mothers) withdraw from the labour market, temporarily or permanently. Sometimes this is because it is their wish to provide fulltime care for their children, whatever their employment opportunities. In many other cases, however, it is despite the fact that they would like to work, or to work more hours, but cannot do so because of constraints in terms of time, access to services or limited opportunities to resume career tracks after childbirth. Other parents (often fathers) spend so much time working that they hardly see, let alone give personal attention to, their children, which raises concerns about both partnership stability and child development. Hence, the demand for a better set of family-friendly social policies that facilitate the reconciliation of work and family life by fostering adequacy of family resources and child development, facilitates parental choice about work and care, and promote gender equality in employment opportunities. This third OECD review of the reconciliation of work and family life analyses how the existing mix of policies, including tax/benefit policies, childcare policy and employment and workplace practices, contributes to different parental labour market outcomes and and other societal outcomes in New Zealand, Portugal and Switzerland (and in particular the cantons of Ticino, Vaud and Zürich). The review is based on visits to the three countries that took place in August, September and October 2003, and the analysis concerns the situation at that time. The review was discussed by the OECD’s Employment, Labour and Social Affairs Committee in April 2004. The report was prepared by Willem Adema (Project Manager), Christopher Prinz and Olivier Thevenon, assisted by Maxime Ladaique (Statistician), Cécile Cordoliani, Orla Kilcullen and Sylvie Ricordeau, under the overall supervision of the Head of the Social Policy Division, Mark Pearson. This volume is published under the responsibility of the Secretary-General of the OECD.

BABIES AND BOSSES: RECONCILING WORK AND FAMILY LIFE – ISBN 92-64-10834-3 – © OECD 2004

3

TABLE OF CONTENTS

Table of Contents Chapter 1. Main findings and policy recommendations . . . . . . . . . . . . .

9

1.1. Introduction to the review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2. Key family and work outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3. The family-friendly policy stance . . . . . . . . . . . . . . . . . . . . . . . . . 1.4. Childcare systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5. Tax/benefit policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6. Family-friendly workplaces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7. Promoting gender equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 11 16 17 21 24 25 26

Chapter 2. The socio-economic environment . . . . . . . . . . . . . . . . . . . . . .

27

2.1. The macroeconomic context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. The demographic context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3. The policy context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

28 35 47 51 52

Chapter 3. Parental labour market outcomes: a gender issue . . . . . . . .

55

3.1. Gender differences in employment outcomes . . . . . . . . . . . . . . 3.2. Mothers in employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3. Distribution of work in households with children . . . . . . . . . . . 3.4. Gender earnings differentials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annex to Chapter 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56 64 68 72 75 77 87

Chapter 4. Childcare systems and policies . . . . . . . . . . . . . . . . . . . . . . . . .

89

4.1. Childcare policy objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2. Types of facilities and the use of childcare . . . . . . . . . . . . . . . . . 4.3. Three competing public policy goals: access, quality and capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annex to Chapter 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

90 91 99 118 121 124

Chapter 5. Balancing adequacy with work incentives . . . . . . . . . . . . . . .

127

5.1. Main characteristics of tax/benefit systems . . . . . . . . . . . . . . . . 5.2. Disincentives to work for second earners . . . . . . . . . . . . . . . . . .

129 136


5

TABLE OF CONTENTS

5.3. Sole parent families struggling with joblessness . . . . . . . . . . . . 5.4. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annex to Chapter 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

149 164 166 167

Chapter 6. Time-related workplace support for parents . . . . . . . . . . . . .

171

6.1. Family-friendly policy measures: setting the scene . . . . . . . . . . 6.2. The public case for family-friendly policies . . . . . . . . . . . . . . . . . 6.3. Family-friendly workplaces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

172 173 181 192 194

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197

Background Annex to the Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

205

List of Boxes 1.1. 1.2. 2.1. 2.2. 2.3. 3.1. 4.1. 4.2. 4.3. 5.1. 5.2. 5.3. 5.4. 5.5. 6.1. 6.2. 6.3.

What are family-friendly policies? . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy recommendations for New Zealand, Portugal and Switzerland . . Ethnic diversity in New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy responsibility in Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . Recent policy initiatives in Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . Level of educational attainment and employment . . . . . . . . . . . . . Quality-quantity dilemma in a low productivity growth sector . . . . . . Subsidising childcare users: the Algarve’s experience . . . . . . . . . . . Plans for investing in childcare services . . . . . . . . . . . . . . . . . . . . . . Different approaches to income taxation . . . . . . . . . . . . . . . . . . . . . Situation of families with a very young child . . . . . . . . . . . . . . . . . . Family tax reform plans in Switzerland . . . . . . . . . . . . . . . . . . . . . . . “Working for Families”: 2004 family benefit reform in New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lessons from policies to make work pay . . . . . . . . . . . . . . . . . . . . . . Public time-related support for parents . . . . . . . . . . . . . . . . . . . . . . . Improving the design of child-related leave programmes . . . . . . . . Industrial bargaining systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 12 37 49 51 58 100 113 115 130 139 143 149 159 175 180 182

List of Tables 2.1. 2.2. 2.3. 2.4. 2.5. 3.1.

6

Cross-canton variation in levels of economic development is as large as cross-country variation . . . . . . . . . . . . . . . . . . . . . . . . . High wages and lowest level of inequality and poverty in Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poverty levels are high for some working families, and extremely high for jobless families . . . . . . . . . . . . . . . . . . . . . . . New Zealand and Switzerland are among the few OECD countries with large shares of foreign(-born) populations . . . . . . . . . . . . . . . . How children grow up in the three countries . . . . . . . . . . . . . . . . . . Gender differences in employment rates are declining . . . . . . . . . .

29 33 34 36 38 57


TABLE OF CONTENTS

3.2.

Compared to men female employment is concentrated in fewer occupations, at lower levels of the hierarchy, and more likely to be of a temporary nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3. In Portugal, women work almost as many hours as men . . . . . . . . 3.4. Little concentration of weekly working hours in New Zealand . . . 3.5. More children lead to mothers reducing working hours . . . . . . . . . 3.6. Main earner households prevail in New-Zealand and Switzerland . . 3.7. Joblessness among sole parents is most frequent in New Zealand . . 3.8. Women rather than men engage in unpaid work, especially in Portugal . 3.9. A smaller wage gap in Portugal, but concentrated in low earning categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.A.1. Female and maternal employment rates (EPR) and share of part-time (PT) employment, by age of youngest child, percentages . 3.A.2. Employment in households with children . . . . . . . . . . . . . . . . . . . . . 3.A.3. Women do the largest share of unpaid work,especially in Portugal 4.1. Diverse child care services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2. Children in New Zealand start using formal childcare at a relatively early age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3. Greater investment in early childhood education and care in New Zealand and Portugal than in Switzerland . . . . . . . . . . . . . . 4.4. High staff-to-child ratios in New-Zealand . . . . . . . . . . . . . . . . . . . . . 5.1. Portugal suffers from a low income tax base and thus relies on indirect taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2. Family spending in Portugal and Switzerland is below OECD average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3. The tax/benefit system reduces working-age poverty in New Zealand considerably . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4. For middle-income families with access to free childcare work pays for the second earner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5. Childcare costs significantly reduce financial returns to second earners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6. Single-earner couple families are most frequent in Ticino, and rarest in Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7. The real value of family benefits in New Zealand has drastically declined in the last six years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8. One in nine children in New Zealand lives with a jobless sole parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9. Work generally pays for sole parents in Portugal, Vaud and Zürich, but much less so in New Zealand and Ticino . . . . . . . . 5.A.1. For low-income families work incentives for second earners are low in New Zealand and in Ticino . . . . . . . . . . . . . . . . . . . . . . . . 5.A.2. Tax/benefits systems only have a minor potential impact on couples' distribution of work . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


60 62 63 67 70 71 73 74 77 79 85 92 97 102 105 130 132 135 137 141 145 147 150 155 166 166

7

TABLE OF CONTENTS

6.1. A.1. A.2. A.3. A.4. A.5. A.6.

Workplace support in New Zealand often concerns care-days and part-time work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APW earnings versus GDP per capital, 2002 . . . . . . . . . . . . . . . . . . . Main family benefit programmes, 2003 . . . . . . . . . . . . . . . . . . . . . . . Comparison of family benefit rates, 2003 . . . . . . . . . . . . . . . . . . . . . Continued payment of salary for those on leave for incapacityrelated reasons (including maternity) in Switzerland . . . . . . . . . . . Unemployment and social assistance benefits for those of working age with children . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Social assistance benefit income as a share of average wages and equivalence elasticities for additional children . . . . . . . . . . . .

185 205 207 209 215 217 218

List of Charts 2.1.

Much lower education levels and lower service sector employment in Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. Labour productivity per employee is low in all three countries . . . 2.3. Fewer marriages that are more likely to end up in divorce . . . . . . . 2.4. Completed fertility rates continue to decline and will stabilise at a higher level in New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5. Marriage and childbearing is increasingly deferred . . . . . . . . . . . . . 2.6. Large differences in teenage birth rates, which are highest for Maori women . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7. Is work less incompatible with having a child than it used to be? 2.8. Portuguese and Swiss pensioner welfare states . . . . . . . . . . . . . . . . 3.1a. Female employment rates in Portugal are highest for woman in the age- group where young children are most likely to be present 3.1b. Women in Vaud and Zürich now often stay in work until their mid-50s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. Maternal employment rate increases with the age of the youngest child in New Zealand and Switzerland, while the share of part-time decreases in New Zealand only . . . . . . . . . . . . . . . . . . . 3.3. Spouses earn less than their husbands, especially in Switzerland 4.1. Full-time day care fees are generally highest New-Zealand . . . . . . 4.A.1. Childcare funding flows in Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . 4.A.2. Childcare funding flows in New Zealand . . . . . . . . . . . . . . . . . . . . . . 4.A.3 Childcare funding flows in Switzerland . . . . . . . . . . . . . . . . . . . . . . . 5.1. Work does not pay for a sole parent in Ticino with a child under age three . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2. Beyond 24% of average earnings work hardly pays for a sole parent in New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1. Portuguese parents in employment are entitled to look after their young children until they are of pre-school age . . . . . . . . . . . . . . . . 6.2. Women in Portugal engage in paid work for almost as many hours as men . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3. More family-friendly workplace support can help avoiding shrinking labour forces in Portugal and Switzerland . . . . . . . . . . . .

8

30 32 41 43 44 45 46 47 67 68

71 77 111 123 124 125 157 158 174 189 191


ISBN 92-64-10834-3 Babies and Bosses: Reconciling Work and Family Life New Zealand, Portugal and Switzerland © OECD 2004

Chapter 1

Main Findings and Policy Recommendations

This chapter presents the main findings and policy conclusions of the review of work and family reconciliation policies in New Zealand, Portugal and Switzerland, in particular the cantons of Ticino, Vaud and Zürich. This chapter presents the main findings of the review and starts with a list of policy recommendations for individual countries and jurisdictions. The chapter summarises key labour market outcomes and succinctly captures how workplace practices, childcare policy and tax/benefit policy affect the behaviour of parents who are trying to find their preferred balance of work and family commitments.


9

1. MAIN FINDINGS AND POLICY RECOMMENDATIONS

1.1. Introduction to the review Finding a suitable work/family life balance is a challenge that all parents face. Many parents and children in New Zealand, Portugal and Switzerland are happy with their arrangements. However, there are many others who feel seriously constrained in one way or another, and whose personal well-being suffers as a consequence. Some people would like to have children, but do not see how they could square that commitment with their current employment situation. Other parents are happy with the number of children in the family, but would like to work more, either to find a greater sense of self-fulfilment, or to increase family income, or both. Yet other parents who are happy with their family situation, may wish to work at different hours, or reduce hours worked to spend more time with their children, but do not because they cannot afford to take a pay cut, or because they do not want to put their career prospects at risk. If parents cannot achieve their desired work/family life balance, economic development is curtailed, through reduced labour supply by parents. A reduction of birth rates has obvious implications for future labour supply as well as the financial sustainability of social protection systems. As parenting is also crucial to child development, and thus the shape of future societies, policymakers have many reasons to help parents find a better work/family balance (Box 1.1).

Box 1.1. What are family-friendly policies? Family-friendly policies are those policies that facilitate the reconciliation of work and family life by fostering adequacy of family resources and child development, facilitate parental choice about work and care, and promote gender equality in employment opportunities. For the purpose of the review, “work” is defined to encompass all paid work (employment and selfemployment), while “families” and “reconciliation” policies are defined as follows: Families: “Each household of one of more adults living together with and taking responsibility for the care and rearing of one or more children.” Reconciliation policies: include “All those measures that extend both family resources (income, services and time for parenting) and parental labour market attachment”.

10


1.

MAIN FINDINGS AND POLICY RECOMMENDATIONS

This review considers how family-friendly policies in New Zealand, Portugal and Switzerland (in the three cantons Ticino, Vaud and Zürich that were visited) help parents to map their work and family commitments. First, policy recommendations for individual countries and jurisdictions are presented while the remainder of this chapter summarises the main findings of the review (Box 1.2). Chapter 2 of this review outlines the socio-economic context in the three countries under review in which policy developments play out, while Chapter 3 presents parental labour market outcomes and trends by gender. The subsequent three chapters try to explain the differences in parental family and labour market outcomes in view of childcare policy (Chapter 4), tax/benefit policy (Chapter 5) and time-related workplace support for parents (Chapter 6).

1.2. Key family and work outcomes In all three countries, some family outcomes cause concern. Completed fertility continues to fall, approaching rather low levels of 1.5 children in Portugal and Switzerland and replacement level in New Zealand. In part, this decline in birth rates is because of deferred family formation (as postponed births often do not come about), in turn related to extended education and later labour market entry. The average age of a mother at first childbirth is now around 30 years in the three countries, an increase of three-four years in two decades. Teenage motherhood is rare in Switzerland, but remains high in an OECD perspective in Portugal, and especially New Zealand where it is very high among the Maori population. Quite uniquely, almost one in four children in New Zealand live in a one-parent household. As only one in two sole mothers in New Zealand is in paid work, many children grow up in jobless families. The incidence of one-parent households increased rapidly since 1985, with declining marriage rates and increasing divorce rates. Changes in family patterns in Switzerland are similar, but sole parenthood is less common. Despite a significant increase over the 1990s, there are few jobless families, and dual-earner couples are now more common in Switzerland than singleearner couples. The proportion of sole-parent households has not increased in Portugal, despite an increase in divorce, because sole parents tend to live with others. Childbirth is a major determinant of female labour force behaviour, while becoming a parent hardly affects male employment behaviour: fathers, everywhere, are generally in work: employment rates for prime-age men are around 80% in New Zealand and Portugal, and 85% in Switzerland. In the three countries under review, women are more often in work than in most other OECD countries: in 2002, female employment rates in Switzerland (72%), New Zealand (65%) and Portugal (61%) compared favourably to the


11


Box 1.2. Policy recommendations for New Zealand, Portugal and Switzerland New Zealand ● Invest more in out-of-school-hours care capacity, for example by exploring

options to make better use of existing education facilities for the provision of such care. ● Extend the role of childcare-related income support linked to licensed

childcare services, by starting to redirect “bulk-funding” for pre-primary school education from providers to parents. Paying childcare subsidies directly to users would remove inequities between parents, and between the childcare and the kindergarten sector. Linking such payments to families’ working hours could strengthen financial incentives for parents (second earners) seeking work, while a comprehensive licensing system would maintain quality standards. ● The new family assistance package announced in May 2004 involves major

income gains for low- and middle-income families with children, while it also provides better financial incentives for families to move off benefits. However, despite modification of in-work payments, the reform does not improve the marginal effective tax rate structure that second earners in couple families face. Further reform could address this issue by strengthening the role of the Childcare Subsidy programme, as it directly links working hours with financial support to parents. ● Closely monitor and evaluate the impact of the introduction of enhanced

case management for clients of Domestic Purposes Benefit, and enforce mutual obligations (requiring sole parents to seek work actively) if reform does not lead to a significant increase of employment among sole parents. ● Modify Domestic Purposes benefit so to make work pay and avoid high

marginal effective tax rates throughout the phase-out range. One way of doing this is through a lower basic payment rate with an employmentconditional increment that gives incentives to increase work effort. For sole parents who can work, this would moderate the benefit and poverty trap substantially. The trade-off of such policy is that those who solely rely on DPB would be worse off. Alternatively, if lowering payment rates is unacceptable for this reason, introduce an employment-conditional benefit for all families with children. ● Enhance the family-friendly nature of workplaces, for example, through

the introduction of subsidies to employers for participating in initiatives that provide workplaces with tailored advice on family-friendly policy practices, and ensure long-term enterprise commitment through regular assessment or audits.

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Box 1.2. Policy recommendations for New Zealand, Portugal and Switzerland (cont.) ● Reform the current employment-protected leave period to include an

entitlement to part-time work for parents with very young children. Envisaged reform will gradually extend paid leave to 14 weeks as from December 2005; without additional spending, such reform could allow for spreading of income support beyond this period. ● To give employers due notice on the return of their employees, increase

the notice period for parents on parental leave (up to the first birthday) from three weeks to two-three months. Portugal ● Reduce unnecessary barriers to part-time employment by changing the

childcare fee structure (and subsidies): parental fees should reflect the number of hours for which childcare services are used. ● Reinvigorate a recent pilot project in the Algarve region that provided

childcare support directly to parents, and which led to many new clients using childcare facilities, including greater access of low-income households to private centres. Public support should encompass the (presently largely informal) family day care sector, while quality can be assured by making support conditional on the use of licensed care facilities. ● Strengthen support for low-income families without harming work

incentives. This could be done by way of the tax system (e.g. through an employment-conditional refundable tax credit for low-income groups) or the benefit system (e.g. through higher child allowance payments for lowincome working families). ● Enhance the family-friendly nature of workplaces, for example, through

the introduction subsidies to employers for participating in initiatives that provide workplaces with tailored advice on family-friendly policy practices, and ensure long-term enterprise commitment through regular assessment or audits. ● Integrate the programmes on child-related leave and part-time work

entitlements as much as possible since the different rules contribute to uncertainty among potential users and reduce potential take-up. ● Without additional spending, allow for greater income spreading of the

maternity pay entitlement, including to the period of (part-time) parental leave, to increase choice for parents with very young children.


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Box 1.2. Policy recommendations for New Zealand, Portugal and Switzerland (cont.) Switzerland ● Increase public spending on childcare and out-of-school-hours care and

extend access to all-day school structures to promote (full-time) female labour market participation. ● Start to redirect funding for childcare and out-of-school-hours care from

providers to parents. This will increase parental choice, improve costconsciousness and efficiency among providers, and eliminate the system of deficit financing as currently used in some communes. ● Consider introducing individual taxation as one method (amongst others)

of encouraging both adults in couple households to work. ● When implementing national legislation on supplementary benefits for

families avoid negative effects on financial incentives to work. This could be done by making part of the payment employment-conditional. Furthermore, adapt elements in the reform package currently under consideration by Federal parliament in such a manner that marginal effective tax rates faced by second earners are not too high for example, by linking financial support to the use of childcare. Also, consider modifying supplementary family allowance in Ticino (and in cantons that are considering introducing such a measure) accordingly. ● Enhance the family-friendly nature of workplaces, for example, by

extending support for initiatives that provide workplaces with tailored advice on family-friendly policy practices, and ensure that, through regular assessments and audits, such initiatives involve long-term commitment on the part of participating enterprises. ● Reform the current system of direct employer-provided sickness benefits

that are paid in case of maternity into a maternity insurance system pooling resources among employers. ● Subject to a right to return to full-time employment given due notice,

introduce a.time-limited entitlement to part-time work for parents with very young children.

OECD average of 55%. Female labour market behaviour has changed in all three countries, and employment rates among women in their early 30s have increased considerably in Portugal and Switzerland. In New Zealand, employment rates of women in their late 40s are still 10 percentage points higher than for women in their 30s, suggesting there are more New Zealand mothers who first have children and then seek a regular job, than in the other two countries.

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There are considerable differences in the nature of employment relationships of women in the three countries. Female employment rates are highest in Switzerland, but when adjusted for working hours, full-time equivalent employment rates are highest in Portugal at 57%, well above New Zealand (52%) and Switzerland (51%). Indeed, the increase of Swiss female employment over the past few decades has almost completely been in parttime jobs, and by now one in two Swiss women work part-time. About one in three women in New Zealand works part-time, while this is less than one in eight in Portugal. Furthermore, once in part-time employment Swiss women often keep that employment status. By contrast, mothers in New Zealand increase their participation in paid work as children grow up, both in terms of employment and hours worked. Hence, mothers of school-age children more often than not work full-time, and employment rates for mothers whose youngest child is in primary school are much higher than for mothers whose child is of kindergarten age (75% versus 58%). These patterns of female employment are determined by many different factors, but one key difference is wealth. Switzerland is a relatively rich OECD country, where parents are more likely to be able to afford reductions in working hours (and earnings) in order to have time to care for children. Parents in New Zealand couple families are often “rich enough” to do this too, but after a few years, second earners are likely to increase hours and family income. In Switzerland, couple families often get used to having “one-and-ahalf-earners”, i.e. one parent working full-time and the other working parttime, also because such a work pattern is more compatible with school hours. In Portugal, many families need a full-time second earner to sustain family income, and dual full-time earnership among couples with children has been the norm since the late 1980s. Hence, gender differences in employment rates are small, but time-use surveys do suggest that women with a full-time job in families with young children undertake 50% more unpaid housework than men. In Portugal, part-time employment is not widely sought after, and employment conditions in part-time work are often “atypical” (e.g. in a lowpaid job with a contract of fixed duration). The several months of paid maternity leave on offer in Portugal ensure that care for children can be provided without significant loss of income for a while. Thereafter, if Portuguese parents work full-time, the difficulty is finding affordable quality childcare. The alternative would be for one parent to drop out of work to provide parental care, but this increases the risk of poverty: one-third of all such families in Portugal are income-poor. So far, the discussion has treated Switzerland in a general manner. However, Switzerland is a federal country with 26 cantons and half-cantons that set their own policy in many areas, including tax/benefit policy and childcare policy. It is no surprise therefore, that parental labour market


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outcomes vary across cantons. While maternal employment rates are generally above the OECD average, they are significantly higher in Vaud and Zürich (at 70%) than in Ticino (62%), in which canton the share of female parttime employment is also low by Swiss standards. Moreover, maternal employment behaviour differs when children grow up. Reflecting differences in cantonal childcare policy (see below), maternal employment rates in Vaud are always in excess of 60% regardless of the age of the youngest child, while in Zürich maternal employment drops below 50% for mothers of children aged zero-two years and increases to over 80% for those with school-age children.

1.3. The family-friendly policy stance Family-friendly policy is a balancing act in the pursuit of different policy objectives, including equity between different income groups, family types, and men and women; health; child development; and labour market concerns. Not surprisingly, the emphasis of policy and policy development differs across countries, as influenced by historical and socio-economic contexts (Chapter 2). Nevertheless, in all three countries there is a considerable gap in public support between the expiry of paid leave (after about threefour months) and the age at which affordable early education and childcare services generally becomes available (age three-four). In Switzerland, the traditional federal policy reflex has been not to intervene at all with respect to families with young children, as decisions in this area are considered by a large part of the population to be a private matter: parents themselves should decide how they wish to balance their work and care commitments. There is no such thing as a federal family policy. However, there are concerns that the absence of policy intervention will hold back economic development, and the federal parliament recently moved toward allocating some resources to creating more childcare capacity, an area traditionally the remit of cantons and communes. The federal constitution specifically allows for federal regulation of both child benefits and maternity insurance, but in practice employers pay child and maternity (sickness) benefit to their employees, worth about 1.1% of GDP (similar to public spending in New Zealand and Portugal, see below), under a mixture of federal law (labour law and code of obligations), cantonal law, and collective agreements with employees. Ticino can be said to have an integrated cantonal family policy. It has a system of income-tested child benefits for families, and these are most generous when children are not yet three years of age. Subsequently, they can attend the cantonal infant schools. It is more difficult to speak of a cantonal policy in Vaud and Zürich, where policy can vary significantly across communes. In the large canton of Zürich, the differences between the city of Zürich, with its fairly comprehensive childcare support policy, and smaller rural communes, often without any such policy, can be considerable.

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The overriding avowed policy objective underlying the pursuit of familyfriendly policy in New Zealand and Portugal is to support parents so they have a choice in reconciling their work and family life. However, public social spending on families with children in New Zealand (2.5% of GDP) is over twice as high as in Portugal (1.1%), with most of the difference due to public spending on support for sole parents and their children. With employment rates among sole parents at about 50% being almost 30 percentage points lower than in the other two countries, one of the main challenges that New Zealand policy faces is to design and implement reform that helps all parents, regardless of their household status, to acquire a better work/family life balance. Recent and ongoing reform includes both earmarked support to increase work options and untied income support to increase family resources. The new policy paradigm aims to give parents choice that is both “real” in terms of sustainable quality employment (however defined), and “considered” in terms of appropriate timing of taking employment. As reform is recent, it is too soon to say whether or not an appropriate balance of active and passive measures has been chosen. However, the high levels of sole parent benefit payments relative to net income in work involves a high risk that employment rates among sole-parent families in New Zealand will remain well below those in Portugal and Switzerland. In Portugal, the issue of work and family reconciliation is discussed within a gender equity framework, and there are financial incentives for fathers to use paid leave (Section 1.7). The Portuguese policy model provides choice as it contains many entitlements to unpaid time-related support for parents with young children. However, many parents in Portugal cannot afford to reduce hours in work or take unpaid leave, and, hence, the use of such measures is limited. The government emphasises the role of part-time work as a way for families to reconcile their work and care responsibilities, and urges employers to make this and other family-friendly measures available as part of their “social co-responsibility”. However, unless financial returns from working part-time increase (through, for example, the introduction of an inwork benefit, or childcare fees becoming proportional to hours of childcare used, see below) it is unlikely that part-time work will increase significantly in Portugal.

1.4. Childcare systems Some parents prefer to provide full-time care for their young children regardless of employment prospects and family income levels. Preferences for different types of non-parental care also vary. Some parents prefer to use relatives or neighbours as non-expensive and reliable sources of childcare, but this form of care is not always available, or only for a limited number of hours per week. Other parents prefer to buy care on a formal or informal basis.


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Whatever the preferences, considerations of price, accessibility and quality often mean that working parents use a combination of care sources to juggle their way through care and work commitments. Childcare systems play a crucial role in helping families reconcile work and family life. However, childcare policy design is not solely driven by “care” and labour supply considerations, but also by child development and education concerns. Care and child development objectives ought not to be mutually exclusive: carers are educators, and educators are carers. Policy design has to find an appropriate balance between these objectives, and this balance varies across countries and with the age of children. Public childcare policy for those not yet three years of age often has an emphasis on family/ work reconciliation objectives. With respect to older children, the balance of policy objectives moves towards a greater emphasis on educational objectives. All three countries seek to achieve greater coherence in workplace and education practices by a better mapping of school and work and a better integration of out-of-school-hours care systems. For example, in Switzerland generalising continuous school hours (rather than some hours in the morning and some in the afternoon, interrupted by a long lunch break) would be a first step to align school and possible part-time work hours, while initiatives to provide for a full-day school programme of activities are emerging. Out-ofschool-hours care capacity is of concern in all countries, but especially in Portugal, where full-time dual-earnership is widespread, and it will be key to any future expansion of female working hours in the other two countries. Historically, the demand for non-parental childcare increased with changing female labour force behaviour. A further increase in female employment rates, however, will be difficult to achieve without a more comprehensive policy approach towards issues of cost and accessibility of good-quality childcare. The way in which childcare constraints become visible differs significantly across the three countries under review. In Portugal, mothers may temporarily drop out of the labour force to care for very young children, as affordable childcare is not available on a comprehensive basis. In New Zealand, childcare costs seriously reduce financial returns to work for a family on average earnings. Parents reduce working hours when children are very young, but increase labour supply when children grow up (when affordable early childcare and education services become more generally accessible). In Switzerland, the tax/benefit system favours part-time work by second earners, while cost and lack of capacity (especially in rural areas) leads parents to use different childcare sources (for example, relatives, neighbours, one day of formal care) to work two or three days per week. Moreover, short school hours (and the lack of out-of-school-hours care facilities) make it hard for mothers to increase hours of paid work.

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Compared to the other two countries, the relatively high incidence of fulltime female employment in Portugal contributes to a greater need for full-time day care for children not yet three years old, and for out-of-school hours care for school-age children. There are, however, indications that many Portuguese mothers perceive their working hours (and the need to sustain family income) as a major barrier from devoting as much time to their children as they would like. There is a concern in Portugal that young children might sometimes be left unattended. The policy priority should be to enable parents to choose the type of childcare that they prefer (including parental care), while making better use of the existing childcare capacity. To help achieve this, it is necessary to change the structure of the childcare market that currently requires purchase of fulltime childcare. This is an unnecessary barrier to greater use of part-time work in Portugal. To achieve a greater use of part-time work (one of the government’s avowed objectives), it is important to reform the fee structure and differentiate fees by hours of childcare being used. Furthermore, Portuguese parents frequently claim to prefer using informal childminders (family day care) as this option provides both flexibility in hours and a homely care environment. A reallocation of public funding towards users of family day care is likely to increase its usage. A system of registering childminders could be linked to such payments as a way of ensuring good quality-care. In New Zealand, childcare policy is largely developed, supervised and financed by the Ministry of Education. Policy aims to increase quality and participation in early childhood and education services, while increased investment in full-day services reflects growing recognition of work/life issues. Quality objectives (and considerations on pay equity among teachers) will continue to lead to a gradual increase in remuneration levels of early childhood staff relative to that of primary school teachers. The improvement of quality is also pursued through encouraging the largest possible number of staff to obtain a teaching diploma (rather than having a fully-qualified teacher and an assistant working in tandem), For children aged three-six years, staffto-child ratios required in New Zealand are the highest of all three countries (and indeed also of all previously reviewed countries). The result of the current policy will be an increase in wage costs so increasing childcare costs and potentially parental fees. There is a risk that this will lead to a reduction of childcare capacity, if the government does not meet the additional costs of the strategy. This may be particularly likely in poorer areas, as low-income groups are least likely to be able to afford the ensuing fee increases, and private centres will withdraw provision. New Zealand has a programme that provides income-related childcare support to parents, and this particularly helps sole parents on income support (see below). However, financing of childcare providers in New Zealand is mainly through “bulk-funding” of specified amounts per hour and per child


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(with subsidy rates depending on quality standards that are being adhered to), for a maximum six hours of care per day (reflecting primary school hours). This financing structure (which does not cover out-of-school-hour services) certainly helps parents who work part-time, but does not fully cater for parents working full-time. The financing structure invites centres that wish to run care facilities for under two year olds (which is relatively costly to provide) or provide care for more than six hours per day to either make these services very expensive to parents or cross-subsidise it with funds acquired for the care of (older) children for six hours per day. Enhancing a better match of operational aspects of good quality early childhood services with parental working hours is a key policy challenge in New Zealand. The federal structure of Switzerland poses very specific challenges to childcare policy. In Ticino, the response for over three year olds (though not for younger children) has been to integrate policy at cantonal level, while communes in Vaud and Zürich operate at their own discretion, although the latter sometimes co-operate at “district level” to pool resources. There are considerable geographical differences in service provision across the country. However, in general, weak municipal returns on the provision of childcare hold back investment therein. And while this practice is becoming less frequent, financing structures can be very inefficient, as communes sometimes finance childcare facilities through guaranteeing to make up any deficits. A new federal initiative, although small, encourages communes to invest in childcare facilities. In this respect, Vaud is one of the most innovative cantons as a reform project is intended to create a new foundation to pool diverse (private and public) resources and match the development of childcare facilities to parental needs. To encourage similar cantonal initiatives elsewhere and to encourage more efficiency in the running of childcare centres, the recently introduced federal financial support should be made contingent on ending deficit financing. In Ticino, formal childcare capacity for children not three years of age, is very limited, but infant schools with qualified teaching staff are widely accessible from age three-four onwards, and closely integrated with the primary education system. Opening hours are much shorter than working days (generally from 8.30 a.m. to 15.45 p.m.), with 17 weeks of holidays. In itself, this system does not facilitate full-time employment. By contrast, in Lausanne childcare policy is strongly focussed on helping parents to reconcile work and care commitments: financial support for childcare centres is mainly to facilities that cater for extended hours of care (10/12 hours per day for 46/48 weeks per annum). Municipal policy aims to cover 50% of all children aged zero-seven by the end of 2006. As in Lausanne, income-tested financial support to parents is granted on a widespread basis in Zürich city, where about 29% of zerofive year olds (as opposed to 14% across the Canton) use some form of

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childcare. Waiting lists suggest that supply of formal childcare capacity is lower than demand, and is often used on a part-time (rather than a full-time) basis. In all three countries, the way childcare, pre-school and out-of-schoolhours systems are being funded should be revisited. Rather than solely funding providers, there is a case for re-directing a significant part of current funding to parents. This would give them more choice in terms of work and care options, providers, and types of care (e.g. centre-based or home-based). Such a programme could also improve equity by reaching a greater group of parents than at present, while improving cost-consciousness and efficiency among providers. Income testing could be used to target child care spending to those most in need, while quality can be procured by tying financial support to the use of licensed facilities.

1.5. Tax/benefit policy Tax/benefit systems and financial support for parental childcare fees influence the decision to engage in paid work or not for many parents. The maximum fee for subsidised full-time childcare is highest in the City of Zürich, at about 30% of APW earnings for one child, and lowest in Portugal, at 12%.1 Some type of public assistance for low-income groups exists in all countries under review. The earnings range at which financial support is phased-out varies considerably, ranging from over 200% and around 150% of APW earnings in Switzerland and Portugal, respectively, to only 90% of APW earnings in New Zealand. This implies that middle-income families get support in Portugal and Switzerland, but not in New Zealand, unless the family has access to the kindergarten system. In Portugal, a country with a relatively wide income distribution and a large low-wage sector, there is a high incidence of working poverty, especially among single-earner couples. However, except for this latter group of families, poverty rates after taxes and transfers are close to those in the other two countries, even though the tax/benefit system has little impact when it comes to reducing poverty in working families. In the income tax system vertical redistribution seems not to be very effective, which is partly a consequence of a large number of tax deductions that do not benefit lower-income families. At the same time, the recent child allowance reform ensured better targeting in the benefit system. Because transfers in Portugal are low, work pays in most cases, with one exception. Childcare fee structures are such that part-time work will often not pay. This may not be a big problem because most people in Portugal want to work full-time and need to work full-time to make ends meet, but it may become a greater concern in the future. Rather than stronger income-testing of child allowances, which would harm work incentives for low income families, policy could aim to reduce high income inequality and


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working poverty by strengthening financial returns to work for low-income groups through the introduction of an employment-conditional refundable tax credit. Although the exact rules vary across and within cantons, the financial incentives for parents who wish to engage in paid work are similar across Switzerland. Second earners with very young children (and, to a lesser extent, sole parents) have limited financial incentives to work full-time rather than part-time when they need formal childcare. One main reason for this is the way in which childcare support is phased out with earnings. Finding childcare solutions is particularly expensive when children are very young, while preschool education in kindergartens which becomes available from age four or five onwards (age three or four in Ticino) is provided for a much lower fee. However, kindergarten as well as school hours are short and in many cantons not even offered in a continuous block of hours. Thus, mothers struggle to work full-time until their youngest child is ten or more, which makes a career difficult and partly explains why so many mothers never return to a full-time job. To foster societal and economic development through a sufficient supply of qualified labour, future family policy reform in Switzerland should make sure that taking up work and increasing work hours pays for second earners and sole parents. In particular, this will require investments in the childcare sector and an extension of out-of-school-hours care capacity. Introducing individual taxation as one method (amongst others) to encourage both adults in couple households to work (and to work more hours) could also be considered. On the benefit side, any introduction of income-tested supplementary family allowances similar to those that exist in Ticino should be done without harming labour market incentives for potential recipients. This could be done by making part of the proposed supplementary family allowance employment-conditional. Furthermore, the recent (29 March 2004) initiative that is currently under consideration by federal parliament could be adapted to strengthen the financial incentive structure of second earners in couple families, for example, by linking such support to the use of childcare facilities. In New Zealand, there is little horizontal redistribution towards families with children in the tax/transfer system, while childcare support is phased out early. As a result, for middle-income couple families, high fees for childcare often mean that work, or more work, barely pays for a second earner, unless parents have access to the largely publicly-financed kindergarten and preschool facilities. In addition, non-employment among sole parents is one of the key challenges that New Zealand policy faces (see above). By generating weak financial incentives to work, the sole-parent benefit (Domestic Purposes Benefit) creates dependency traps and so does little to raise beneficiaries’ self-

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sufficiency, whilst at the same time putting a significant burden on public finances (1.2% of GDP). New reform announced in May 2004 will reshape the balance between the adequacy of benefits and the financial incentives to work for second earners and sole parents. With a new family assistance package, total public spending on family benefits will almost double by 2007, when the reform is fully implemented. The structure of this package implies major income gains for low- and middle-income families with children. It also provides better incentives for families to move off benefits. However, despite modification of in-work payments, the reform does little to improve the marginal effective tax rates structure that second earners in couple families face. Further reform could address this issue by strengthening the role of the Childcare Subsidy programme, as it directly links working hours with financial support to parents. Providing public support is key to successful labour market integration of sole parents in New Zealand. Enhanced case management and a stronger focus on employment activation programmes have recently replaced the work test for sole parents that was introduced in 1999. Because the resources devoted to labour market support have increased and caseloads have dropped to 160 clients per caseworker, this policy shift potentially has a high likelihood of improving outcomes. However, DPB clients have weak financial incentives to work. While the old system tried to promote employment through a work test but limited support services, now there are services but no work test. Countries with high employment rates among sole parents usually have a work test and provide employment supports (including childcare). Evidence has shown that long-term benefit recipients are hesitant to make the final move into employment if the possibility of benefit receipt continues to exist. To raise the effectiveness of the latest reform of Domestic Purposes Benefit, financial disincentives to work for sole parents must be lowered. In all three countries, therefore, some groups of parents face a situation in which work, or more work, does not pay. This may be because available benefits are high relative to earnings (especially low-income families in New Zealand and Ticino) or because centre-based childcare fees are so high (middle-income families in all three countries). All three countries need to reconsider the balance between the adequacy of their benefit levels and the financial incentives to work. To make work pay, to reduce (working) poverty among families and children and to secure future labour supply, all three countries should consider introducing appropriate employment-conditional elements into their tax/benefit systems, and link these with payments that make quality childcare affordable.


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1.6. Family-friendly workplaces Parents have to allocate their time between paid work thereby securing family income and providing personal parental care for their children. Workplace practices that make this time allocation easier are thus very important to them. Such support is most generally available around childbirth. Indeed, the Portuguese model of maternity, parental leave and long-term special leave can, if taken sequentially, provide a parent (usually the mother) with employment protection until the child is about 2.5 years old. Policy also provides entitlements to work on a part-time basis for another two years. By contrast, in the other two countries the duration of employmentprotected leave ends much sooner: at the child’s first birthday in New Zealand and after only 16 weeks in Switzerland. However, the effective duration of leave periods is largely determined by the extent to which they are paid, and in this regard differences between New Zealand and Portugal are not that big: about two/thirds of mothers are entitled to income support during leave for about three to four months. In Switzerland, there is no maternity insurance: public sector workers are entitled to 16 weeks of paid leave; private sector workers may have access to income support as regulated by collective agreements, while other female workers have to rely on a system of “sickness payments”, wherein the duration of payment varies with the length of service (in autumn 2004, a proposal for paid maternity insurance of 14 weeks will be considered by the Swiss electorate). There is no comprehensive information on the average effective duration of paid “maternity” leave in Switzerland, but it is likely that only the minority of mothers receives income support for about three months or more. In general, Portuguese parents cannot afford to make greater use of the unpaid time-related support measures that are available to them. Extending paid leave is expensive and there are often better uses of scarce public funds to help families reconcile work and family life. Nevertheless, even without an increase in public budgets governments can increase parental choice options within child-related leave systems, by allowing them to spread income payments over a longer period. For example, an initiative in Portugal to allow current payments to be taken over a fivemonth period is worth considering for policy implementation in the two other countries. There are considerable differences across countries in the methods public authorities use to promote family-friendly workplaces. The Portuguese government goes furthest in time-related leave legislation, and, in the context of its recent initiative to promote “social co-responsibility”, has started to use financial support to entice enterprises to do more. For example, employers can procure social vouchers for their workers with children not yet seven years of age, and in return they can deduct relevant childcare spending from their taxable income. In New Zealand, the policy approach is to encourage firms to

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make their workplaces family-friendly, and notwithstanding the prevailing attitude of non-interventionism in business issues, the Swiss government (alongside umbrella organisations of employers and unions) supports initiatives to promote family-friendly workplace practices. Despite these efforts, family-friendly workplaces are not widespread in these three countries. Other measures will be needed to spread such policies. In the first instance, it seems useful to support financially initiatives that provide tailored advice to companies such as those undertaken in Switzerland, and there seems some demand for this type of service in New Zealand. For such initiatives to be effective, they should include re-assessment after six months or a year or so, to ensure long-term en te rprise com m itm ent. Govern me nts co ul d consi de r i ntroduci ng requirements to provide a minimum number of policies out of a prescribed list, for example, by reducing working hours by two hours per day for parents with very young children; providing financial support towards the cost of childcare or out-of-school 0care; making flexitime options available; and providing extra days to care for sick children. In this manner, a standard of access to family-friendly workplace support would be guaranteed, while (small) workplaces would have the opportunity to tailor such practices to their needs.

1.7. Promoting gender equity As a matter of fact, mothers rather than fathers reduce working hours when children are very young. From the perspective of family income, this often makes economic sense as maternal earnings are generally lower than paternal earnings. However, as taking leave or reducing working hours on a long-term basis are often seen as signals of less-than-complete commitment to careers, women have to consider the implications of having children on their career progression. Indeed, some may therefore choose not to have children. This issue seems particularly relevant to Switzerland where many women consider it impossible to pursue both a career and have a family. The proportion of women with tertiary education who are childless is as high as 40% (which is twice as high as the Swiss average and four times the average figure in New Zealand and Portugal), while many other families are likely to be smaller in size than desired. Making paid work more attractive to women concerns a wide range of measures and a narrow focus on interventions around childbirth is inappropriate. Nevertheless, the current system of paid sick leave (de facto maternity pay) around childbirth in Switzerland is in need of reform, as less than half of the mothers in Switzerland receive income support during maternity leave for three months. Moreover, as these benefits are directly


25


provided by employers, there are financial disincentives to employers to hire young women. Reform of this system into one that pools resources comprehensively among employers would be welcome. By contrast, Portuguese policy has a strong emphasis on gender equity. It financially encourages fathers to take leave, a paid “father quota” of 15 days has recently been introduced which about 30% to 40% of eligible fathers use, while in about 12% of the cases the entitlement to paid maternity leave is shared among both parents (by comparison, about 1% of eligible mothers transferred their parental leave entitlement to their partner in New Zealand). In itself, the Portuguese policy stance may not change workplace cultures overnight but, without this policy signal to fathers, changes towards more gender-equitable workplaces will be even more difficult to accomplish. Workplace practices may also help in reducing the penalty in reduced career progression that mothers often pay when they work part-time in the aftermath of childbirth. This penalty seems much higher in Switzerland, where part-time work is often of long duration, than in New Zealand, where mothers increase hours of work as children grow, and where the number of women in higher management (at close to 40%) is almost twice as high as in Switzerland. The New Zealand experience seems to suggest that more women can pursue a career, if part-time work is more broadly accepted as a work/family life reconciliation solution and if it only concerns a limited period. One way of reducing the part-time penalty is to embed a part-time work entitlement of limited duration, say six months, in careers and life-time employment patterns. However, as the Portuguese experience shows, for such a system to work, parttime wages should be high enough to sustain family income. Improving the work/family balance is likely to have implications for the shape of future society and the financial sustainability of social protection systems. At the same time, it will reduce concerns about future labour supply. If female employment rates and working hours were to gradually increase over the next 50 years to match male employment rates and working hours, this alone could increase GDP by 15 to 20 percentage points over the same period in New Zealand and Switzerland and half that in Portugal. There are thus good economic reasons for helping mothers to remain in the labour market.

Notes 1. APW earnings or “average earnings” refer to the annual earnings of an Average Production Worker in the manufacturing sector. In 2003 these were USD 23 850 (NZD 41 452) in New Zealand, USD 8 020 (€ 8 677) in Portugal and USD 41 120 (CHF 65 265) in Switzerland. Adjusted for the cost of living average earnings in New Zealand were USD 28 590, USD 12 690 in Portugal and USD 34 710 in Switzerland.

26



Chapter 2

The Socio-economic Environment

Economic and demographic conditions are key factors in explaining policy action and reaction with regard to family/work reconciliation. A booming economy with labour shortages offers different opportunities and probably requires different kinds of policy interventions than a stuttering economy. This chapter looks at three areas that set the scene (and also the limits) for national policy developments: the macroeconomic environment; the demographic environment; and the policy setting in which work/family reconciliation policy development unfolds. The chapter illustrates that such circumstances differ markedly in New Zealand, Portugal and Switzerland, while certain issues, such as labour productivity and working poverty, have become a policy concern in all three countries.


27

2. THE SOCIO-ECONOMIC ENVIRONMENT

F

amily/work reconciliation policies do not operate in a vacuum. Economic

and demographic conditions are key factors in explaining policy action and reaction. A booming economy with labour shortages is likely to attract (especially also female) labour and lead to employers offering appealing work contracts. This will also be a natural stimulus to the childcare sector. The opposite is likely to happen in times of economic slowdown. In such a situation, policy intervention seems more urgent. This chapter sequentially looks at three areas that set the scene (and also the li mits) fo r n atio nal policy developments: th e macro eco no mic environment; the demographic environment; and the policy setting in which work/family reconciliation policy development unfolds.

2.1. The macroeconomic context 2.1.1. Economic development Switzerland is the most affluent of the three countries under study. PPP-adjusted GDP per capita is some 20% above the OECD average, while it is 11% and 25% below that average in New Zealand and Portugal, respectively (Table 2.1). There is considerable cross-canton variation in economic wealth in Switzerland, with Zürich being the richest of all 26 Swiss cantons, Ticino being one of the poorest, and Vaud being close to the Swiss average. Cross-country differences in wealth have diminished since the early 1990s because of the very different underlying economic trends. Swiss annual average GDP growth of 1.1% in real terms during the last decade was among the lowest of all OECD countries, and in the early years of this century Switzerland was struggling to avoid a recession. Portugal experienced GDP growth rates around OECD average in the last decade, but like Switzerland faced an economic downturn in recent years. New Zealand, on the contrary, has had a prosperous decade, and in 2001-2002 the annual GDP growth rates reached 4.3%. Government outlays relative to GDP are highest in Portugal, at 46%. The recent economic downturn has contributed to a sizeable public deficit close to 3% of GDP in 2002, the maximum threshold determined in the euro area. Switzerland and New Zealand both have outlays below 40% of GDP, significantly below the OECD average. While the strong New Zealand economy has produced a budget surplus in recent years, Switzerland currently has a small budget deficit. Similar indicators for the Swiss cantons show that, in 2000, cantonal

28


GDP per capita

955 738

OECDa


5 766.6 15 612.8 37 393.9

Ticino Vaud Zürich

24 599

21 783 18 394 29 940

– 4.1 – 2.4 – 6.6

– 2.4

2000-2001

% change

100

74 72 133

OECD= 100

Comparative price levels for GDP

3.0

3.7 2.5 1.1

1992-2002

18 909.9 24 626.0 30 192.0

24 224.7

USD 2001

Compensation per employee in business sector

2.2

4.3 0.4 0.2

2001-2002

Percentage

– 3.0 – 3.3 – 7.8

– 3.1

% change 2000-2001

78 102 125

100

% Swiss = 100

National income per capita

2.9

2.7 3.8 2.0

2001-2002

Annual average growth rate

B. Cross-canton comparison

3.0

3.2 2.8 1.6

1997-2002

GDP (real)

Source: OECD (2003a), Economic Outlook; OECD (2003b), National Accounts; BFS (2003), Statistical Yearbook 2003.

3.3 8.9 21.3

100.0

% Swiss NI

NI : National income. GDP: Gross domestic product. PPPs: Purchasing power parities. a) Unweighted average.

175 880.8

Switzerland

USD

2002

National income

2001

In million USD

86 608 190 823 218 295

New Zealand Portugal Switzerland

Millions of USD

At current prices and current PPPs

GDP

A. Cross-country comparison

Main economic indicators, 2002, and selected annual growth rates

5.2

1.8 3.2 0.8

1997-2002

Consumer prices

General government receipts

Cantonal revenue

42.3

41.8 43.3 38.3

22.1 19.4 13.5

18.1

2000

23.5 18.8 15.0

18.9

Share of Swiss national income

Cantonal expenditure

44.5

39.2 46.1 38.5

2002

Percentage of GDP

General government outlays

Table 2.1. Cross-canton variation in levels of economic development is as large as cross-country variation


29


expenditure surpassed cantonal revenues in Vaud but not in the other two cantons (Table 2.1). By 2002, however, Ticino had also run into a small deficit. The economies in all three countries are characterised by a high prevalence of small and medium sized enterprises. With little cross-country variation, around 95% of all enterprises have less than 20 employees. Around 40% of all employees work in such enterprises (38% in Portugal, 41% in Switzerland, and 43% in New Zealand). Implementation of family-friendly policies is generally regarded to be more difficult in small firms than in larger ones (Chapter 6). Only between 21% (Portugal) and 33% (Switzerland) of all employees work in large companies with more than 250 employees. Portugal’s economic structure, however, is still quite different from that in most other OECD countries, including Switzerland and New Zealand.1 Only 54% of all employees in Portugal work in the service sector, compared to 69% in New Zealand and 72% in Switzerland (Chart 2.1). The agricultural and the industrial sectors are still large in Portugal, and are only slowly declining because employment in low-skill segments of the economy was still growing until 2002. Chart 2.1.

Much lower education levels and lower service sector employment in Portugal

Panel A. Much lower education levels in Portugal Distribution of population by level of educational attainment, 25 to 64 years old, 2001

Panel B. Lower service sector shares in Portugal Distribution of civilian employment by economic sector, 2002

Less than secondary

Agriculture

Upper secondary 24

Tertiary

47

29

80 13

62

34 0

20

25

43 40

New Zealand

11 9

23

60

80

100

Industry

Services 8

Portugal

23

12

69 34

Switzerland

4

OECD

7

26

0

20

54

24

72

68 40

60

80

100

Source: OECD (2003c), Education at a Glance; OECD (2003d), Labour Force Statistics.

The continued prevalence of low-skilled jobs in Portugal is closely related to the educational composition of the population. In this regard, Portugal is lagging far behind other OECD countries. In 2001, educational attainment levels did not include secondary education for 80% of the working-age population, compared to 24% and 13% in New Zealand and Switzerland,

30



respectively, and an OECD average of 34% (Chart 2.1). Recently, supply for high-skilled labour has grown faster than demand for such labour, indicating difficulties in matching qualification levels and labour market needs. In New Zealand, the buoyant economy of the early 21st century has contributed to a 25-year high in terms of skill shortages. Labour shortages are recently more pronounced for skilled and specialist positions than for unskilled and semi-skilled positions, but unskilled and semi-skilled positions have also become increasingly difficult to fill over the last year (DoL, 2003). Despite large streams of emigration and immigration, skill shortages in New Zealand do not seem to result from “brain drain”. The composition of migrants suggests a “brain exchange”, with immigrants on average being somewhat older and better skilled than emigrants (Glass and Choy, 2001). The Swiss labour market currently does not suffer from particular skill shortages, which is manifested in increasing unemployment rates at all skill levels recently. More than in many other OECD countries, the Swiss economy is also influenced by low-skilled foreign workers, and (certainly in Ticino) by flexible and adaptable cross-border workers (Chapter 3). The relatively low level of educational attainment of the Portuguese workforce and various other factors, such as the organisation of production, are reflected in low labour productivity. Despite a 2% annual average increase over the last twenty years, labour productivity is still only around two-thirds of the OECD average (Chart 2.2). In New Zealand and Switzerland, labour productivity is also now below OECD average when measured as GDP per employee. In both countries, and especially in Switzerland, this is to some extent explained by the large share of part-time employment (Chapter 3). A recent estimate of labour productivity measured as GDP per hour worked, however, still finds that Swiss labour productivity is below that of its trading partners, for instance 12% lower than that of the US (OECD, 2004a).2 This is related to low productivity in “sheltered” sectors such as construction, private non-financial services, and education.

2.1.2. Income inequality and poverty Wages in Portugal are the lowest in the existing 15 members of the European Union, with a mean wage adjusted for purchasing power parities almost 40% below OECD average. Comparable data for OECD countries (Table 2.2) also suggest that wages are much higher for some groups of the population, contributing to Portugal’s high level of income inequality (Rodrigues, 1999). Income inequality in New Zealand is also high in OECD comparison (O’Dea, 2000; Hyslop and Maré, 2001). Furthermore, inequalities seem to have increased in all three countries over the 1990s: from the early/mid-1990s to 2001, using a standardised methodology suitable for making cross-country comparisons, the Gini coefficient has increased from 0.32 to 0.35 in Portugal (with all of the increase occurring in the first half of the 1990s), from 0.31 to 0.33 in New Zealand, and from 0.27 to 0.29


31


Chart 2.2.

Labour productivity per employee is low in all three countries Trends in labour productivity over the last twenty years

50 000 45 000 OECD (+1.7%) 40 000 Switzerland (+0.3%)

35 000

New Zealand (+1.0%)

30 000

Portugal (+1.9%)

25 000 20 000 15 000 1980

1985

1990

1995

2000

Note: In brackets, annual average growth rate over 1981-2001. Source: OECD (2003l), Employment Outlook.

in Switzerland – very much in line with the increase from 0.28 to 0.30 identified for the OECD as a whole (Förster and Pearson, 2002; OECD, 2004b).3 Within the group of poor people, income inequality is much larger in Switzerland than in the other two countries, but the ratio of the equivalised income of the ninth to the first income decile is significantly lower (Table 2.2). In Portugal, 13.7% of the total population live with an income below 50% of the median (noting that in Portugal median income is only about 80% of average income). This is a higher poverty level than in New Zealand and Switzerland (Table 2.2). However, poverty is very sensitive to the definition used and the population considered. New Zealand turns out to be in a relatively worse position when only looking at working-age households, many of which are jobless. The low poverty level for the whole population essentially results from a pension system that ensures a minimum income for every person over age 65. If the poverty threshold were set at 60% of the median income, many pensioners in New Zealand would be defined as income poor, lifting the overall poverty rate from over 10% to over 20% – the same poverty level that is found for Portugal when using this higher poverty threshold and much above the level of almost 15% for Switzerland (Table 2.2).4 More detailed data by household type suggest that working poverty is high for certain families in all three countries (Förster and Mira d’Ercole, 2004). In New Zealand and Portugal, as many as one in five working sole parents (compared to one in eight in Switzerland) have incomes below the poverty threshold when measured at 50% of median equivalised household income (Table 2.3). Working poverty is also high among single-earner couple families with children, in particular in Portugal, where one-third of such couple families are poor.

32



Table 2.2. High wages and lowest level of inequality and poverty in Switzerland Selected indicators of disparity, latest available year Wages:

Average wage

USD PPPs

Income inequality

Gini coefficienta

90/10 income ratio

Poverty Share of the Share of the population working-age with less population with than 50% less than 50% of median of median income income

early 2000s

Share of the population with less than 60% of median income

%

2001

early 2000s

New Zealand

17 458

0.33

4.6

10.4

11.8

20.3

Portugal

13 930

0.35

4.8

13.7

10.9

20.6

Switzerland

27 751

0.29

3.4

8.6

8.2

14.7

OECDb

22 266

0.30

3.9

9.5

9.1

16.3

a) Gini coefficient is a statistical measure that has a value of “0” if every person in the economy has the same amount of income, and “1” if one person had all the income, and everybody else had no income at all. b) Average of the following 21 OECD countries: Australia, Austria, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, New Zealand, Norway, Poland, Portugal, Sweden, Switzerland, United Kingdom, United States. Source: Förster, M. and M. Mira d'Ercole (2004), "Income Distribution and Poverty in OECD Countries in the Second Half of the 1990s", OECD Social, Employment and Migration Working Paper, Paris, forthcoming.

Jobless families are at a much higher risk of relative income poverty in all OECD countries. Both in Portugal and in New Zealand 85% of all sole parents out of work are poor (compared to 44% in Switzerland), but this population group is much larger in New Zealand than in the other two countries (Table 2.3). 5 Jobless couple families with children, which are again more frequent in New Zealand than in Portugal and Switzerland, are found below the poverty threshold in around one in two cases (The impact of the tax/ benefit system on eventual poverty outcomes is discussed in Chapter 5). In New Zealand the discussion about working-age poverty is indeed dominated by concerns about joblessness, while there is also concern about the non-indexation of certain elements of family assistance (Chapter 5). In Portugal, on the contrary, working-age poverty is closely linked with the low level of wages. In 2000, 11% of all workers had earnings below two-thirds of the median – which is the definition of low-wage employees generally used by the Portuguese authorities.6 This proportion was highest among women (at 16%), young workers aged 15-24 (at 21.5%) and workers who have not completed primary education (15.6%).


33


Table 2.3. Poverty levels are high for some working families, and extremely high for jobless families Mean income and poverty levels by household type, latest available year Share of individuals in each household type

Mean equivalised household income

Poverty rate (below 50% of median income)

New Portugal Switzerland Zealand



Percentage

Index (all households = 100.0)

Percentage

Jobless households Single adult

1.4

0.7

1.7

46.7

58.5

64.8

52.8

47.7

30.2

Lone parent Childless couple

3.3 2.2

0.4 2.7

0.8 2.5

34.7 62.7

29.2 83.6

54.6 88.4

87.6 22.3

84.8 25.3

44.1 14.7

Couple with children

2.8

0.9

0.7

42.7

44.5

52.3

43.3

50.6

47.2

Single adult Lone parent

4.3 5.0

1.6 1.6

8.2 2.6

106.0 56.7

132.3 87.2

110.1 72.3

6.7 21.3

6.1 20.3

6.0 11.9

Childless singleearner couple

4.8

9.1

7.3

88.7

91.6

109.3

11.8

12.8

8.0

21.6

23.4

21.8

144.0

136.9

136.6

3.4

2.0

3.1

15.3

15.2

22.4

69.3

58.0

79.2

14.5

32.4

8.8

Dual-earner couple with children

39.4

44.1

32.1

107.3

99.2

91.9

4.1

4.8

8.2

All households with a working-age head

100.0

100.0

100.0

100.0

100.0

100.0

11.8

10.9

8.2

Working households

Childless dual-earner couple Single-earner couple with children

Source: Förster, M. and M. Mira d'Ercole (2004), “Income Distribution and Poverty in OECD Countries in the Second Half of the 1990s”, OECD Social, Employment and Migration Working Paper, Paris, forthcoming.

In Switzerland, most recent data for 2002 (using a very different absolute poverty concept, based on a relatively high income-threshold by international standards) showed that 6.5% of all employed people are poor, and that these working poor account for three-fifths of all those who are poor (Streuli and Bauer, 2002).7 Cantonal differences are large, with 5.4% of those in work in German-speaking cantons still being poor, 8.3% in French-speaking cantons and 13.5% in Ticino, thus being one of the poorest cantons in Switzerland. Overall, working poverty is particularly high among foreigners (11%), sole parent families (19%) and couple families with three or more children (16%). Large families are also at a high risk of poverty. Despite low fertility in many OECD countries, including Portugal and Switzerland (Section 2.2.2), many children still live in large families. In Portugal, for instance, only 7% of all families have three or more children – but these families account for 26% of all children. In Switzerland, families with three or more children account for

34



32% of all children, and this proportion is even higher in New Zealand where three- and four-child families are still more frequent. Job loss of the first earner is particularly critical for such families.

2.2. The demographic context 2.2.1. People, families and households This review covers small countries in terms of populations size: Portugal has a population of 10 million people, with the populations of Switzerland and New Zealand being roughly two-thirds and one-third of this number, respectively (Table 2.4). New Zealand is sparsely populated with most people living in urban agglomerations, and close to a third living in the largest city, Auckland. In Portugal and Switzerland, still around one-third of the population live in rural areas, which is of some relevance in the context of the provision of childcare services (Chapter 4). In the last decade, Portugal’s population size has remained largely stable, while New Zealand has on average grown by 1% per annum. Population growth in Switzerland is somewhere between these two. Growth in both New Zealand and Switzerland is largely explained by continued net migration. Both countries are among the top four OECD countries in terms of foreign(-born) populations, with one in five residents being foreigners or foreign-born.8 In New Zealand there is also a large population of indigenous peoples (Maori), comprising roughly one-seventh of the total population (Box 2.1). In terms of age structure, Portugal and Switzerland are very similar: twothirds of the population are of working-age, and there are nearly as many people over age 65 as there are children under age 15. In both countries the populations will age considerably in the coming decades. Because of its relatively high level of fertility (Section 2.2.2), New Zealand’s population is much younger: there are still twice as many children and youths up to age 15 (23% of the total population) than there are elderly persons aged 65 and over. Naturally, this difference explains some of the difference in the focus of public policy (Section 2.3.1). Together, Ticino, Vaud and Zürich host about 30% of the entire Swiss population. Zürich is the largest canton in Switzerland in terms of population size, and it is also one of the most densely populated. All three cantons have very high shares of foreigners, partly related to the nearness to the national border and partly to economic strength. In terms of family and household structures, various differences can be identified. Average household size is significantly lower in Switzerland than in the other two countries (Table 2.5). The larger household size in New Zealand is related to the higher level of fertility and the higher prevalence of extended households. The larger figure for Portugal is a consequence of the much lower share of households without children, which in turn is due to the higher


35

36

–

37 347

2001

32

195 711

111

176

109

14

Inhabitants per km2

Density

0.6

0.6 0.6

0.8

0.6

0.2

1

%

Net average annual increase 1991-2001

77

.. ..

..

68

64

86

1999

%

Degree of urbanisation

Source: OECD (2003d),Labour Force Statistics. OECD (2003e), Trends in International Migration. OECD (2003f), Main Economic Indicators. UN, World Urban Prospects www.un.org/esa/population/publications/wup1999/wup99.htm.

6.1

26.9 22.1

25.5

20.1

2.2

19.5

2001

%

Foreing(-born) populationa

a) Foreign-born population in New Zealand; foreign population in Portugal and Switzerland

. . Not available.

OECD

9 17

626 1 229

4

312

Vaud Zurich

100

–

–

Share of Swiss pop

Ticino

7 261.2

Switzerland

3 850

10 061

Portugal

New Zealand

Thousands

Total

Population

2.3

.. ..

..

3.1

0.9

2.9

1992-2002

‰

Net migration rate

Main demographic indicators, latest available year

19.2

18.0 15.7

14.8

16.7

16.7

23.0

Children 0-14

67.0

66.4 69.1

67.3

67.3

67.7

65.4

2001

Total population = 100 %

Working age 15-64

Share of the population

13.8

15.6 15.2

17.9

16.0

15.6

11.7

Elderly 65+

Table 2.4. New Zealand and Switzerland are among the few OECD countries with large shares of foreign(-born) populations




Box 2.1. Ethnic diversity in New Zealand New Zealand is a country whose population characteristics involve considerable ethnic diversity. In the 2001 Census that allowed for up to three responses per person, some 80% of the population reported to be of European ethnicity, 14.7% were Maori, 6.5% were Pacific peoples, 6.6% were Asian, and other ethnic groups made up 0.7% of the population (MSD, 2003). By 2051, Maori and Pacific people are projected to make up 30% of the working-age population. This is partly a consequence of their higher fertility rates (2.5 children per woman compared to around 1.8 among European New Zealanders) and the lower age at childbirth (age 26 on average compared to age 31). There are large disparities in social outcomes experienced by different ethnic groups. For example, Maori are more likely to have lower educational qualifications, to have lower paid jobs and to be unemployed. Teenage births are rather frequent and sole parenthood is widespread. One consequence of this is that Maori constitute 40% of the recipients of Domestic Purposes Benefit (DPB), New Zealand’s benefit for sole parents, and one-third of all Unemployment Benefit recipients. This in turn implies that reforms of the benefit system, and of DPB especially, affect Maori people more than the rest of the population. “Population targeted funding” has increased the resources devoted by mainstream public service delivery departments to services targeting Maori and other ethnic groups, particularly Pacific peoples. Examples include iwi (tribal family) and whanau (extended family) development projects. These are based on the idea that addressing the extended family and the head of the family in particular can help raising the likelihood of achieving stable employment for one or several family members, thereby breaking intergenerational poverty and benefit dependency. However, funding based on ethnic origin has been criticised for not always reaching the families most in need, and a review of target policy and programmes has been started to clarify the issue (New Zealand Government, 2004).

fertility level in the past and the later average age at which young adults leave the parental home. Extended family living is no longer frequent in Portugal, although it was until the mid-1990s. New Zealand is unique in this sample of countries but also throughout the OECD with its very high proportion of children, 23.7% in 2001, living in a one-parent household. This compares to about 8% in Portugal and 10% in Switzerland (Table 2.5). Sole parenthood in New Zealand has always been


37


Table 2.5. How children grow up in the three countries Trends in household composition, 1980-2000 1980-85a

1990

1995

2000

2001

2002

New Zealandb 3.0

2.9

2.9

..

2.8

..

Without children in all households

49.2

51.5

54.4

..

57.1

..

With youngest child aged 17 and over in all households

10.2

10.8

9.9

..

8.5

..

With youngest child aged under 17 in all households

40.6

37.7

35.7

..

34.4

..

887 742

868 791

903 882

..

908 889

..

13.8

19.1

20.1

..

23.7

..

73.3

..

70.4

..

6.6

..

5.9

..

Average household size Share of households in all households (percentages adding to 100%):

Number of children (aged under 17) Share of children living in (percentages adding to 100%): One-parent households Two-parent households

82.1

Extended families

4.2

76.8 4.1

Share of children in household (percentages adding to 100%) with: No parent in work

13.3

24.4

22.8

..

20.7

..

One parent in work

40.8

34.9

32.3

..

35.1

..

Both parents in work

45.9

40.8

44.9

..

44.2

..

3.3

3.0

3.0

2.8

2.9

2.9


37.1

39.1

39.0

39.9

39.6

39.5


21.3

22.7

27.3

28.5

28.8

29.4


41.7

38.2

33.8

31.5

31.6

31.1

Portugal Average household size Share of households in all households (percentages adding to 100%):

Number of children (aged under 17)

2 360 292 2 110 572 1 702 556 1 651 995 1 661 543 1 663 749

Share of children living in (percentages adding to 100%): One-parent households

7.1

7.9

8.4

7.2

7.7

8.4

Two-parent households

79.2

82.0

82.5

89.8

89.3

88.3

Extended families

13.4

9.9

9.2

3.0

3.1

3.2

Share of children in household (percentages adding to 100%) with:

38

No parent in work

8.6

6.4

6.4

4.6

4.7

5.1

One parent in work

46.7

40.7

37.7

32.0

32.4

32.9


44.7

52.9

55.9

63.4

62.9

62.1



Table 2.5. How children grow up in the three countries (cont.) Trends in household composition, 1980-2000 1980-85a

1990

1995

2000

2001

2002

2.6

2.4

..

2.3

..

..


50.8

62.8

..

66.2

..

..


10.5

11.6

..

9.4

..

..


31.5

25.6

..

24.5

..

..

1 374 472 1 275 748

..

1 366 886

..

..

..

Switzerland Average household size Share of households in all households (percentages adding to 100%):

Number of children (aged under 17) Share of children living in (percentages adding to 100%): One-parent households

6.1

6.9

..

10.4

..


91.1

91.5

..

87.3

..

..

1.6

..

2.3

..

..

..

Extended families

2.8

Share of children in household (percentages adding to 100%) with: No parent in work

2.4

2.3

..

4.2

..

One parent in work

68.6

58.5

..

43.9

..

..


29.0

39.2

..

51.5

..

..

2.6

2.4

..

2.3

..

..


53.7

59.4

..

63.5

..

..


12.8

15.7

..

13.3

..

..


33.5

24.9

..

23.1

..

..

57 530

46 351

..

50 681

..

..

Ticino Average household size Share of households in all households (percentages adding to 100%):

Number of children (aged under 17) Share of children living in (percentages adding to 100%): One-parent households

7.1

8.7

..

11.3

..

..


90.8

89.5

..

86.3

..

..

2.0

1.8

..

2.4

..

..

5.3

4.6

..

7.2

..

..

54.1

..

..

38.4

..

..

Extended families Share of children in household (percentages adding to 100%) with: No parent in work One parent in work

76.0

66.1

..


18.7

29.3

..


39


Table 2.5. How children grow up in the three countries (cont.) Trends in household composition, 1980-2000 1980-85a

1990

1995

2000

2001

2002

2.4

2.2

..

2.2

..

..

62.9

65.6

..

66.4

..

..

9.0

9.4

..

8.6

..

..

28.2

25.0

..

25.1

..

..

107 713

..

122 265

..

..

..

Vaud Average household size Share of households in all households (percentages adding to 100%): Without children in all households With youngest child aged under 17 and over in all households With youngest child aged under 17 in all households Number of children (aged under 17)

103 540

Share of children living in (percentages adding to 100%): One-parent households

7.4

7.9

..

12.2

..


90.9

90.9

..

86.1

..

..

1.6

1.2

..

1.7

..

..

2.2

2.3

..

5.3

..

.. ..


66.3

53.0

..

44.3

..


31.5

44.6

..

50.4

..

..

2.4

2.2

..

2.1

..

..

62.9

67.9

..

70.8

..

..

9.7

10.5

..

7.8

..

..

27.4

21.6

..

21.4

..

..

215 275

194 336

..

211 302

..

..

Zürich Average household size Share of households in all households (percentages adding to 100%): Without children in all households With youngest child aged 17 and over in all households With youngest child aged under 17 in all households Number of children (aged under 17) Share of children living in (percentages adding to 100%): One-parent households

7.2

8.1

..

11.6

..

..


91.1

90.8

..

86.0

..

..

1.7

1.2

..

2.5

..

..

2.2

2.4

..

4.4

..

..

43.1

..

..

52.5

..

..


68.7

58.9

..


29.1

38.7

..

. . Not available. a) 1980 for Switzerland ; 1985 for Portugal ; 1986 for New Zealand. b) 1986, 1991 and 1996 in New Zealand. Source: Information supplied by national authorities.

40



high, but it also increased substantially since the mid-1970s (especially until the early 1990s). This change is reflected in the rapid decline in marriage rates and the equally rapid increase in the incidence of divorce in the last two decades (Chart 2.3). Today, about 50% of all children in New Zealand are born outside marriage, some 30% live within a consensual union, and 80% of all couples cohabit before marriage. In Switzerland, on the contrary, cohabiting couples still tend to get married when having children. Despite large proportions of unmarried childless couples in this country (three in four couples move in together before marrying), only about one in ten children are born outside marriage – one of the lowest figures in Europe.

Chart 2.3.

Fewer marriages that are more likely to end up in divorce

Total female first marriage ratea

Divorces per 100 marriages 1980

2001

27

0.76 New Zealand

0.34

0.86

48

8

Portugal

32

0.67

0.66

31

Switzerland

44

0.58 0.8

0.6

0.4

0.2

0

0

10

20

30

40

50

a) Total first marriage rate is the sum of age-specific first mariage rates, which is an estimate of the likelihood of getting married. Source: Eurostat (2002a), Demographic Data, NewCronos Database; Statistics New Zealand, Demographic trends 2002.

Related to the frequency of sole parenthood is the proportion of children growing up in a jobless household. In the early 2000s, this concerned no less than one in five children in New Zealand but only one in twenty in the other two countries. From 1985 to 1990, the share of children in New Zealand who live in a jobless household increased rapidly, with half of this increase being explained by the increase in the number of children living with a sole parent. With the improving economic climate of the 1990s the jobless rate in New Zealand gradually declined despite a continued increase in the share of sole parent households in this country.


41


Children growing up in sole parent families are a particular policy concern in New Zealand, as these children have been shown to be disadvantaged in terms of social and economic participation throughout the OECD. Furthermore, differences in education performance between children growing up in sole parent families and those in couple families are larger in New Zealand than in other countries. Among other things, this has been found to be related to unequal access to good-quality schools and health care (Pong et al., 2003).9 Compared to the other two countries, growing up in a single-earner family is most common for children in Switzerland, while Portuguese children most frequently live in dual-earner couple families. In both countries, the share of dual-earner families has increased by some twenty percentage points over the last 20 years. Such an increase is not found in New Zealand, where female employment rates have changed much less during this same period (Chapter 3).

2.2.2. Fertility behaviour Low fertility is increasingly becoming a policy concern in many OECD countries because of its negative consequences for future labour supply and the financial sustainability of mature social protection systems. Since the late 1980s, fertility rates have been similar in Portugal and Switzerland, with the Total Fertility Rate fluctuating around 1.4-1.5 children per woman, which is significantly below OECD average (Chart 2.4). The completed fertility rate measured in a cohort perspective is still higher in Portugal (1.8 children) than in Switzerland (1.6), because the steep decline in fertility to sub-replacement level occurred some ten years later. With 1.96 children per woman, the Total Fertility Rate in New Zealand is currently among the highest in the OECD. From 1970 to 1985, fertility declined very rapidly but it has remained around replacement level since then. The 1965 birth cohort is likely to complete its childbearing phase at a level of 2.3 children per woman. The postponement of marriage and childbearing is one of the reasons for the decline in fertility in OECD countries. From 1980 to 2000 the mean age at childbirth has increased by 2.5 years both in Portugal and in Switzerland (largely in parallel to the increase in age at marriage) and by 3.5 years in New Zealand (which is less than the five year increase in the mean age at marriage in this country) (Chart 2.5). Throughout the OECD, this deferment of family formation is related to prolonged education and later entry into the labour market, i.e. a postponement in the age at which young adults get established in their careers. Cross-country differences in housing market behaviour also play a role. In countries where home ownership rates are high (around 75% in New Zealand and Portugal, compared with less than 50% in Switzerland) and buying accommodation is common for young adults in their late 20s, increases in housing prices contribute to postponed family formation.10

42



Chart 2.4.

Completed fertility rates continue to decline and will stabilise at a higher level in New Zealand

A. Completed fertility rate By year of birth of mother, 1930-1965 New Zealand

B. Total fertility rate 1970-2002 Portugal

Switzerland

Rate 4.0

Rate 4.0

3.5

3.5

3.0

3.0

2.5

2.5

2.0

2.0

1.5

1.5

OECD

1.0

1.0 1930 35

40

45

50

55

60

65

The completed fertility rate (CFR) measures the number of children that a cohort of women who have reached the end of their childbearing years had in the course of their reproductive life. The CFR is measured by cumulating age-specific fertility rates in a given cohort as they aged from 15 to 49 years.

1970

75

80

85

90

95

2000

The total fertility rate (TFR) in a specific year is the average number of children who would be born to a synthetic cohort of women whose age-specific birth rates were the same as those actually observed in the year in question.

Source: Eurostat, New Cronos database, Theme 3; Statistics New Zealand, Demographic trends 2002.

Today, Portuguese women are on average one year younger when having a baby than women in the other two countries. This is reflected in the age-specific fertility rates that – despite the same overall fertility level in the two European countries – are higher in Portugal up to age 30, but higher in Switzerland above age 30 (Chart 2.6). Women in New Zealand have higher birth rates at all ages. One consequence of these cross-country differences is that teenage motherhood is among the lowest in the OECD in Switzerland, but still very frequent in Portugal and especially in New Zealand. The overall fertili ty pattern for N ew Zealand is par tly a consequence of the very distinct childbearing behaviour of the indigenous population. Maori women tend to have their children in their early twenties, and teenage fertility is close to 70 per 1 000 women every year, which is not much below the peak level of fertility around age 30 in Portugal and Switzerland (Chart 2.6).


43


Chart 2.5.

Marriage and childbearing is increasingly deferred

A. Mean age of women at marriage New Zealand

B. Mean age of women at birth Portugal

Mean age 30

Mean age 30

28

28

26

26

24

24

22

22

20

Switzerland

20 1970

1980

1990

2000

1970

1980

1990

2000

Source: Eurostat, New Cronos database, Theme 3; Statistics New Zealand, Demographic trends 2002.

Postponement of marriage and childbearing, however, explains only some of the decline in birth rates. Other important factors are the increase in the proportion not marrying (as those people have fewer children than those who marry) and, most importantly, the decline in marital fertility itself. An increasing number of (married) women is found to have no or at most one child. This is especially the case in Switzerland, where 21% of all women at age 40 are childless and another 15% have only one child.11 Highly-skilled women in Switzeland in particular choose to have no child, with four in ten women with tertiary education remaining childless, presumably to avoid spoiling their career opportunities. While having fewer children is generally a conscious choice, in all OECD countries population surveys find that at least some women have fewer children than they would want to have. Data from the mid-1990s suggest that in all three countries desired family size is about half a child higher than the actual Total Fertility Rate at that time, but very close to completed fertility of the 1955 birth cohort (the cohort of women aged 40 years at the time of the survey).12 Reflecting new labour market aspirations, some women feel they have to choose between having a career and having a family. Labour markets have not sufficiently responded to help parents (and mothers in particular) realise their dual aspirations.

44



Chart 2.6.

Large differences in teenage birth rates, which are highest for Maori women Age-specific fertility rates per 1 000 women in 2001 New Zealand

Maori (NZL)

Portugal

Switzerland

160 140 120 100 80 60 40 20 0 15-19

20-24

25-29

30-34

35-39

40-44

45-49

Source: Statistics New Zealand (2002), New Zealand Official Yearbook 2002; INE (2002), Statistical Yearbook 2001; Swiss Statistics (2003), Statistical Yearbook 2003.

To what extent increased female employment has contributed to the decline in fertility is a matter of debate. In the 1970s, countries with high levels of fertility had very low female employment. This relationship changed during the 1980s so that in a cross-country perspective the opposite conclusion seems to hold today (Chart 2.7, panel A). For individual countries, however, a negative relationship between fertility and employment seems to exist in almost all cases, with women out of work having more children than those working (e.g. Engelhardt et al., 2001). This is partly confirmed by the fertility and employment trends in the three countries under study (Chart 2.7, panel B).13 In Portugal the increase in female participation in the last two decades went hand in hand with a decline in birth rates. The changing crosscountry correlation, however, suggests that in a number of countries (and in Scandinavian countries in particular) childrearing and employment have become less incompatible than in the past. This is an indication that policy matters. Generally, policies that focus on reducing the indirect costs for mothers to work by offereing affordable quality childcare and careerembedded part-time employment opportunities seem to be the most promising avenue towards improving birth rates (OECD, 2003g; Sleebos, 2003).


45


Chart 2.7.

Is work less incompatible with having a child than it used to be? Panel A. Female employment rate (age 15-64) and total fertility rate, 1985 and 2000 1985a, b

TFR 2.5

2000b

TFR 2.5

2.0

NZL

2.0

NZL PRT OECD 22

OECD 22

SWI

1.5

1.5

SWI

PRT

1.0

1.0 20

30

40

50 60 70 80 Female employment rate (%)

20

30

40

50 60 70 80 Female employment rate (%)

Panel B. Trends in total fertility rate and female employment rate (age 15-64) Total fertility rate (left axis) 2.4

80

Employment rate (15-64 ans) (right axis)

2.4

80

New Zealand

2.4

Portugal

80 Switzerland

2.1

70

2.1

70

2.1

70

1.8

60

1.8

60

1.8

60

1.5

50

1.5

50

1.5

50

1.2 1980

85

90

95

40 2000

1.2 1980

85

90

95

40 2000

1.2 1980

85

90

95

40 2000

a) 1986 in New Zealand. b) As data is not available for the complete 1985-2000 period, OECD(22) does not include the Czech Republic, Hungary, Iceland, Luxembourg, Mexico, Poland, Slovak Republic and Turkey. Source: OECD (2003l), Employment Outlook; OECD (2003d), Labour Force Statistics; OECD (2003h), Society at a Glance – Social Indicators.

46



2.3. The policy context 2.3.1. Social policy intervention At 26.4% of GDP in 2001, publicly mandated social spending in Switzerland is significantly higher than in Portugal (20.3%) and New Zealand (18.5%). From 1980 to 2001, in Portugal and in Switzerland social spending as a percentage of GDP has doubled, and in both countries 50% of social spending is now financial support for those in retirement (Chart 2.8). Trends and composition of social spending are totally different in New Zealand.14 A large drop in spending over the 1990s, affecting all spending categories, meant that in 2001 public social spending as a percentage of GDP is virtually back to its 1980 level (which was much higher than in the other two countries at that time). Spending on retirement benefits has declined substantially (in response to a gradual increase in the age of eligibility for superannuation payments over the period 1992-2001). In 2001, only one-fourth of public social spending in New Zealand was support for those in retirement, with a similar amount spent for the working-age population and roughly half of this on family benefits.15 The limited (public) family spending in Switzerland is a result of a noninterventionist approach to family policy in this country. A majority among Chart 2.8.

Portuguese and Swiss pensioner welfare states

Public and mandatory private social spending in % of GDP by broad spending categories, 1980, 1990 and 2001 Family

Health

Support for those on retirementa

Support for the working age pop.b

30 25 20 15 10 5 0 1980

1990 2001 New Zealand

1980

1990 Portugal

2001

1980

1990 2001 Switzerlandc

a) Old age and survivors benefits. b) Incapacity, unemployment, labour market programmes, housing and other. c) Figures on social spending include public as well as mandatory private spending (such as for instance the cantonal Swiss family benefits that are paid directly by the employer). In the case of Switzerland the latter category also includes some voluntary private social spending which cannot statistically be separated from mandatory private social spending. Source: OECD (2004c), Social Expenditure Database, Paris.


47


the Swiss electorate (and policy makers) believes that family matters are predominantly the responsibility of the parents involved. This helps to explain why national family policy proposals tend to fail in referendums (Chapters 5 and 6). Switzerland does not have a federal or comprehensive cantonal family policy, as municipalities play an independent role in important policy areas such as, for example, childcare (see Section 2.3.2 below).16 There are, however, important regional institutions such as the youth secretariats of the districts in Zürich that aim to promote child welfare (e.g. take care of children without parents, provide counselling and support, supervise childcare centres). There also is a well-developed network of civil society organisations. Associations such as Pro Familia Suisse, Pro Juventute Suisse or Fachstelle UND offer various family services, partly with a focus on the reconciliation of work and family life, while they also have become important advocacy groups with a certain influence on politics. An important shift in the Swiss policy debate during the last few years is that family policy is increasingly regarded as one of the most pressing social policy issues.17 This increase in awareness has led to several relevant initiatives and projects (Chapters 4 and 6), but has yet to lead to broad-based policy change. Portugal’s relatively low public spending on family matters is reminiscent of the late implementation of its unified social security system (which only occurred after the revolution in the mid-1970s), and more recently (especially after 2000) also of its budget pressures. In the process of building a democratic state after 1975/76, the country heavily relied on the “third sector”. Support to families continues to be predominantly offered through such NonGovernmental Organisations (the “social network”) which receive funding from the government that is negotiated on an annual basis. No marital or parental counselling and guidance services receive any state funding.18 Despite much higher public spending on family policies, New Zealand policy can also be characterised as non-interventionist, with family matters and costs for children predominantly being the responsibility of the parents.19 However, there is a strong consensus that the most disadvantaged groups of the society need public (financial) support, and sole parent families in particular have long been identified as a specific target group of such support (Chapter 5).

2.3.2. Policy coherence Policy coherence is a recurrent issue everywhere, but it is particularly relevant to Switzerland due to its federal structure (Box 2.2). In the area of family policy, federal responsibilities are primarily laid down in Article 116 of the Swiss federal constitution, which obliges the confederation to take the needs of the family into account in fulfilling its tasks. Further the constitution stipulates that the confederation may legislate on family

48



Box 2.2. Policy responsibility in Switzerland Switzerland is not a centralised nation but a confederation of 26 relatively independent cantons. The Swiss political system is characterized by two important related principles: federalism and subsidiarity. The federal structure means that the confederation has competence only where it is empowered under the federal constitution. In all other cases and also when the confederation does not make use of its competencies, the cantons are responsible. The principle of subsidiarity states that a higher political level should take on a responsibility only if the lower one is unable to do so. The federal responsibility structure raises issues of policy coherence (especially if different levels of governments follow different policy objectives on the same issue) but also of efficient use of resources and of equal treatment. In line with the principle of federalism, taxes are collected at all three levels of government. Part of the revenues are then distributed across cantons and municipalities according to a complex fiscal equalisation scheme. Ongoing reform of the federal system of public finances and its financial equalisation regime aims at improved policy coherence and a more effective use of public sector funds. The reform, launched in the early 1990s, recently approved by parliament and to be submitted to referendum in autumn 2004, has several objectives (OECD, 2002a and 2004a): ● to disentangle cantonal and federal spending responsibilities. Responsibility

for over 40 per cent of the spending programmes which are currently cofinanced by the cantons and the confederation will be transferred to only one administrative level; ● to improve the co-ordination of spending programmes whose responsibility

would still be shared by the cantons and the confederation. This will be done, for instance, by clearly separating the role of the two actors, with the confederation setting strategic objectives and the cantons being fully responsible on how to reach them; ● to reinforce co-operation across cantons. In order to avoid spillovers giving

rise to a sub-optimal provision of public or publicly-funded services, cantons will be entitled to claim a financial compensation from the other cantons whose residents are using its service; and ● to reduce financial disparities across cantons resulting from geographic

and topographic as well as socio-demographic factors. Reform is expected to be implemented by 2007.


49


allowances and operate a federal family compensation fund (but in fact it does not do so), and that it shall institute a maternity insurance (but it has not done so yet). The new 1999 Swiss constitution also allows the federal government to develop policy initiatives in the area of family policy, an area that is not its immediate concern. A recent time-limited federal initiative makes funds available towards new or expanding childcare facilities although this is principally a cantonal and municipal responsibility (Chapter 4). But while many actors agree that federal solutions that are equitable for all residents in Switzerland are needed, there is also consensus that federal structures should remain untouched. Several initiatives try to improve the funding structure in federal Switzerland. Most importantly, this is one of the main objectives of the new fiscal equalisation project (Box 2.2). The effect of this reform that aims to reorganise responsibilities between the cantons and the federation will be limited in those areas where responsibility lies with the municipalities. Hence, for instance, the reform is unlikely to improve the provision of childcare services unless a similar reform is implemented at cantonal level to reinforce co-operation between municipalities, and to improve co-ordination between the canton and its municipalities.20 New Zealand is a centralised country, although central institutions such as Work and Income New Zealand (the section of the Ministry of Social Development that administers income support and employment assistance) often have a regional structure. Issues of policy coherence mainly refer to consistency of different national government policies, such as the co-ordination of different types of benefits (Chapter 5). In Portugal effective implementation of social policies, as for example the provision of service delivery at a local level, crucially depends on the cooperation be tween a larg e number of actors, nam ely third sector organisations, local governments, decentralised bodies and others. Furthermore, rules – such as parental leave regulations – are sometimes complicated, as many different contingencies are explicitly and separately covered. Recent initiatives like the New Labour Code and the Framework Law of Social Security, aimed at collecting, harmonising and simplifying existing regulations, have been made in response (Box 2.3). All three governments have recently set up “family commissions” – proof of the need to be seen to take family policy seriously, but also an important attempt to improve policy co-ordination. In Switzerland, the “Federal Coordination Commission for the Family” set up in 1995 is an expert body advising the Federal Department for Interior Affairs; it also organises conferences with cantonal, federal and expert involvement. In Portugal, the

50



Box 2.3. Recent policy initiatives in Portugal In early 2004, several new regulations were introduced that directly or indirectly aimed at improving the work and family life reconciliation of families with children: ● With the Framework Law of Social Security, for example, a 13th month

payment of Child Allowance (Chapter 5) was introduced for low-income families, which is paid in September in order to compensate for the expenses borne by the family in the beginning of the school year. Pension entitlements of parents providing care to minor children were also considerably improved. ● The New Labour Code, which collects all measures hitherto found in

different pieces of labour legislation, also introduced several new regulations, as for example, introducing the possibility to extend maternity leave over a longer period while receiving a reduced benefit payment, and a greater focus on tailored professional training for labour market reintegration after longer periods of maternity leave or special leave to look after children or to assist seriously disabled or chronically ill family members (Chapter 6). ● The “100 measures to improve family life”, to quote a third important new

government initiative, cover a wide range of family-related measures, such as promotion of certified training of childminders and support to local initiatives that develop childcare (Chapter 4) as well as creation of a “Family-friendly Company” certificate to enhance good practice at company level (Chapter 6).

“Family Commission Co-ordinator” recently appointed by the new government is directly involved in co-ordinating reconciliation policy initiatives. In New Zealand, the “Families Commission” established in July 2004 is an independent body with an important role in terms of advocacy and public dialogue.

2.4. Summary Family friendly policy development across the three countries under review has to account for main features within the socio-economic, demographic and political environment: ●

New Zealand faces skill shortages and continued low labour productivity despite rapid economic growth. High working-age poverty caused by frequent joblessness and large disparities in social outcomes across ethnic


51


groups is the major social concern. Related to several of these challenges is the large proportion of sole parent families. ●

While the budget deficit is considerable, Portugal faces even greater challenges than New Zealand in terms of raising low levels of labour productivity that are associated with low levels of educational attainment amongst the population. Low wages which lead to a large group of working poor adults and children are another major concern. Population ageing as a consequence of low fertility is an important challenge for the future.

●

In economic terms, one of Switzerland’s major problems is sluggish economic growth, because low labour productivity growth undermines its competitive edge. Poverty among families of working age is a major concern in Switzerland. Population ageing as a consequence of low fertility is also a serious concern, and includes the particular problem of very high childlessness, especially among the highly qualified To secure (familyfriendly) policy coherence across different layers of government and to assure equity between families across the many cantons and municipalities is another major challenge.

Notes 1. Another characteristic of the Portuguese economy is the importance of the informal market. The size of the shadow economy is estimated at 22-23% of GDP, compared to 9-10% in Switzerland, 12-13% in New Zealand and an unweighted average over 21 OECD countries of 16-17% (Schneider and Klinglmair, 2004). 2. This estimate on labour productivity per hour worked is in line with the figure given in the KILM database of the ILO, according to which hourly labour productivity in Switzerland is 85% of that of the United States, 65% in New Zealand and 55% in Portugal. Measured per employee, labour productivity in relation to that of the US is 70% in Switzerland, 60% in New Zealand and 50% in Portugal. 3. This is an average over 20 OECD countries, not including Mexico and Turkey that both have Gini coefficients around 0.50. Cross-country comparisons of Gini coefficients have to be seen in light of the fact that this summary measure of inequality is quite sensitive to the middle of the income distribution, telling nothing about inequality at the bottom and/or the top of the distribution. Moreover, cross-country differences may be influenced by differences in the classification of income components, and by differences in the extent to which extreme incomes are covered in the survey. It is therefore common to consider differences in Gini levels of less than two percentage points as not significant 4. This latter threshold of 60% of median income is also the poverty line officially used in Portugal (namely in official documents like the National Action Plan for Inclusion). 5. Due to the low number of cases in the survey, results for non-working sole parents are not available for Switzerland. 6. MSST/DEEP calculations based on Quadros de Pessoal 2000 micro data.

52



7. In the Swiss statistics working poverty refers to households with an income below the “official” poverty line determined by the Swiss Conference of Social Assistance (SKOS). SKOS guidelines determine the poverty line in relation to subsistence income plus rental costs and health care premiums. For 2002, the respective threshold was 40% of APW earnings for a single person and 79% of APW earnings for a two parent family with two children. 8. Migration statistics in New Zealand are based on the residence-concept and thus refer to the foreign-born population, while those in Portugal and Switzerland are based on nationality and so refer to the population of foreigners (OECD, 2004b). 9. There are large differences across New Zealand in the quality of education, related to socio-economic inequalities across the country. Targeted Funding for Educational Achievement (so-called equity funds) are used to offset some of the regional income differentials and to promote schooling in deprived areas, but the quality of schools remains very different across the country also because these funds are too low compared with the generous donations parents make in wealthy areas (often some NZD 500 per student, a quasi-fee). 10. In New Zealand in 2002, for instance, housing prices increased by 16-20% (though the increase was much lower than this in the years before). In Portugal, the current situation mirrors the housing policy after 1975/76. A generous credit system for the purchase of a house together with a long-term rent freeze has ruined the rental market. The situation is being repaired now, and renting is becoming more attractive vis-à-vis purchasing, but trust in the rent market has to be built up slowly. 11. Childlessness in Switzerland is around twice as high as in Portugal and New Zealand (Rowland, 1998). 12. Data from the Fertility and Family Surveys for Switzerland (from 1995) and Portugal (from 1997) and the International Social Survey Programme for New Zealand (from 1994) show the following picture: in New Zealand, desired family size was around 2.5 children (compared to a TFR of 2.0 and completed fertility of 2.4 for the 1955 birth cohort); in Portugal desired family size was 2.1 children (compared to a TFR of 1.5 and completed fertility of 2.0 for the 1955 birth cohort); and in Switzerland desired family size was 2.0 children (compared to a TFR of 1.5 and completed fertility of 1.8 for the 1955 birth cohort). 13. Due to the large share of part-time work of women in Switzerland and New Zealand, female employment in Portugal is higher than in the other two countries when measured in full-time equivalents (Chapter 3). 14. Trends in social spending as a proportion of GDP are also influenced by GDP growth over that period, which was larger in New Zealand than in the other two countries. 15. Public spending trends in New Zealand also reflect the historical/political context. During the 1970s and through to the mid-1980s, policy was pursued through excessive regulation and public intervention. This was followed, from the mid1980s onwards, by a period of deregulation and the retreat of policy intervention with significant cuts to welfare budgets. The current government wishes to find a balance between the two approaches. 16. Ticino is in the process of developing a more comprehensive family policy, comprising various cash benefit payments (Chapter 5) as well as early childhood education and care (Chapter 4).


53


17. The view that family policy is one of the most pressing social policy issues today is also expressed by SODK and by TAK, two of the public social welfare players. SODK is the influential political conference of cantonal social directors; it mainly works through recommendations to cantons. TAK is the tripartite agglomeration conference (tripartite means federal, cantonal and municipal), founded in 2001, which aims to prepare coherent social policy recommendations at all government levels. 18. In Portugal, family therapy and counselling is primarily a private service, although some family help centres connected to universities, university hospitals, health centres, drug rehabilitation centres and family associations are publicly accessible. In addition, since 1997 the Office of Family Mediation (though only operating in Lisbon and its neighbouring boroughs) offers support in the creation of an agreement regulating parental responsibility after separation. 19. New Zealand has a dedicated Family Court that deals with issues around partnership dissolution and family violence (with no difference being made between marriage and other forms of families). In case of a divorce or any other form of family break-up, 12 free sessions of counselling are offered (in total, some 20% of all divorces in New Zealand go through the court). 20. Like most of the German-speaking cantons of Switzerland, Zürich also has a fourth administrative level between the canton and the municipality: the district. While this is a purely administrative layer, activities undertaken at district level are always funded jointly by the canton and the municipality (demonstrating the joint interest in an issue).

54



Chapter 3

Parental Labour Market Outcomes: A Gender Issue

This chapter discusses parental employment patterns in New Zealand, Portugal and Switzerland in a gender context. The presence of children in household hardly affects labour market behaviour of fathers but has a significant but different impact on maternal employment patterns: in Portugal, working mothers often engage in full-time employment, in New Zealand mothers often reduce hours when children are very young, but often work fulltime when kids are older, while Swiss mothers predominantly work on a part-time basis. Apart from the comprehensive discussion of employment trends and how employment outcomes vary with the age and number of children, the chapter also considers gender wage gaps and gender differences in the distribution of unpaid work.


55

3. PARENTAL LABOUR MARKET OUTCOMES: A GENDER ISSUE

F

acilitated by increasing service sector employment in all three countries

under review, growth in female employment over the last few decades reflects some progress towards a more equal division of paid work between men and women. Nevertheless, female employment remains concentrated in certain occupations and sectors, and in terms of hours in work, employment contracts of fixed duration, earnings and hours in unpaid work, gender differences remain substantial. To a considerable extent these gender differences are related to the presence of children in families: while children noticeably affect female employment patterns, they seem to have little impact on male labour force behaviour. This chapter illustrates the different labour market outcomes for men and women, and how parental work and family reconciliation solutions differ among fathers and mothers. It first discusses some key labour market indicators and differences between men and women in terms of the economic sectors in which they work, the jobs they occupy, the number of hours they work, and the employment status they have (for example whether or not they engage in temporary work). It then goes on to show how children affect parental employment outcomes, and the allocation of work and care responsibilities in such households. Before summarising, the chapter discusses gender wage gaps, and differences in the contributions fathers and mothers make to family income in couple households.

3.1. Gender differences in employment outcomes Despite the differences in past economic trends, female labour force participation has grown during the 1990s in all three countries under review, as in most OECD countries. By contrast, male labour force participation either stabilised (New Zealand) or declined slightly, as in Portugal and Switzerland (Table 3.1). While narrowing over the 1990s, gender gaps in labour force participation and employment rates remain nevertheless considerable at about 14 to 15% in all three countries – although they vary with levels of educational attainment (Box 3.1). Considering cross-country differences in labour market engagement, labour force participation rates for both men and women are highest in Switzerland at over 80%, about 5 and 9 percentage points above levels in New Zealand and Portugal, respectively (Table 3.1). Cross country-differences in female employment rates show the same pattern, and while lowest in

56



Table 3.1. Gender differences in employment rates are declining Key labour market indicators New Zealand

Portugal

Switzerland

1990 1995 2002 1990 1995 2002 1990a 1995 2002

OECD 2002

1990 2002

Ticino Vaud Zürich Labour force participation (percentage of working age population 15-64) Men and women

73.0 74.7 76.4 70.9 68.4 72.0 79.7

79.4

81.3

73.5 79.7

83.4 69.4 69.9

Men

83.0 83.8 83.9 82.8 77.3 79.3 91.1

90.1

88.7 85.6 88.6

88.9 82.7 80.4

Women

63.2 65.8 69.1 59.6 59.9 65.0 68.2

68.7

73.9 (61.6) 71.2

77.8 56.4 59.6

Employment rate (percentage of working age population 15-64) Men and women

67.3 70.0 72.4 67.4 63.2 68.1 78.2

76.7

78.9

70.9 76.5

79.9 65.1 65.1

Men

76.1 78.5 79.6 80.1 72.1 75.7 90.0

87.4

86.2 82.1 85.4

85.6 78.0 75.0

Women

58.5 61.7 65.4 55.4 54.8 60.8 66.4

66.0

71.6

60.0 68.0

74.3 52.4 55.4

Women, aged 25-54 65.6 68.1 71.8 65.4 69.6 74.0 71.8

72.0

78.1 70.1 76.4

78.9 59.6 64.1

69.3

75.6

77.4 60.6 61.9

Women, aged 30-34 57.1 60.2 63.0 72.7 73.5 79.3

..

71.3 74.0

Share of part-time (under 30 hours)b employment in percentage of total employment, aged 15 and over Men and women Men Women

19.6 21.0 22.6

22.9

24.7

6.8

6.5

7.7

34.6 35.4 36.1 12.8 14.5 14.4 42.6

44.9

45.3

7.9

9.5 11.4

7.6

8.6

9.6 22.1

3.9

3.8

5.7

20.6 24.9 6.4

9.9

39.6 43.2

25.8 11.1 14.7 9.2

4.9

7.2

44.9 20.0 18.8

Unemployment rate (percentage of labour force 15-64) Men and women

7.8

6.3

5.3

4.9

7.6

5.4

1.8

3.3

2.9

3.4

4.2

4.0

6.0

6.9

Men

8.3

6.3

5.1

3.3

6.8

4.5

1.2

2.9

2.8

3.9

3.7

3.7

5.4

6.7

Women

7.3

6.3

5.4

7.0

8.6

6.5

2.6

3.9

3.1

(2.6)

4.7

4.4

6.9

7.2

Long-term unemployment (percentage of total unemployment)c Men and women Men Women

20.9 25.5 14.4 44.9 50.9 35.5 17.0 33.6 21.8

..

..

..

31.3 29.6

24.5 29.7 16.9 38.2 48.4 34.8 15.9 31.1 19.3

..

..

..

30.0 28.5

15.5 20.1 11.5 49.4 53.4 36.2 17.8 36.0 24.5

..

..

..

32.6 30.9

. . Data not available. a) Switzerland: 1991 instead of 1990. b) Part-time employment refers to persons who usually work less than 30 hours per week in their main job. c) Long-term unemployment: 12 months and over. Source : OECD (2003l), Employment Outlook; and cantonal Swiss data supplied by Swiss Statistics.

Portugal at almost 61%, the female employment rate in Portugal is just above the target set by the European Employment Strategy for 2010. These high (female) employment rates and low (female) unemployment rates show the relative strength of the Swiss economy (Chapter 2). There are nevertheless clear cross-cantonal differences: in general, male participation rates (89%) and employment rates (86%) are similarly high in Vaud and Zürich, and just about 3 percentage points lower in Ticino. Cross-cantonal differences in female employment rates are much larger: these rates are highest in Zürich, at 74%, 68% in Vaud and lowest in Ticino, at 60%.


57


Box 3.1. Level of educational attainment and employment The population structure in terms of levels of educational attainment is very different in the three countries under review. In Portugal, 80% of the population does not have an upper secondary qualification, while this is only 12% and 24% in Switzerland, and New Zealand, respectively (see table below). Most Swiss of working age have an upper secondary school certificate. In Portugal, education levels do not differ markedly across genders. In New Zealand, women are more likely than men to have completed tertiary education, while in Switzerland, men are more than twice as likely as women to have obtained a university degree. The level of educational attainment among women is changing most rapidly in New Zealand. For example in 1995, 37% of women had only primary education, a figure that has declined to 26% by 2001 (OECD, 2002c). Such a change also exists in Portugal among the younger generation, among which the proportion reaching the upper secondary and tertiary education level has increased over the last decade. Women are responsible for most of this increase.

Portuguese have low levels of educational attainment, with little gender difference Distribution of population and employment rates by level of educational attainment and gender, 25 to 64 years old, 2001 Both sexes

Men

Women

Less than Upper Tertiary upper secondary education secondary education education



A. Distribution of population by level of educational attainment New Zealand

24.3

46.4

29.2

22.8

50.8

26.3

25.8

42.2

32.0

Portugal

80.1

10.8

9.0

81.2

11.3

7.5

79.1

10.3

10.5

Switzerland

12.6

62.0

25.4

9.9

55.0

35.1

15.3

68.9

15.8

OECD

33.6

43.4

23.0

31.3

45.0

23.6

35.9

41.8

22.3

B. Employment rates New Zealand

62.4

80.8

81.7

73.7

88.6

88.1

52.8

71.6

76.7

Portugal

73.3

82.7

91.0

84.2

84.6

92.4

62.8

80.8

90.0

Switzerland

69.4

81.1

91.6

84.9

92.2

95.2

59.4

72.3

83.5

OECD

57.1

74.0

83.1

75.5

82.8

89.9

40.6

65.2

75.8

Source : OECD (2003c), Education at a Glance ; OECD (2003l), Employment Outlook.

In all countries there is a positive correlation between the level of

58



Box 3.1. The level of educational attainment and employment In all countries there is a positive correlation between the level of education and the employment rate in the population as a whole, and for women in particular. Compared to New Zealand and Switzerland, Portuguese women are more likely to be in employment regardless of their education level. The lower overall employment rate of Portuguese women therefore is a result of the much larger share of women with low educational attainment; recent improvements in education may bring Portugal closer to or even above the other two countries in terms of female employment rates.

In contrast to New Zealand, female unemployment rates in Portugal and Switzerland are higher than for males. As indicated by the low incidence of long-term unemployment, especially for women, the unemployed in New Zealand frequently move in (and out) of jobs or the labour force. In the other two countries, female unemployed persons are much more likely to be in the labour force and look for work for more than 12 months. In all three countries, part-time employment has increased slightly over the 1990s, without changing cross-country differences in patterns. In all three countries men are unlikely to work on a part-time basis. However, there are considerable differences in the incidence of female part-time employment across the three countries: in Portugal only one in seven woman works less than 30 hours per week, while part-time employment is a key feature of the New Zealand and, especially the Swiss labour market, where almost one in two women works part-time. Cross-cantonal differences do exist, however, as part-time employment is less frequent for both men and women in Ticino – whereas its share in both Vaud and Zürich is above the Swiss average.

3.1.1. Occupational and sectoral concentration Service sector employment concerns about two out of three workers in New Zealand and Switzerland, while in Portugal the industrial sector (36%) and the agricultural sectors (10%) remain relatively large (Table 3.2). These differences also apply to female employment patterns with female employment in agriculture and especially industry being higher in Portugal than in the other two countries. Female employment is heavily concentrated in service activities, and accounts for over 80% of the female working population in New Zealand and Switzerland, while this is only 61% in Portugal. Female employment is particularly concentrated in the public services, health, education and personal and financial services. Women make up either close to or well above 60% of all workers in these sectors (OECD, 2002b).1


59


Table 3.2. Compared to men, female employment is concentrated in fewer occupations, at lower levels of the hierarchy, and more likely to be of a temporary nature Employment structure New Zealand

Portugal

Switzerland

OECD

1990 1995 2002 1990 1995 2002 1990 1995 2002

2002

1990 1995 2002

Ticino Vaud Zürich Share of agriculture in percentage of civilian employment Men and women

8.8 16.0

9.2

8.4

4.2

4.5

4.2

2.3

4.5

2.0

..

8.3

6.6

10.1 13.5

8.2

7.2

..

5.0

5.0

3.1

6.1

2.2

..

..

..

6.1 19.4 10.5

9.9

..

3.8

3.3

(1.2) (2.5)

1.8

..

..

..

24.6 25.1 22.7 35.6 33.4 36.0 32.2 27.7 24.1

17.7 18.8

19.3

..

25.7 27.3

28.1

..

..

..

8.4

9.2

..

..

..

80.0 76.7

78.7

..

71.1 66.6

69.7

..

..

..

89.0

..

..

..

10.6

9.7

Men

..

..

Women

..

..

Share of industry in percentage of civilian employment Men and women Men

..

..

Women

..

..

32.1 42.5 41.7 46.9

..

37.2 33.9

11.6 26.5 23.4 23.0

..

15.1 12.2

6.9

28.1 25.9

Share of services in percentage of civilian employment Men and women

64.8 65.3 68.5 48.3 57.4 55.6 63.6 67.8 71.6

Men

..

..

Women

..

..

57.7 44.0 50.1 45.9

..

82.3 54.1 66.2 67.1

..

57.8 61.1 81.1 84.4

92.0 89.1

63.6 67.5

Occupational concentration – number of occupations that employ at least 75% of wage and salary employeesa Men

..

..

28.0

..

..

27.0

..

..

31.0

..

..

..

..

..

30.0

Women

..

..

17.0

..

..

16.0

..

..

20.0

..

..

..

..

..

19.0

Occupational concentration - number of occupations that employ at least 75% of wage and salary employeesa Men

..

..

Women

..

..

70.0

..

..

74.0

..

..

71.0

..

..

72.0

..

..

75.0

..

..

..

..

..

73.0

66.0

..

..

..

..

..

70.0

..

..

29.0

Share of women in managerial occupations and in jobs with a supervisory role ..

..

38.0

..

..

28.0

..

..

a

21.0

..

..

..

Share of temporary employment in total employment Men and women

..

..

..

18.3 10.0 21.8 12.6 13.1 12.5

..

..

..

Men

..

..

..

16.8

9.1 20.5 11.4 12.5 12.1

..

..

..

Women

..

..

..

20.5 11.1 23.4 14.3 13.8 12.9

..

..

..

..

..

..

10.9 10.2 13.7 8.6

9.6 12.6

14.6 11.0 15.2

Share of self-employment in total employment Men and women

18.7 20.0 18.5 26.0 26.0 24.7

8.3

9.7

9.5

..

..

..

. . Data not available. a) 2001 in New Zealand; 2000 in Portugal and Switzerland. Source: OECD (2003d), Labour Force Statistics; OECD (2002b & 2003l), Employment Outlook.

60



In all three countries, women are more likely to work in certain occupations (e.g. personal assistant, nurse). Occupational concentration is strongest in New Zealand, where 28 occupations account for 75% of all male workers, while in these occupations the share of male employment is on average 70% (Table 3.3). By contrast, only 17 occupations account for 75% of New Zealand female workers, with the average proportion of female employment in these occupations being 74%. Women seem to have difficulty reaching the top level of the job hierarchy, especially in Switzerland, where only 21% of management jobs are held by women. This proportion is considerably higher in Portugal and New Zealand, at 28% and 38%, respectively.2

3.1.2. Non-standard forms of employment Changing production methods and the development of the service sector (as well a product market deregulation, e.g. the liberalisation of shop opening hours) have contributed to changing work practices and more flexible employment relationships. This has led to an increase in the number of casual or atypical workers3 who often have limited access to family-friendly workplace support. Comprehensive information on the prevalence of atypical work is not available. Table 3.3 shows that in Portugal,4 temporary work today accounts for over 20% of workers, almost 12% in Switzerland, and in both these countries women are slightly more likely than men to engage in temporary work.5 Carroll (1999) and Tucker (2002) suggest that in New Zealand temporary employment covers about 3% of workers,6 while casual workers as narrowly defined as employees hired on a periodic basis (but without an explicit date of termination in their employment contract) are estimated to concern about 5% of employment. The share of self-employment in Switzerland is about 10%, considerably higher in New Zealand at 18.5%, and especially high in Portugal at 25%. In Portugal, this is related to the fact that many self-employed work on a contract basis for employers, and are relatively cheap, as they are due lower social security contribution rates.7 Foreign and Cross border workers are an important feature of the labour market in Zürich, Vaud and especially Ticino, where 28% of the workers are foreign and where cross-border workers make up 18% of the workforce (in principle these workers have the same rights as Swiss nationals). Many employees in Ticino work under precarious employment conditions.8

3.1.3. Differences in working time Differences between male and female working hours changed since 1996, but not by much. In all three countries, average male weekly working hours have decreased, especially in New Zealand and Portugal (Table 3.3). Compared


61


to 1996, average female weekly working hours increased in New Zealand, while the average female working week in Portugal and Switzerland declined. In all, the “female/male ratio” of average weekly working hours, fell slightly in Switzerland, and increased in New Zealand and Portugal. Table 3.3. In Portugal, women work almost as many hours as men Average usual weekly hours of work, by gender, 1996 and 2002 Men and women

Men

Women

Ratio women/men

Men and women

1996

Men Women

Ratio women/men

2002

New Zealand

38.2

43.6

31.5

72%

37.3

41.8

31.9

76%

Portugal

42.2

44.5

39.3

88%

39.5

41.3

37.3

91%

Switzerland

36.7

41.7

29.9

72%

35.3

40.8

28.6

70%

OECD-26a

39.5

42.7

35.1

82%

38.4

41.5

34.5

83%

EU-15

38.6

41.6

34.5

83%

37.6

40.7

33.8

83%

a) Excludes the Czech Republic, Japan, Poland and Turkey. Source: OECD Database on usual hours of work.

The average working week for men exceeds the female equivalent for two main reasons: women are much more likely to work on a part-time basis, while men more often work more than 40 hours per week. However, in Portugal, average female weekly working hours are 91% of what they are of men. This is because women in Portugal on average work more than 37 hours per week and more than 75% of Portuguese women work between 35 and 42 hours per week (Table 3.4). By contrast, 44% of New Zealand women and more than half of Swiss women work less than 35 hours per week.9 New Zealand has the highest incidence of workers who engage in paid work for over 45 hours per week. This concerns almost half of all male primeage workers, compared to about one in five Portuguese and Swiss men. Women are far less likely to engage in long hours in all countries. Nevertheless 17% of New Zealand women and 13% of Portuguese women work over 45 hours per week, while this is only 7% in Switzerland. The distribution of working hours varies a little across the three Swiss cantons: it appears that on average both male and female workers work slightly longer hours in Ticino than in Vaud or Zürich. Differences in working time distribution across countries partly explain why employment rates (in persons) across these three countries differ. Assuming a full-time working week of 40 hours as the total number of current working hours, estimates of full-time equivalent employment rates can be generated. Thus, if men were to work on average 40 hours per week (which is slightly less than actual hours, Table 3.4), male employment rates would rise

62



to 83.1% in New-Zealand, 78.1% in Portugal and 87.9% in Switzerland. For women, full-time equivalent employment rates are much lower than actual employment rates and are 57% in Portugal, 52% in New-Zealand and 51% in Switzerland, where so many women work on a part-time basis. Thus, while the number of women in employment is highest in Switzerland at 72%, the associated full-time equivalent employment rate is only 51%. The effect is most significant in comparison to Portugal, where the female employment rate is 11 percentage points below that in Switzerland while the associated full-time equivalent is 6 percentage points higher. This also means that a Table 3.4. Little concentration of weekly working hours in New Zealand Incidence of actual weekly hours of work among prime-age (20-54) workers, 2002 Weekly hours

0-34

35-44

45 or more

Men and women

28.7

39.5

31.8

Men

15.5

39.8

44.6

Women

44.3

39.0

16.6

Men and women

8.2

73.6

18.4

Men

3.9

72.9

23.2

13.3

74.3

12.5

27.0

58.1

14.9

6.4

72.0

21.7

Women

51.2

41.8

6.9

Men and women

22.1

63.9

14.0

74.8

20.1

49.9

6.4

New Zealand

Portugal

Women Switzerland Men and women Men

Ticino Men

5.11

Women

43.7

Men and women

27.6

57.7

14.7

8.5

70.9

20.6

Women

50.1

42.1

7.8

Men and women

28.2

59.2

12.6

74.2

17.8

42.1

6.6

Vaud Men

Zürich Men Women

8.04 51.3

Source: Statistics New Zealand; INE, Employment Survey; Swiss Labour Force Survey, 2002.


63


possible expansion of the Swiss labour force is much more likely to be related to increasing working hours, than in the number of working people (as in Portugal).

3.1.4. Variations in employment rates over the life cycle Cohort-data, based on age-related employment rates, can be used to illustrate variations in employment rates over the life cycle. Chart 3.1a shows that male employment rates vary little with age, although the charts suggest that in all countries age-related male employment rates keep increasing until the time that fathers have very young children. Otherwise, cross-country differences in male employment levels relate largely to the age at which men start to retire. Female profiles show more variation with age, which illustrates the effect of family formation and raising children, but there are significant crosscountry differences. In New Zealand, during the last 10-15 years there has been only little change across age-cohorts in the employment behaviour of prime-age female workers, while older female workers nowadays stay significantly longer in employment.10 The pattern of female participation by age is distinctive in that there are relatively low levels of participation during the main childbearing years of 25-39, whereas female employment rate increases after, i.e. when the youngest children enter pre-school or primary school. Chart 3.1a also seems to suggest that (given similar cohort sizes) there is a group of women in New Zealand who only start to engage in paid work after childbirth. In Portugal and Switzerland, female employment rates have increased significantly across all age-groups and cohorts, but especially for women of childbearing age. In Switzerland the “M-curve” has virtually straightened out with younger cohorts of female workers. However, as cantonal data illustrate, a significant number of women in all three cantons still withdraw from the labour market (Chart 3.1b). While in Ticino, mothers who withdraw from the labour market upon childbirth do generally not go back to work, female employment rates for women in Vaud and Zürich in their 40s are higher than for women in their 30s. 11 However, these charts seriously understate the impact of childbirth on female employment behaviour in Switzerland and to a lesser extent also in New Zealand, as rather than withdrawing from the labour force as in the past, mothers reduce working hours in the presence of a child.

3.2. Mothers in employment This section illustrates the link between family formation and female labour market participation, and that the increase in female employment is largely related to changing maternal labour market behaviour.12

64



Chart 3.1a. Female employment rates in Portugal are highest for women in the age-group where young children are most likely to be present Cross-cohort comparisons of employment ratesa by age, percentages Synthetic cohort data: 1936-1940 women 1956-1960 women

Cross-section data: Women, 2002 Men, 2002

1946-1950 women 1966-1970 women New Zealand

100 90 80 70 60 50 40 30 20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

45-49

50-54

55-59

60-64

45-49

50-54

55-59

60-64

Portugal 100 90 80 70 60 50 40 30 20-24

25-29

30-34

35-39

40-44 Switzerland

100 90 80 70 60 50 40 30 20-24

25-29

30-34

35-39

40-44

a) The chart combines cross-sectional data by age and gender for the year 2001 with “synthetic cohort” data for women belonging to selected age cohorts. Source: OECD (2002b and 2003l), Employment Outlook.


65


Chart 3.1b. Women in Vaud and Zürich now often stay in work until their mid-50s Cross-cohort comparisons of employment ratesa by age, percentages Synthetic cohort data: 1936-1940 women 1956-1960 women

1946-1950 women 1966-1970 women

Cross-section data: Women, 2002 Men, 2002

Canton Ticino 100 90 80 70 60 50 40 30 20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

45-49

50-54

55-59

60-64

45-49

50-54

55-59

60-64

Canton Vaud 100 90 80 70 60 50 40 30 20-24

25-29

30-34

35-39

40-44 Canton Zürich

100 90 80 70 60 50 40 30 20-24

25-29

30-34

35-39

40-44

a) The chart combines cross-sectional data by age and gender for the year 2001 with “synthetic cohort” data for women belonging to selected age cohorts. Source: Data supplied by BFS from censuses.

66



Table 3.5. More children lead to mothers reducing working hours Maternal and female employment rates (EPR) and share of part-time (PT) employment New Zealand

Portugal

2001

2001

Switzerland

Canton Ticino

Canton Vaud

Canton Zürich

2000

EPR Share PT EPR Share PT EPR Share PT EPR Share PT EPR Share PT EPR Share PT

1 child

64.1

38.8

73.2

10.0

67.8

67.6

57.3

62.8

68.8

62.4

68.5

70.5

2 children

64.5

49.3

69.5

11.3

62.1

78.4

47.1

72.4

62.7

75.6

63.4

81.1

3 children

59.3

52.8

55.7

14.3

54.4

79.1

40.0

76.2

53.5

78.8

55.3

81.4

4+ children

46.3

51.4

38.1

17.8

44.7

70.8

26.2

78.0

39.9

75.4

43.5

75.8

All mothers

62.2

45.8

70.9

10.6

62.8

73.5

51.2

67.4

63.6

69.8

64.1

76.1

All women

65.8

35.3

56.7

12.0

65.9

49.1

54.8

42.8

63.2

48.1

69.8

48.5

Source: Information supplied by national statistical offices.

3.2.1. Female employment rates depends on the presence and number of children Table 3.5 shows the effect of family size on maternal employment rates and length of working time. In all three countries, the larger the family the higher the probability of mothers working part time, and/or withdrawing from the labour force. The presence of a third child significantly reduces the likelihood of mothers being in employment, especially in Portugal where parttime employment is relatively low. In fact on average fewer mothers than women work part-time in Portugal. By sharp contrast, part-time work plays an important role in the employment patterns of mothers in New Zealand and especially Switzerland, where three out of four mothers work on a part-time basis. The cantonal differences reflect general employment patterns across Switzerland, mothers in Vaud and Zürich are the most likely to work and for 75% to 80% of mothers this concerns part-time employment; maternal employment rates and the incidence of part-time work are slightly lower in Ticino.

3.2.2. Variations of employment rates and working time with the age of the youngest child The age of the youngest child has relatively little influence on maternal employment rates in Portugal, with nine out of ten mothers working full-time irrespective of the age of the youngest child (Chart 3.2). By contrast, the age of the youngest child is a critical factor in both the level of maternal employment rates and maternal working-time variation in New Zealand and Switzerland. In both these countries, the maternal employment rate is lowest when the


67


youngest child is not yet three years old at below 60% in Switzerland and just over 40% in New Zealand. However, with the age of children maternal employment rates increase rapidly in New Zealand, while the incidence of maternal part-time employment declines (from 56 to 40%, see Chart 3.2 and Table 3.A.1 of the annex). Thus, it seems that New Zealand mothers increase hours (and return to full-time work) when children grow up. On the other hand, while maternal employment rates in Switzerland also increase as children grow up, the proportion of part time work does not change. Part-time employment is thus a much longer-term feature of maternal employment in Switzerland. There is considerable variation in cantonal maternal employment patterns as children grow up. Mothers in Ticino and Zürich are most likely to withdraw from the labour force when children are not yet three years of age, while employment rates increase from 50% to 60% in Ticino and to 70% in Zürich when children are in the three-five age group. By contrast, in Vaud the employment rate of mothers with children in the zero to five age-group is 60%. This is related to the greater availability of childcare services in Vaud for parents with very young children. The maternal employment pattern in Zürich and Ticino seems at least partly related to shortages in childcare capacity for very young children, and reflects that children age three-five use kindergartens (Zürich) or infants’ schools (Ticino) on a more or less universal basis (Chapter 4).

3.3. Distribution of work in households with children 3.3.1. Distribution of paid work In all three countries the proportion of households with both parents in employment has been growing considerably during the 1980s and 1990s. By beginning of the 21st century, 60-70% of all couple households with children are dual earner couples in all three countries. The proportion of single-earner couple families has declined everywhere to less than 30% in Portugal and New Zealand, and slightly below 40% in Switzerland. The proportion of couples where both spouses work is highest in Portugal, at 70%, and strikingly most of these couples concern two full-time workers, while full-time dual-earnership only concerns about one in three of the New Zealand couples and one in eight of Swiss couple households.13 Hence, in the latter two the “main earner notion” still prevails, although in a modified form: in both New Zealand and Switzerland as a whole (but not in Ticino), one-and-a-half earner families are now more prevalent than single-earner families. In Switzerland, over four out of ten couples consist of one full-time worker and a spouse who works part-time (although this masks considerable variety among families; some spouses will work less than 15 hours per week, others close to 30). The notion of gender equitable sharing of long part-time working hours (for example, both

68



partners in a couple family working for 30 hours per week), has entered the policy debate in urban Switzerland and while its popularity is still low at 3% of couple households with dependent children, its incidence has more than doubled over the last ten years (Table 3.6). Given the implications for financial poverty and social exclusion of families with children, the relatively high rate of joblessness among couples with dependent children in New Zealand (at almost 7%) is of particular concern, even though there has been a significant decline in the last ten years (Table 3.7). By contrast the trend of joblessness among couple families is upwards in Switzerland, even though its incidence is still low at 2% (but is slightly higher in Ticino than in the other two cantons). The employment situation of single parents also varies considerably across countries. At 50%, employment rates among sole parents in New Zealand are almost 30 percentage points lower than in Portugal and Switzerland. In all three countries sole parents are less likely than working mothers in couple families to work part-time, while over 90% of working sole parents in Portugal work full-time. The employment trend among sole parents in Switzerland appears to be a growing incidence of part-time work, while overall employment rates are fairly stable. In New Zealand, the increase of sole parents working part-time has coincided with an overall increase of employment among sole parents. Differences in employment patterns of sole

Chart 3.2. Maternal employment rate increases with the age of the youngest child in New Zealand and Switzerland, while the share of part-time decreases in New Zealand only Employment rates of mothers (and related part-time share) by age of the youngest child, percentages, 2002 Under 3 years old

3 to 5 years old

6 to 16 years old

90 80 70 60

(74)

(73)

50 (74)

40

(67)

(73)

(77) (75)

(60)

30 20

(71) (55)

(82)

(52) (40) (50)

(56)

10 (10) (10) (11)

0 New Zealand

Portugal

Switzerland

Ticino

Vaud

Zürich

Source: Information supplied by national statistical offices.


69


Table 3.6. Main earner households prevail in New Zealand and Switzerland Employment status of couple families with childrena No one in employment

One in employmentb

Both in employmentb

All

FT

PT

All

2FT

1FT, 1PT

2 PT

0.8

New Zealand 1986

3.2

40.3

38.7

1.6

56.5

28.9

26.9

1991

9.6

35.6

33.0

2.6

54.8

27.9

26.0

0.9

1996

8.3

29.9

26.6

3.3

61.8

29.8

30.6

1.4

2001

6.7

29.2

26.1

3.0

64.2

32.5

30.3

1.3

Portugal 1985

5.3

44.2

42.8

1.3

50.5

45.0

5.2

0.3

1990

3.9

36.2

35.3

0.9

59.9

54.4

5.4

0.1

1995

3.7

33.2

31.9

1.3

63.1

53.5

9.0

0.6

2000

2.4

27.2

26.0

1.2

70.4

62.0

8.0

0.4

2002

3.0

27.0

26.1

0.9

70.0

61.7

8.1

0.2

Switzerland 1970

0.7

72.9

71.7

1.2

26.4

11.1

15.1

0.3

1980

1.0

66.6

65.5

1.1

32.4

11.9

20.1

0.4

1990

0.9

54.8

53.3

1.5

44.2

12.5

30.3

1.3

2000

2.1

38.7

36.3

2.3

59.3

13.3

42.8

3.1

0.3

Ticino 1970

2.0

81.3

79.5

1.8

16.7

8.6

7.8

1980

2.8

75.5

73.6

2.0

21.7

9.1

12.2

0.4

1990

2.0

63.9

61.7

2.2

34.1

10.9

22.2

0.9

2000

3.9

50.4

47.0

3.4

45.7

12.2

31.4

2.1

Vaud 1970

0.8

69.6

68.4

1.2

29.7

15.0

14.4

0.3

1980

0.8

63.4

62.5

0.9

35.8

14.5

20.8

0.5

1990

1.1

48.2

46.4

1.8

50.7

16.6

32.6

1.5

2000

2.8

38.0

35.4

2.6

59.2

14.9

41.8

2.5

0.3

Zürich 1970

0.5

74.5

73.4

1.1

25.0

10.5

14.3

1980

0.7

66.2

65.3

0.9

33.1

10.6

22.0

0.4

1990

0.8

54.6

53.2

1.3

44.6

10.6

32.6

1.4

2000

1.9

37.4

35.1

2.3

60.6

12.1

44.7

3.8

a) Children 16 years old or younger. b) PT = part-time, working less than 30 hours per week; FT = full-time, working 30 or more hours per week. Source: Information supplied by national statistical offices.

70



Table 3.7. Joblessness among sole parents is most frequent in New Zealand Employment status among sole parentsa Not in employment

In employmentb All

FT

PT

New Zealand 1986

60.0

40.0

29.4

10.6

1991

68.3

31.7

21.6

10.0

1996

59.9

40.1

24.6

15.5

2001

49.6

50.4

30.5

20.0

1985

35.9

64.1

57.8

6.2

1990

28.9

71.1

65.0

6.1

1995

29.4

70.6

64.6

6.0

Portugal

2000

24.2

75.8

68.3

7.5

2002

22.1

77.9

71.6

6.2

1970

27.3

72.7

51.6

21.1

1980

23.2

76.8

49.1

27.6

1990

19.2

80.8

42.9

37.8

2000

21.7

78.3

33.5

44.8

14.0

Switzerland

Ticino 1970

43.4

56.6

42.6

1980

36.9

63.1

47.0

16.1

1990

28.6

71.4

45.3

26.1

2000

30.3

69.7

34.7

35.0

Vaud 1970

22.7

77.3

60.8

16.5

1980

17.8

82.2

58.2

24.0

1990

15.2

84.8

52.6

32.2

2000

22.0

78.0

38.7

39.3

23.2

Zürich 1970

23.0

77.0

53.8

1980

20.0

80.0

46.8

33.2

1990

17.6

82.4

38.2

44.2

2000

21.4

78.6

29.6

49.0

a) Children 16 years old or younger. b) PT = part-time, working less than 30 hours per week; FT = full-time, working 30 or more hours per week. Source: Information supplied by national statistical offices.


71


parents across Swiss cantons reflect the general trend, with both employment rates and the incidence of part-time work in Ticino being much lower than in Vaud and Zürich.

3.3.2. The distribution of unpaid work Time is a scarce resource, and hence, parents seek to allocate their responsibilities in a rational manner (Becker, 1991). The male breadwinner model (though predominant for only a very short period historically speaking, and never lived by all strata of the society) involved a clear allocation of responsibilities and time: men spent their time at work providing family income, while women spent their time caring for children at home. With the changes in female aspirations and labour market behaviour this notion has lost much of its relevance, but relative to men women are still much more engaged in unpaid housework and the provision of care. Compared to Switzerland where the female/male ratio of total hours of paid and unpaid work is close to one, gender differences in total hours of paid and unpaid work are relatively large in Portugal and New Zealand (Table 3.8; details in Table 3.A.2 of the annex). While the total amount of working time (paid as well non paid) is higher for men than for women in New Zealand, the reverse is true in Portugal where women still engage in half as much more unpaid housework as men do. More than elsewhere Portuguese women thus seem to manage “a double burden”: being in (full-time) employment and carrying out the majority of the unpaid work (Torres et al., 2001). There exist considerable differences between sexes in the distribution of different types of unpaid work in all three countries. In all of these countries mothers rather than fathers engage in childcare activities, although differences seem smallest in Switzerland (Table 3.8).14 The amount of time women spend on unpaid work varies with their employment status. In all three countries, part-time employment is related to a larger amount of time devoted to unpaid work (and child care). The amount of time spent on child-care and total unpaid work is also influenced by the age of the youngest child. In New Zealand and Portugal, the allocation of time to childcare is highest when a child is not yet six years of age, while in Switzerland the age of the child seems to be less relevant to the time devoted to child-care.

3.4. Gender earnings differentials 3.4.1. The gender wage gap Gender differences in terms of sectors of economic activity, types of occupations, the nature of employment contracts, hours of work, and changes in labour force behaviour in the presence of children all contribute to

72



Table 3.8. Women rather than men engage in unpaid work, especially in Portugal Distribution of time spent (average hours per day, in 2000) for couple families with youngest child under 6 year old Total of unpaid work

Paid work

Total paid and unpaid time Child care

Other unpaid

New Zealand Men (average)

05:46

01:20

00:59

00:21

Women (average)

01:22

03:15

02:46

00:29

-> ratio women/men

0.2

2.4

2.8

07:06 04:37 1.4

0.7

Women in full-time paid work

04:42

02:11

01:52

00:19

06:53

Women in part-time paid work

01:44

04:53

02:27

02:26

06:37

Women at home

00:00

03:48

03:16

00:32

03:48

Portugal – 1999 Men (average)

05:38

01:21

00:31

00:50

06:59

Women (average)

03:06

05:22

01:32

03:50

08:28

-> ratio women/men Women in full-time paid work

0.6 05:33

4.0 04:43

3.0 01:33

4.6 03:10

1.2 10:16


04:06

07:14

02:24

04:50

11:20

Women at home

00:45

08:10

01:51

06:19

08:55

Men (average)

06:02

03:16

02:00

01:16

09:18

Women (average)

01:37

08:03

03:29

04:34

Switzerland – 2000

-> ratio women/men

0.3

2.5

1.7

09:40 3.6

1.0


05:10

07:08

02:58

04:10

12:18


02:13

07:25

03:05

04:20

09:38

Women at home

00:00

08:58

04:04

04:54

08:58

Source: Statistics New Zealand, Time Use Survey; Portugal: TUS - Time Use Survey 1999 (October); Swiss Labour Force Survey.

working women generally earning less than their male counterparts (OECD, 2002b). Gender wage gaps at mean male and female earnings appear largest in Switzerland at 22%, are about 16% in New Zealand and smallest in Portugal, at 10% (Table 3.9).15 However, in Portugal the wage gap in the private sector is considerable and probably about 25%, while on average female earnings in the public sector are 33% above male earnings (Eurostat, LFS). Educational attainment, tenure, work experience, etc., are all observable factors that explain part of the gender wage gap. However, there remains an unexplained proportion of the gender wage gap and this variation may reflect gender discrimination in remuneration. Santos and Gonzales (2002) find that since the mid-1980s gender discrimination in earnings has fallen substantially in Portugal, but that unexplained earnings differences remain considerable: in


73


1997 men earned 11% more and women 16% less than they should in the absence of unexplained variation. For Switzerland, Bauer (2000) estimates that only one third of the wage gap is explained by differences in human capital while another can be explained by employment segregation. The rest (i.e. 50%) remains unexplained. The non-explained part of the wage gap is even 63% in “female-dominated” occupations, and 75% when considering only part-time workers.16 Family characteristics are also among the factors which explain the wage differential between men and women, and between mothers and childless women (Harkness and Waldfogel, 1999). The main reason is that family formation affects female rather than male labour force behaviour, and labour force withdrawal in the aftermath of childbirth can lead to a depreciation of human capital. Also, reducing working hours can signal less than complete career commitment to employers and affect career progression. For New Zealand, Dixon (2000) estimated the wage differentials that are associated with having children for working women in the 20-39 year age bracket. The estimated wage “penalty” associated with motherhood for working women in this age bracket was around 7-10%.17 For Switzerland, Bauer (2000) shows that career interruption has a major long-term impact on the earnings potential. A child-related career interruption of four years implies that over the lifetime wages increase by some 35% – compared to 50% for a single childless woman and 55% for men. Table 3.9. A smaller wage gap in Portugal, but concentrated in low earning categories The gender wage gapa, basic indicatorsb in 2001c Hourly earnings, full-time wage and salary employees The gap at The gap at the bottom the top quintiled quintiled

Hourly earnings, all wage and salary employees The gap at The gap at Ratio of the bottom the top median quintiled quintiled

Ratio of mean

Ratio of median

New Zealand

86

91

92

85

84

87

93

83

Portugal

92

85

89

95

95

85

89

98

Switzerland

76

79

74

78

78

80

74

77

OECDe

84

86

86

85

84

85

86

84

Ratio of mean

a) b) c) d)

Percentage ratio of female to male wage. Persons aged 20 to 64 years old. 1999 for Portugal. Ratio between the upper earnings limits of, respectively, the female and male earnings distributions’ quintiles. e) Unweighted average for 19 OECD countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, New Zealand, Portugal, Spain, Sweden, Switzerland, United Kingdom and the United States. Source: OECD (2002b), Employment Outlook.

74



3.4.2. The differences in earnings between partners in a household While in all the countries, wives earn less than their husbands in the vast majority of households, earning differentials between partners are smallest in Portugal, where spouses contribute on average 81% of their husband’s earnings to household income. This is only 58% in New Zealand and 40% in Switzerland. In Switzerland, spouses earn less than 20% of their male partner in one-third of couples. This proportion is about 18% in New Zealand, whereas Portuguese spouses generally earn at least 40% of what their husbands earn (Chart 3.3). Moreover, the number of couples where spouses earn more than their husband is relatively high in Portugal and New Zealand (at 33% and 29%, respectively), while it is very low in Switzerland (at 6%). Chart 3.3. Spouses earn less than their husbands, especially in Switzerland Distribution of two-earner couples where the husband worked full-time by the ratio female to male of annual income from work, latest year New Zealand

Portugal

Switzerland

Percentage of working couples 25

20

15

10

5

0

1. 5+

+

-0 .1 0. 10. 2 0. 20. 3 0. 30. 4 0. 40. 5 0. 50. 6 0. 60. 7 0. 70. 8 0. 80. 9 0. 91. 0 1. 01. 1 1. 11. 2 1. 21. 3 1. 31. 4 1. 41. 5

0

Ratio (female/male) Source: Data supplied by national authorities based on: Statistics New Zealand, New Zealand Income Survey, June 2003 quarter; Portugal: Eurostat, ECHP 2000; Swiss Labour Force Survey 2002.

3.5. Summary Changes in female labour market aspirations over the last few decades may have played a key role in the reduction of gender-inequities in labour market opportunities. There remain however considerable differences in labour market outcomes between women and men, and between mothers and fathers. Recent trends in New Zealand, Portugal and Switzerland show that while female employment increased considerably and male employment rates trended downwards, the gender gap in employment rates remains


75


substantial at around 13-14%. Cross-country differences in employment patterns are otherwise very large. Switzerland (73.9%) has the highest female employment rates, while these are 65% in New Zealand and 60.8% in Portugal. However, Portuguese women generally work full-time – while Swiss women do not. Full-time equivalent employment rates are consequently highest in Portugal at 57%, followed by New Zealand (52%) and lowest in Switzerland (51%). Portugal stands out as the country with the most gender equitable allocation of paid work: about nine out of ten women (and mothers) work fulltime. Hence, many couples are dual full-time earner couples. For employment patterns of parents with children in New Zealand and Switzerland the change in female labour market aspirations has meant that one-and-a-half earner couple households have replaced the single-earner model as the most prevalent way of allocating paid work among families. The great difference between these two countries is that while in New Zealand mothers work fulltime again by the time the youngest child is five-six years of age (in primary school), the “one-and-a-half-earner” model spreads over a much longer part of the “life-course” in Switzerland. There are significant cross-cantonal differences in employment trends, but in general it appears that female employment rates are highest in Zürich, except for mothers with a child under age three. With employment rates at 60%, mothers in Vaud are most likely to continue to work during the early childhood years. In Ticino, where employment rates are generally below those in the two other cantons, mothers are most likely to withdraw from the labour force (and least likely to work part-time); in this canton, the single-earner family is still the most common model of employment allocation in couple families. In all countries, the employment structure remains highly gendersegregated. Female employment is particularly concentrated in the services sectors (health, education and personal, and financial services), where women make up either close to or well above 60% of all workers. Women are less likely to reach top management occupations. And women are more likely to engage in temporary work or in other non-standard ways of work to facilitate work/ family reconciliation. The upshot of all this is a persistent gender wage gap which is smaller in Portugal than in New Zealand and Switzerland. In Portugal, on average, females’ earnings are about 80% of their husbands’ contribution to household income (which is related to the high share of full-time employment of Portuguese women), while this is less than 60% in New Zealand and around 40% in Switzerland. Gender differences in labour market behaviour and outcomes remain considerable, and many of these relate to differences between fathers and mothers: the presence of children in families clearly affects female employment patterns, although least so in Portugal, but seems to have little effect on male labour force behaviour.

76



Annex to Chapter 3 Table 3.A.1. Female and maternal employment rates (EPR) and share of part-time (PT) employment, by age of youngest child, percentages Mothers with youngest child aged: Women 0-16 year old EPR

0-2 year old

3-5 year old

Share PT

EPR

Share PT

EPR

Share PT

EPR

Share PT

6-16 year old EPR

Share PT

New Zealand 1986

57.8

28.5

53.6

45.2

29.1

58.3

47.4

54.0

68,7

40,3

1991 1996

55.1 63.4

31.1 35.6

51.4 58.1

45.6 47.6

30.5 40.4

57.7 59.3

46.1 55.4

55.1 54.3

67.3 70.6

39.6 41.0

2001

65.8

35.3

62.2

45.8

43.2

56.0

58.2

52.2

74.7

40.5

..

Portugal 1981

39.6

..

..

..

..

..

..

..

..

1991

48.2

12.2

..

..

58.0

11.4

..

..

..

..

2001

56.7

12.0

70.9

10.6

70.8

10.2

73.3

9.6

69.9

11.2

1970

46.8

28.6

28.5

55.2

21.2

47.7

27.0

51.9

34.0

59.5

1980

50.4

32.7

35.8

59.3

22.4

53.3

31.3

54.3

42.3

61.7

1990

59.5

40.7

47.7

68.2

33.5

66.4

43.0

67.6

57.1

68.9

2000

65.9

49.1

62.8

73.5

51.2

73.1

58.9

74.2

67.9

73.5

2002

71.6

44.4

70.4

69.9

58.2

75.2

64.5

73.0

77.8

67.2

45.4

Switzerlanda

Switzerland, Canton

TICINOa

1970

39.5

20.0

19.0

45.3

11.7

42.8

18.6

47.0

24.1

1980

41.0

24.7

25.7

51.3

16.6

46.5

22.7

51.0

29.5

52.2

1990

50.9

31.4

38.7

61.9

27.0

60.1

35.8

63.9

44.3

61.8

2000

54.8

42.8

51.2

67.4

41.4

69.0

50,1

69.9

55.5

66.0

2002

60.4

39.1

61.8

61.9

50.0

50.0

62.5

60.0

66.7

66.7

48.4

Switzerland, Canton VAUD

a

1970

47.3

25.9

32.3

46.1

22.9

40.8

31.0

44.7

38.3

1980

51.1

30.8

39.8

54.1

25.3

54.8

34.8

55.9

47.1

53.6

1990

60.6

38.3

54.5

62.9

41.4

64.2

50.9

62.9

63.3

62.4

2000

63.2

48.1

63.6

69.8

56.0

70.4

60.1

71.4

67.1

69.1

2002

68.2

42.5

68.5

64.0

61.9

76.9

61.5

75.0

74.4

55.2


77


Table 3.A.1. Female and maternal employment rates (EPR) and share of part-time (PT) employment, by age of youngest child, percentages (cont.) Mothers with youngest child aged: Women 0-16 year old EPR

Share PT

Switzerland, Canton ZÜRICH

EPR

Share PT

0-2 year old EPR

3-5 year old

6-16 year old

Share PT

EPR

Share PT

EPR

Share PT

60.3

a

1970

49.5

27.7

27.6

54.9

19.2

42.7

24.9

51.1

33.8

1980

54.8

34.1

37.1

63.7

21.1

55.5

31.1

57.0

44.8

66.4

1990

63.9

41.9

48.6

72.8

31.5

70.5

43.1

72.9

59.5

73.4

2000

69.8

48.5

64.1

76.1

49.8

75.1

60.6

77.5

70.5

76.1

2002

74.3

43.8

69.6

74.7

48.6

82.4

68.0

70.6

81.5

73.6

. . Not available. a) Caution when interpreting trends over time: data prior to 2001 are from census, data from 2001 are from SLFS. Source: Statistics New Zealand, Calculations from Census of Population and Dwelling (1986-2001); Portugal: information supplied by INE; calculations from Swiss Federal Statistical Office on Censuses from 1970 to 2000, and Swiss Labour Force Survey from 2001.

78



Table 3.A.2. Employment in households with children New Zealand Two parents

One parent

No one in One in Not in Both in employment Unknown In employment Unknown employment employment employment FT

PT

2FT 1FT, 1PT 2 PT

FT

All

PT

A. Households with youngest child 16 years old or less 1986

2.5

31.0

1.3

23.1

21.5

0.6

3.3

9.8

4.8

1.7

0.2

1991

7.1

24.5

1.9

20.7

19.2

0.7

3.4

15.3

4.8

2.2

0.1

100.0 100.0

1996

6.0

19.2

2.4

21.5

22.1

1.0

3.9

14.1

5.8

3.7

0.3

100.0

2001

4.6

18.1

2.1

22.5

21.0

0.9

3.5

13.4

8.2

5.4

0.3

100.0

B. Households with youngest child not yet 3 years old (0-2) 1986

3.3

55.6

1.8

10.5

16.9

0.5

9.9

0.9

0.5

100.0

1991

10.7

40.6

2.2

10.3

16.2

0.6

16.9

1.6

1.0

100.0

1996

8.0

33.7

3.0

12.5

22.0

1.0

15.7

2.1

2.0

100.0

2001

6.5

33.0

2.6

14.2

21.0

0.9

15.7

3.2

2.9

100.0

100.0

C. Households with youngest child 3 to not yet 6 years old (3-5) 1986

2.5

35.2

1.3

18.1

24.2

0.6

13.9

2.7

1.5

1991

7.4

26.9

2.1

15.8

21.8

0.7

19.9

3.0

2.4

100.0

1996

6.3

19.9

2.6

18.1

25.2

1.2

17.9

4.5

4.2

100.0

2001

4.9

19.7

2.2

19.0

23.5

1.0

17.2

6.4

6.0

100.0

D. Households with youngest child 6 to 16 years old 6 to 16 years old 1986

2.4

19.5

1.1

32.5

24.5

0.7

9.2

7.7

2.5

100.0

1991

5.3

15.4

1.8

30.3

21.6

0.8

13.8

7.8

3.2

100.0

1996

5.2

12.0

2.2

30.1

22.8

1.1

12.9

9.0

4.7

100.0

2001

3.8

11.0

1.9

29.8

21.7

1.0

11.8

12.1

6.9

100.0

PT=Part-time = employment of less than 30 hours a week; FT=Full-time = employment of 30 hours or more per week. Source: Statistics New Zealand, Census of Population and Dwelling (1986-2001).


79


Table 3.A.2. Employment in households with children (cont.) Portugal Two parents No one in employment

One in employment FT

PT

One parent

Both in employment 2FT

Not in employment

All In employment

1FT, 1PT 2 PT

FT

PT


4.9

38.9

1.2

40.9

4.7

0.2

3.3

5.3

0.6

1990

3.5

32.0

0.8

49.2

4.9

0.1

2.7

6.2

0.6

100,0 100,0

1995

3.3

28.9

1.2

48.4

8.2

0.5

2.8

6.2

0.6

100,0

2000

2.2

23.7

1.1

56.6

7.3

0.3

2.1

6.0

0.7

100,0

2001

2.3

23.6

1.3

56.9

7.0

0.3

2.1

6.1

0.5

100,0

2002

2.7

23.5

0.9

55.7

7.3

0.2

2.1

6.9

0.6

100,0

B. Households with youngest child not yet 3 years old (0-2) 1985

3.9

42.1

1.3

42.7

5.0

0.4

2.4

2.0

0.1

100.0

1990

2.5

35.4

0.5

52.6

4.3

0.1

1.6

2.4

0.5

100.0

1995

2.9

33.1

1.8

48.4

8.7

1.0

1.8

2.3

0.2

100.0

2000

2.4

25.7

0.6

61.9

5.9

0.0

1.6

1.4

0.4

100.0

2001

1.8

25.1

1.2

61.4

6.0

0.1

1.5

2.4

0.4

100.0

2002

2.7

26.2

0.4

58.6

6.4

0.0

2.1

3.0

0.6

100.0

100,0

C. Households with youngest child 3 to not yet 6 years old (3-5) 1985

3.2

39.1

1.0

44.9

5.0

0.0

2.3

4.3

0.2

1990

1.8

30.8

0.5

55.7

4.5

0.1

2.0

4.2

0.3

100,0

1995

2.6

30.7

1.2

49.1

8.9

0.8

2.2

4.3

0.3

100,0

2000

1.4

22.4

0.9

60.4

7.1

0.3

1.7

5.6

0.3

100,0

2001

1.1

21.8

1.1

63.4

5.6

0.2

1.6

5.1

0.2

100,0

2002

1.7

22.1

0.3

63.4

5.5

0.2

1.5

5.0

0.3

100,0

D. Households with youngest child 6 to 16 years old 6 to 16 years old 1985

5.6

38.0

1.2

39.2

4.5

0.3

3.9

6.5

0.8

100.0

1990

4.2

31.5

0.9

46.9

5.1

0.1

3.2

7.5

0.7

100.0

1995

3.6

27.5

1.0

48.2

7.9

0.3

3.2

7.5

0.7

100.0

2000

2.4

23.4

1.3

53.2

7.9

0.5

2.4

7.8

0.9

100.0

2001

2.8

23.6

1.4

52.9

7.8

0.4

2.5

7.9

0.6

100.0

2002

3.1

23.0

1.2

51.7

8.3

0.3

2.4

9.2

0.7

100.0

PT=Part-time = employment of less than 30 hours a week; FT=Full-time = employment of 30 hours or more per week. Source: Information supplied by INE.

80



Table 3.A.2. Employment in households with children (cont.) Switzerland Two parents No one in One in employment employment FT

PT

One parent Both in employment 2FT

1FT, 1PT

Not in employment

2PT

In employment FT

All

PT


0.6

68.1

1.1

10.5

14.3

0.3

1.4

2.6

1.1

100.0

1980

0.9

60.5

1.0

11.0

18.6

0.4

1.8

3.7

2.1

100.0

1990

0.9

48.7

1.4

11.5

27.7

1.2

1.7

3.7

3.3

100.0

2000

1.8

31.6

2.0

11.6

37.3

2.7

2.8

4.3

5.8

100.0

100.0

B. Households with youngest child not yet 3 years old 1970

0.4

76.8

1.0

10.3

9.7

0.2

0.5

0.8

0.2

1980

0.7

75.4

1.1

9.2

11.0

0.5

0.7

1.0

0.5

100.0

1990

1.0

63.1

1.7

9.6

19.7

1.4

1.1

1.3

1.0

100.0

2000

2.0

43.0

2.3

10.9

32.3

3.4

2.3

1.8

1.9

100.0

C. Households with youngest child 3 to not yet 6 years old 1970

0.3

74.5

0.9

9.5

12.0

0.2

0.8

1.3

0.5

100.0

1980

0.5

70.8

0.8

10.2

13.6

0.4

1.1

1.6

1.0

100.0

1990

0.8

59.3

1.4

9.4

22.7

1.3

1.4

1.8

1.9

100.0

2000

1.9

39.9

2.0

10.2

34.6

3.2

2.4

2.2

3.7

100.0

100.0

D. Households with youngest child aged 6 to 16 years old 1970

1.1

54.8

1.4

11.6

20.3

0.5

2.7

5.4

2.3

1980

1.2

48.8

1.1

12.2

24.4

0.4

2.6

6.0

3.4

100.0

1990

0.8

32.2

1.1

14.0

36.4

1.0

2.2

6.6

5.6

100.0

2000

1.6

20.4

1.9

12.8

41.7

2.1

3.3

7.0

9.1

100.0

PT=Part-time = employment of less than 30 hours a week; FT=Full-time = employment of 30 hours or more per week. Source: Calculations from Swiss Federal Statistical Office on Censuses from 1970 to 2000.


81


Table 3.A.2. Employment in households with children (cont.) Ticino Two parents No one in employment

One in employment FT

PT


1FT, 1PT

Not in employment

2PT

In employment FT

PT

All


1.9

74.6

1.7

8.1

7.4

0.3

2.7

2.6

0.9

1980

2.5

67.2

1.8

8.3

11.1

0.4

3.2

4.1

1.4

100.0 100.0

1990

1.8

55.3

2.0

9.8

19.9

0.8

3.0

4.7

2.7

100.0

2000

3.4

40.6

2.9

10.5

27.1

1.8

4.2

4.8

4.8

100.0


0.6

85.6

1.1

5.9

4.6

0.2

1.0

0.9

0.2

100.0

1980

1.3

79.6

1.5

7.0

7.1

0.3

1.4

1.4

0.3

100.0

1990

1.8

67.9

1.9

8.7

14.4

0.8

2.0

1.5

0.9

100.0

2000

3.6

50.5

2.5

10.0

24.8

2.2

3.4

1.5

1.5

100.0

100.0


0.9

81.2

1.4

6.6

6.7

0.2

1.3

1.4

0.4

1980

1.2

76.7

1.3

6.8

9.0

0.2

1.8

2.2

0.8

100.0

1990

1.7

63.5

1.8

7.6

17.5

1.0

2.5

2.6

1.8

100.0

2000

3.2

47.8

2.8

9.0

26.7

1.9

2.9

2.5

3.2

100.0


3.8

59.0

2.5

11.3

10.4

0.4

5.4

5.3

1.9

100.0

1980

3.5

58.9

2.1

9.3

13.4

0.5

4.4

5.8

2.0

100.0

1990

1.8

45.8

2.1

11.3

23.6

0.8

3.7

7.1

4.0

100.0

2000

3.4

30.9

3.2

11.6

28.5

1.6

5.3

7.9

7.5

100.0


82



Table 3.A.2. Employment in households with children (cont.) Vaud Two parents No one in One in employment employment FT

PT

One parent Both in employment

2FT

1FT, 1PT

Not in employment

2PT

In employment FT

All

PT


0.7

64.1

1.1

14.0

13.5

0.3

1.4

3.8

1.0

100.0

1980

0.8

56.9

0.8

13.2

18.9

0.4

1.6

5.2

2.1

100.0

1990

1.0

42.0

1.6

15.0

29.5

1.4

1.5

5.0

3.1

100.0

2000

2.4

30.2

2.2

12.7

35.7

2.2

3.2

5.7

5.8

100.0

100.0


0.7

74.8

1.0

12.4

9.0

0.1

0.6

1.3

0.2

1980

0.9

72.3

1.1

9.6

12.9

0.5

0.7

1.4

0.6

100.0

1990

1.2

55.4

1.9

12.6

24.1

1.3

1.0

1.6

1.0

100.0

2000

2.7

37.9

2.4

12.6

34.8

2.8

2.5

2.4

1.9

100.0


0.5

70.5

0.9

12.6

11.8

0.2

0.9

2.0

0.5

100.0

1980

0.6

67.8

0.8

10.0

15.7

0.4

1.0

2.5

1.2

100.0

1990

1.0

51.8

1.7

12.4

26.1

1.4

1.1

2.5

2.0

100.0

2000

2.6

37.3

2.2

11.0

34.9

2.3

2.7

3.1

3.8

100.0

100.0


0.9

51.8

1.3

16.3

18.0

0.4

2.4

7.0

2.0

1980

0.7

44.8

0.7

16.4

23.2

0.4

2.3

8.2

3.3

100.0

1990

0.8

26.6

1.3

18.4

35.3

1.3

2.0

9.0

5.2

100.0

2000

2.0

20.9

2.1

13.9

36.7

1.7

4.0

9.3

9.3

100.0



83


Table 3.A.2. Employment in households with children (cont.) Zürich Two parents No one in One in employment employment FT

PT


1FT, 1PT

Not in employment

2 PT

In employment FT

PT

All


0.5

69.4

1.0

9.9

13.5

0.3

1.3

2.9

1.3

1980

0.7

59.6

0.9

9.7

20.1

0.4

1.7

4.1

2.9

100.0 100.0

1990

0.7

48.0

1.2

9.6

29.4

1.2

1.7

3.8

4.4

100.0

2000

1.7

30.2

2.0

10.4

38.4

3.3

3.0

4.2

6.9

100.0


0.5

78.7

1.1

10.1

7.7

0.2

0.5

0.8

0.2

100.0

1980

0.8

76.3

1.2

8.1

10.5

0.6

0.8

1.1

0.6

100.0

1990

1.1

64.9

1.8

7.6

19.1

1.5

1.4

1.3

1.3

100.0

2000

2.1

43.6

2.4

9.8

31.4

4.1

2.8

1.5

2.2

100.0

100.0


0.3

76.8

0.9

8.6

10.2

0.2

0.7

1.5

0.6

1980

0.5

71.4

0.8

9.3

13.3

0.4

1.3

1.5

1.5

100.0

1990

0.8

59.4

1.4

7.6

23.2

1.5

1.6

1.9

2.6

100.0

2000

1.9

38.7

1.9

8.9

35.6

3.8

2.8

2.0

4.5

100.0


0.6

56.5

1.0

10.7

20.5

0.4

2.2

5.7

2.5

100.0

1980

0.6

47.1

0.7

10.6

27.3

0.3

2.3

6.5

4.5

100.0

1990

0.5

30.0

0.7

12.1

39.8

1.0

2.0

6.5

7.4

100.0

2000

1.3

17.4

1.8

11.6

44.1

2.5

3.3

7.0

11.1

100.0


84



Table 3.A.3. Women do the largest share of unpaid work, especially in Portugal Distribution of time spent (average hours per day, in 2000)

Paid work

Total of unpaid work

Child care

Other unpdaid

Total paid and unpaid time

New Zealand All couple families with at least one child at home Men (average)

3:57

0:35

0:13

0:22

4:32

Women (average)

2:32

0:54

0:26

0:28

3:26

-> ratio women/men

0.6

1.5

2.0

1.3

0.8


5:26

0:46

0:25

0:21


2:19

1:09

0:31

0:38

6:12 3:28

Women at home

0:00

0:53

0:25

0:28

0:53

Couple families with youngest child under 6 y.o. Men (average)

5:46

1:20

0:59

0:21

7:06

Women (average)

1:22

3:15

2:46

0:29

4:37

-> ratio women/men

0.2

2.4

2.8

1.4

0.7


4:42

2:11

1:52

0:19

6:53


1:44

4:53

2:27

2:26

6:37

Women at home

0:00

3:48

3:16

0:32

3:48

Lone parent families with youngest child under 6 y.o. Male lone parent

2:55

10:08

6:22

3:46

13:03

Female lone parent

1:20

11:01

6:22

4:39

12:21

-> ratio women/men

0.5

1.1

1.0

1.2

0.9

Portugal - 1999 All couple families with at least one child at home Men (average)

4:50

1:04

0:15

0:49

5:54

Women (average)

2:42

4:25

0:48

3:37

7:07

-> ratio women/men

0.6

4.1

3.2

4.4

1.2


5:57

4:41

1:01

3:40

10:38


3:54

6:55

1:29

5:26

10:49

Women at home

0:36

7:50

1:08

6:42

8:26


85


Table 3.A.3. Women do the largest share of unpaid work, especially in Portugal (cont.) Distribution of time spent (average hours per day, in 2000)

Paid work

Total of unpaid work

Child care

Other unpdaid

Total paid and unpaid time


5:38

1:21

0:31

0:50

6:59

Women (average)

3:06

5:22

1:32

3:50

8:28

0.6

4.0

3.0

4.6

1.2

-> ratio women/men Women in full-time paid work

5:33

4:43

1:33

3:10

10:16


4:06

7:14

2:24

4:50

11:20

Women at home

0:45

8:10

1:51

6:19

8:55


3:36

1:00

0:11

0:49

4:36

Female lone parent

2:50

4:45

1:12

3:33

7:35

0.8

4.8

6.5

4.3

1.6

-> ratio women/men Switzerland - 2000

All couple families with at least one child at home Men (average)

6:02

3:13

2:00

1:13

9:15

Women (average)

1:54

8:00

3:28

4:32

9:54

-> ratio women/men

0.3

2.5

1.7

3.7

1.1


5:38

6:44

2:54

3:50

12:22


2:19

7:24

3:05

4:19

9:43

Women at home

0:00

9:09

4:04

5:05

9:09


6:02

3:16

2:00

1:16

9:18

Women (average)

1:37

8:03

3:29

4:34

9:40

-> ratio women/men

0.3

2.5

1.7

3.6

1.0


5:10

7:08

2:58

4:10

12:18


2:13

7:25

3:05

4:20

9:38

Women at home

0:00

8:58

4:04

4:54

8:58


5:28

2:19

-

2:19

7:47

Female lone parent

3:26

6:55

3:12

3:43

10:21

0.6

3.0

-

1.6

1.3

-> ratio women/men

Source: Statistics New Zealand, Time Use Survey; Portugal: TUS – Time Use Survey 1999 (October); Swiss Labour Force Survey.

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Notes 1. Gender segregation of employment can be horizontal (e.g., employment of men and women is concentrated in different sectors of activity and forms of employment) or vertical (the position of men and women in the hierarchy differs), and characterises employment patterns in these three countries as well as other OECD countries (OECD, 2002b). 2. Part-time employment is also less frequent in management occupations, but nevertheless involves an important share of women employees (48% of female managers in Switzerland), whereas only 5% of male managers, in Switzerland, work on a part-time basis (Strub, 2003). 3. Examples of such workers include: workers with a contract of fixed duration, seasonal workers, cross-border workers, workers who engage in self-employment and work on a contract basis (and who would generally prefer to have a regular contract), on-call workers, and workers employed by a temping agency. Often, these characteristics coincide with part-time work and low-paid employment, but it may also concern a high-skilled computer engineer who works from home. 4. In Portugal, the average wage of temporary workers in 1997 was only 65% of average earning of regular workers, but being a temporary worker does not seem to influence the chances to access to training in Portugal (OECD, 2002b). 5. In a study on precarious employment for Switzerland, Marti et al. (2003), find that about 11% of all Swiss employees can potentially be considered to be in precarious employment, while upon accounting for other factors, including family income, almost 4% of the workforce is estimated to be in precarious employment in Switzerland. Women are about three times more likely to be in precarious employment as men. No significant difference is found by linguistic region or nationality. 6. Tucker (2002) argues that since the cost of overtime by full-time workers fell during the 1990s, the demand for casual workers declined over the same period. 7. These self-employed workers can choose between two different contribution rates: 25.4% with “minimum coverage” (including, for example, retirement pensions and maternity insurance) and 32% (including sickness and occupational injuries). Contribution rates also vary with the wage-level chosen for assessment. 8. Many workers (including many cross-border workers) employed in the tourism or textile sectors in Ticino will not be covered by collective agreements. These workers are in low-paid jobs and have limited access to family-friendly workplace support. In Ticino, the wage difference between regular and atypical workers is about 23%, but in certain sectors (e.g. textile) this may be up to 45-50%. As most workers with precarious contracts (including cross-border workers) are female, the gender wage gap in certain sectors can be as high as 45%. 9. Part-time employment is nevertheless unequally distributed among sectors and occupations. In Switzerland, part-time work is mainly concentrated in the occupations of the tertiary sectors, whereas full-time employment is predominant in industry (Strub, 2003). 10. In contrast, in New Zealand employment rates of female prime-age workers have increased rapidly in the three decades prior to 1990. 11. Bauer (2000) finds that mothers in Switzerland who interrupt their career often work fewer hours on their return to the labour market than before. This is related to the long-term human capital loss related to the career break (human capital


87


depreciation effect); while the financial incentives to go back to full-time work often have weakened over time as spousal earnings also increase during their career break (income effect). 12. For the three countries under review, no comprehensive cross-country data exist which would allow for a comparison of attitudes towards mothers in work. In any case, if such evidence were available it should be interpreted with care as attitudes are not independent of circumstances and policy. To estimate to what extent this matters Antecol (2000) considers the employment behaviour of first generation of immigrants in the US. After controlling for exogenous as well as endogenous variables, gender employment gaps for Swiss but especially Portuguese immigrants are lower than in the country of origin, while employment gaps among New Zealand immigrants to the US are similar to what they are in New Zealand. This seems to suggest that especially in New Zealand attitudes are important determinants of the decision to participate in the labour market. 13. Full-time work by both partners in a couple family is more common in New Zealand when children grow up (see Table 3.A.2 of the annex). 14. Perista (2002) shows that Portuguese men have increased their participation in domestic work but, by selecting those activities that are relatively less timeconsuming, e.g. administrative work rather than personal childcare. Sousa-Poza (1999) shows for the Swiss case that the level of education has an adverse effect on the amount of time allocated to domestic work and a positive effect on time devoted to childcare. The effect depends, however, on the region and the cultural environment. Thus, level of education is a more discriminating factor in the time allocated to children in Latin Switzerland (compared to Germanic Switzerland) where, in particular, the amount of time allocated to children is adversely affected by low levels of educational attainment. 15. Considering the earnings gap at across earnings deciles it appears that the gender wage gap at the bottom of the quintile in New Zealand is considerably smaller than at the top, while this is the reverse for Switzerland, and especially Portugal. The latter results from under-reporting of earnings at the bottom income level and from the relative importance of the informal economy in Portugal (about 20% of National income, Chapter 2). 16. Souza-Poza (2002) shows that gender discrimination in pay differs markedly across workers and sectors. For example, the gender wage gap for low-skilled jobs is 18% in Switzerland and this cannot be explained by observable variables. Among high-skilled workers, wage differentials are larger (at 28%), but only 20% of this variance cannot be explained. 17. In estimating this wage penalty, Dixon (2000) notes that the estimate could be biased by unmeasured differences between mothers and non-mothers, which could not be controlled for in the analysis.

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Chapter 4

Childcare Systems and Policies

This chapter examines the full range of early childhood education and care facilities aimed at educating children and helping parents to reconcile work and family life. In all three countries the proportion of three-six year old children using some type of nonparental childcare is high. By contrast, the use of formal day care by younger kids is considerably lower: it is highest in New Zealand at 40% of very young children (zero-three) while about half that in Portugal and Switzerland. This chapter discusses these and other outcomes, in view of differences in public policy approaches towards the development of childcare capacity, reducing the costs of access for families and promoting high-quality early childhood education and care services.


89

4. CHILDCARE SYSTEMS AND POLICIES

4.1. Childcare policy objectives Public investment in early childhood education and care is warranted for two largely independent reasons. The first motive is to provide education and care outside the family to foster social and cognitive development of children and to prepare their future integration into the education system (OECD, 2001a; Kamerman et al., 2003). In this context, facilities also aim to maintain and foster the transmission of certain cultural traditions, as is the case in New Zealand with regard to the Maori and Pacific Islands community. The second motive is to help parents in reconciling work and family life, and to promote gender equity in employment opportunities. From a macroeconomic standpoint, these policies are aimed at supporting the labour supply provided by families (and mothers in particular) and at minimising the loss of human capital due to labour market withdrawal. Supplying childcare services aims therefore to make having children and working more compatible (even though it is true that women’s employment began to grow in most countries before childcare supply had been developed). This in turn means that currently underprovided childcare for children under the age of three and for older children outside their school activities are special targets for investment. While aiming to enable parents to choose their preferred form of care provision, childcare policy design has to find an appropriate balance between these objectives, and this balance varies across countries and with the age of children. Public childcare policy for those not yet three years of age often has an emphasis on family/work reconciliation objectives. With respect to older children, the balance of policy objectives moves towards a greater emphasis on educational objectives. Indeed, recent policy debate in New Zealand and Switzerland includes a focus on the challenges associated with finding a better mapping of working hours and opening hours of Early Childhood Education and Care (ECEC) facilities and school-hours without endangering educational concerns. The aim of this chapter is to show how early childhood policies in New Zealand, Portugal and Switzerland cope with this challenge. The chapter first describes the available forms of education and care and the use of the various types of services. The subsequent sections analyse how policies differ in terms of developing access, quality and capacity in childhood education and care policy.

90


4.

CHILDCARE SYSTEMS AND POLICIES

4.2. Types of facilities and the use of childcare 4.2.1. Childcare institutions Facilities for very young children In all three countries, children under the age of three can attend collective care facilities (Table 4.1). In New Zealand, either community-based (not for profit) or private (for profit) “education and care centres” are the most frequent type of collective childcare for very young children, who can also attend play-centres. Crèches in Switzerland sometimes enrol very young children of 6 weeks old, while if very young children enter crèches in Portugal this is generally on expiry of the four-month period of maternity leave (Chapter 6). A minimum attendance of three or four half-days per week is generally required to enrol in these types of institutions, while actual duration of care provided per day in these institutions varies. In Portugal, children can be cared for a total daily duration of 11 hours, a frequent practice among private sector centres (Wall, 2004). In Switzerland, many day-care institutions are open for up to 12 hours, although this practice varies across and within cantons. In recent years there has been significant growth of full-day-care services (10-12 hours per day) in New Zealand; approximately 71% of services are full-day as against “sessional-based” (up to three or four hours per day) kindergarten. In Switzerland, childcare for children under the age of three very much varies across cantons in line with different policy objectives. In Ticino, an emphasis on early childhood education means that childcare policy targets children older than 3, whereas the infrastructure for very young children is very limited: there are only six subsidised centres with a maximum capacity of 300 children, and another 26 non-subsidised crèches with about 460 places. In the canton of Zürich, children between zero and five years old attend nurseries (Krippen), where children of working mothers have priority access provided they attend for at least five half-days per week. Collective care facilities for children under age three (nurseries, crèches and day-care centres) are more developed in Vaud (and especially its capital Lausanne which accounts for 40% of cantonal childcare supply), where balancing work and family life and gender equality are explicit policy goals. For this reason, “extended hours” of care are frequently offered both in nurseries where children are cared from their first months until their third year and in crèches for children from their 18th month. Facilities with extended opening hours offer a service of care for 10 or 12 hours per day, are open all week long and for most of the year. Some other institutions, however, only provide “restricted hours” for a maximum of four hours per day.


91

92 3-5 0-5

Kindergartens

Te Kohanga Reo (Maori Community)

0-5

Nga Puna Kohunga

6 months-6 years old

3-6 years old

Family-based crèches

Kindergartens

Emergency unit / Temporary centers

Care for children from families at risk


Crèches

Children aged 0-6

0-5

Unlicensed playgroups and playcentres

Unlicensed

0-5

Playgroups

0-5 0-5

Home-based care

Age group

Education and care centres

Licensed

Children aged 0-5

Table 4.1. Diverse childcare services

C t

f VAUD

Public and private in the solidarity network exclusively

Public and private in the solidarity network

Public and private in the solidarity network

Private, with over 70% belonging to the social solidarity network

PORTUGAL

Unlicensed non-profit parental associations.

Developed by the Maori Community in order to preserve their culture and language.

Associations generally linked to a national organisation.

Parental co-operatives

Parental associations co-ordinated by professionals. 55% of capacity provided through the Barnardos network.

Private businesses and NGOs.

NEW ZEALAND

Providers

Main characteristics of care facilities for children

Five hours of educational activities + optional childcare during leisure time

4 to 11 hours per day.

One to three sessions per week.

Care by session, but for full-time care is often possible

Mainly for three-four sessions; three times per week for the youngest children, five times a week for older kids.

Mainly for part-time sessions; up to ten sessions per week.

Flexible, more often used on a part-time basis

Full-time or part-time, with flexible hours.

Duration of care



Canton OF TICINO

SWITZERLAND

Providers

Canton of VAUD

3-6 (but mainly from the age of 4) Public school system

Age group


18 months-4/5 years old

30/36 months-4/5 years old

4/5-6/7 years old

2 months-4/5 years old

0-5 years old

0-5 years old

Crèches

Day-care centres

Day-care units for schoolchildren (Unités d’accueil pour écoliers, UAPE)

Childhood centres (Centre de vie enfantine)

Family-based crèches

Family-based day care

Coordinated by private associations or municipalities

Private or public institutions



Voluntary associations Public Institutions

3-6 years old

2-6 years old

Infant schools (écoles enfantines)

Workshop/playgroups


Drop-in playgroups/ drop-in day care centres 30 months-8 years old

Kindergartens

Facilities with limited opening hours: open for a maximum of 4.30 hours per day, 3 or 4 half-days per week.

2 to 30/36 months

Nurseries

Facilities with longer opening hours: open for at least 4 consecutive hours up to a maximum of 12 hours per day

Children aged 0-5

Scuola dell’ Infanzia

Crèches

Table 4.1. Diverse childcare services (cont.) Main characteristics of care facilities for children

Two to three hours per day, regular attendance (not more than five times per week)

Mandatory regular attendance 2 to 3 consecutive hours per day – 20 hours per week.

Open for a maximum of three to four hours per day, generally with the same schedule as the academic year. Enrolment for regular attendance in stable class groups.

Day care; children receive day care in a collective site once a week

10 to 12 hours, 46 to 48 weeks per year;

5 to 12 consecutive hours outside of school periods, 46 to 48 weeks per year.

Part-time and full-time, regular attendance required

10 to 12 hours per day, 46 to 48 weeks per year;

10 to 12 hours per day, 46 to 48 weeks per year;

8.30 am to 15.45 pm exept for wednesday afetrnoon 7 am to 7 pm in some institutions in Lugano and Chiasso After-school activities offered in some institutions

Duration of care


93

94 Table 4.1. Diverse childcare services (cont.)

4 and over

Day-care clubs

Source: Information supplied by national authorities.

4-5 to 6 years old

4 and over

Crèches (Horten)

0-5 and over

Family-based care

Kindergartens

0-3 years old

Nurseries (Krippen)

Age group

Most private institutions are subsidised

Canton of ZÜRICH

Providers

Main characteristics of care facilities for children

Supplements kindergartens

Supplements kindergartens

Mainly from 8 to 12

At least five half-days per week

Duration of care



4.


In all three countries, family-based childcare is most frequently used by very young children. It may be provided in the provider’s home, which is most frequently the case for private nurseries, or in the parents’ home, when the child is cared for by a nanny or childminder. The latter may or may not have formally recognised professional qualifications and formal employment status. Parents who opt for this solution appreciate two aspects of this form of care. First, the child can stay in a family environment conducive to the development of personal relations between the child and the caregiver. Second, it allows for longer hours and generally more flexible schedules than are possible in collective institutions and therefore better meets parents’ work constraints. There are concerns, however, about the quality of care provided by informal childminders.

Facilities for children of pre-school age In Portugal and Switzerland, care for children between the ages of 3 and 6 is provided by a diverse range of collective facilities, some of which are strictly recreational (drop-in day-care centres, play groups) while others are more educationally oriented (kindergartens and infant schools). Such a division between recreation and education is not as strong in New Zealand where play-centres, kindergartens and other childcare centres adhere to the same curriculum (although different regulations do apply). The role of preschool institutions in educational development is an important aspect in all three countries and is therefore a public concern. In New Zealand, kindergartens cater for mostly three and four years old children (i.e. before entering of the first degree of primary school) in sessions lasting between three and six hours per day. Children of this age group can also attend other “education and care” centres, in which care is generally provided for longer hours per week than in kindergartens (see below Section 4.2.2). In Portugal, kindergartens are also open to children from age three onwards, but daily attendance can be as long as eight hours in view of parental needs. In this case, educational programmes in kindergartens are supplemented by socioeducational “free time” activities (Section 4.3.5). Similar programmes are uncommon in New Zealand, despite some growth in this sector in recent years. Kindergartens in the three Swiss cantons are generally attended by children for a half-day period of three to four hours per day. In the canton of Zürich, most parents who wish to use childcare for more hours per day must place their children in crèches, after-school care or “clubs”. The need to combine several types of childcare to ensure all-day care – which is even more difficult if there is more than one child – makes it difficult for parents to reconcile having children with full-time work schedules. In Vaud and Ticino, infant schools make it possible to cater for most children of pre-school age for


95


more hours per day. In Ticino, these schools (Scuola dell’Infanzia) are part of a tradition more than 150 years old; they cater for children over the age of three from morning until mid-afternoon (but about 12% of the schools do not provide lunch). After-school care is sometimes available, but mostly concentrated in urban municipalities like Lugano and Chiasso. School closure on Wednesday afternoon and the relatively long 17-weeks holiday period, however, pose serious challenges to combining care responsibilities for children with a full-time job (Section 4.3.5). In Vaud, day-care units for school children (Unités d’Accueil pour Ecoliers) care for pre-school age and older children in centres with longer daily opening hours that are also open during most of the year. New Zealand has special childcare facilities for its ethnic minorities, such as the Kohanga Reo for the Maori community, which are designed to ensure that the language and cultural traditions of each minority are transmitted to the next generation.

4.2.2. The use of different types of childcare In all three countries, childcare capacity has expanded since the early 1990s, but rates of use of formal care vary across countries and with the age of the children. The preference for parental care or other forms of informal and “personalised” care together with capacity constraints and the relatively high costs of formal childcare for very young children explain why the use of formal childcare increases with the age of children. Compared to their Portuguese and Swiss peers, very young children in New Zealand are more likely to use a formal childcare service: 40% of children under age three are enrolled in formal childcare. Enrolment rates increase with age, from 16% for those under age one to 42% at age 2 and almost 95% at age 3 (with 96% at age three to five years, Table 4.2). There has been a shift in the type of formal childcare that children in New Zealand use since the mid90s: the number of children in kindergarten has remained fairly stable, while the number of kids that use “education and care” centres have increased significantly: from 31 033 in 1990 to 76 246 in 2002. As a result, in 2002 kindergartens catered for almost 43% of three-four year olds in formal care, “education and care” centres cover about 41% of that age-group, home-based care covers another 3%, while other centre-based facilities (e.g. playschools but also “Kohanga Reo” centres, and correspondence school) cover about 13% (Data Unit Management, MoE).1 On a daily basis, children in New Zealand spend more time in “education and care” centres and home-based services than in kindergartens. However, the average weekly time that children use care has recently increased for all types of care: in 1998, the average was 10.7 hours per week in kindergartens, 15.9 hours in education and care centres

96


4.


Table 4.2. Children in New Zealand start using formal childcare at a relatively early age Participation rate in education and care facilities, % of the child population concerned Age 0-< 3

Age 3-5/6

Age 0-5/6

New Zealand

40%

98% (for 3 and 4 years old children)

64%

Portugal

22%

75%

65%

–

7.2% of 3 year olds

-

Switzerland

31% of 4 year olds 84% of 5 year olds Lausanne Ticino

28.5% from 0 to 30 months 5%a

38.5% of children from 30 months to 5 years 58% of 3 year olds 25%a

95% of 4 year olds 99.5% of 5 year olds

Zürich

90% starting from age 4 94% of 5 year olds

28.7% in Zürich-city and 13.7% in the canton

a) Estimates by the OECD Secretariat. Source: Information supplied by national authorities.

and 15.7 in home-based care,2 in 2003, these were 12, 18.6 and 19.7 hours per week, respectively (MoE, Data Management Unit, 2004). In Portugal, 75% of the three to six years old children are enrolled in preschool institutions, which often organise “free time” activities (see above) so that services are often provided on a full-time basis. By contrast, around 2223% of children under the age of three attend formal childcare facilities (Table 4.2), up from 7% in the 1970s when full-time maternal care was the dominant pattern (Wall, 2004). The high employment rate among mothers with very young children (70%) is not only facilitated by formal care facilities that often facilitate full-time employment (see below) but by considerable reliance on childminder (12%) and especially care provided by relatives (36%). However, there is a concern in Portugal that young children in low-income families might sometimes be left unattended as they may not always have access to such an informal care networks (Torres et al., 2001). Access to informal care networks is of particular concern to those low-income families who have recently moved into the Lisbon area and who therefore do not have access to care networks provided by relatives (Wall et al., 2001). In Switzerland, there are major disparities across linguistic regions and cantons. For example, Buhmann (2001) finds that the use of non-parental


97


childcare resources is generally more common in French and Italianspeaking Switzerland where it concerns about 35% of households with a child under 15, than in German-speaking Switzerland (27%). The use of nonparental childcare also varies with the degree of urbanisation: 36% of all households in cities use external childcare services versus 26% in rural areas. One of the main reasons for these differences is the gap in the supply of formal childcare services that exists across municipalities, which are responsible for decision-making in this field. Differences in the coverage of such services do not only reflect shortages of supply, but also behavioural differences among parents in the three cantons under review, especially concerning children younger than three years. In Ticino and Zürich the prevailing behavioural norm is that the mother cares for the child until the age of three or four (with or without the help of informal arrangements), and only starts using a nursery and/or kindergarten (in Zürich) or infant school (in Ticino) at, or after, that age. In Vaud, parents more frequently use formal childcare facilities from an earlier age. In the canton of Zürich estimates on the use of formal care by children are only available for the age-group zero to five and include children attending nurseries and in kindergartens. Basically, formal childcare for children under the age of five is far more frequent in the city of Zürich (28.7%) than in the canton of the same name (on average 13.7%), where two-thirds of the 171 municipalities do not have any childcare centre for this group . Moreover, use of care facilities is often part-time: in 2002, half of the children in nurseries attended for up to three half-days per week while only 35% of children were cared for five days. Participation in formal child care is most common when children are of pre-school age: 90% of children who have reached their fourth birthday and 94% of those who have reached their fifth birthday by the end of April of a given year attend kindergarten. However, this is only for a limited number of hours per day. In all, parents of young children often make use of different types of childcare (personal care, informal care by relatives neighbours and friends, and formal childcare) to match their work and family commitments. In Ticino, formal childcare in crèches is rare before the age of three (only 5% of children attend this kind of formal childcare), the age at which children can get access to infants’ school. 3 Indeed, participation in the educational system starts relatively early and allows for quasi-universal care of children from the age of four, which nearly reaches a full-day basis: seven hours per day or more when out-of-school-hours care is provided, especially in Lugano or Chiasso. On the other hand, 12% of the infants’ schools in Ticino do not provide lunch and holidays last approximately 17 weeks.

98


4.


In Vaud, and more specifically its capital Lausanne, greater emphasis is placed on the needs of parents in balancing work and family life. This explains the greater development of formal childcare for children under the age of three, and the development of full-day care compatible with the working lives of parents (Métrailler, 2002). In Lausanne, formal care concerns almost 30% of children younger than 30 months for 12 hours per day in most cases, i.e. for a much longer time than in Zürich or Ticino. Nevertheless supply falls well short of demand.

4.3. Three competing public policy goals: access, quality and capacity The fact that early childhood education and care generates collective externalities is the argument traditionally used to justify public intervention in this field. Broadly speaking, there are two such externalities. First, providing a social and educational environment conducive to the healthy development of children will ultimately be favourable for society and the development of its future human capital. Thus there is a collective interest for child development that can not totally be produced by rational individual behaviour since it is obviously impossible to identify ex ante all beneficiaries. Second, enabling parents to reconcile work and family life more effectively raises the activity rate and produces greater wealth and increase current and future tax receipts. Finally, public investment is aimed at achieving three more immediate different goals, i.e. to make early childhood education and care services more affordable, to improve their quality and to increase capacity. The tension between these objectives suggests that certain tradeoffs appear to exist, largely because of financial constraints.

4.3.1. The quantity-quality trade-off A first trade-off results from the tension between developing participation and maintaining certain standards of quality. One way of increasing capacity is to minimise the cost of childcare, in particular by seeking to keep labour costs to a minimum. This can be done by reducing the staff-to-child ratio, which in turn may put quality at risk, and/or lowering wage levels in this sector, which may lead to the recruitment of low-skilled and/or transient staff. On the other hand, maintaining a high standard of quality or improving quality is likely to raise the cost of childcare by, for example, increasing staff-to-child ratios or raising wage levels to attract highly qualified staff. However, this makes it more difficult to develop childcare capacity because of the increase in the cost by unit of care. The factors that determine quality act as a constraint on productivity gains, which may hamper the development of the childcare sector, as suggested by Baumol’s theory on the development of low productivity growth sectors (Box 4.1).


99


Box 4.1. Quality-quantity dilemma in a low productivity growth sector The theoretical framework first presented by Baumol (1967) on the development of low productivity growth services can be used to analyse the dilemma facing public policymakers in the field of early childhood education and care. Baumol shows that, using relatively general assumptions, a difference in productivity gains between sectors will lead to unbalanced growth detrimental to low productivity growth sectors, which will see an unlimited rise in their costs – and thus their prices – in comparison with other sectors with greater productivity gains (Tronti et al., 2000). The consequence of this asymmetry is that services with severely limited productivity gains can only be developed if corresponding demand is either sufficiently “inelastic” in relation to prices or else is very elastic in relation to the income of the households that consume these services. This creates a dynamic of low growth in this sector while rising prices restrict the consumption of these services to the wealthiest segment of the population. This asymmetry has serious consequences for the development of service capacity, quality and accessibility. To counter this trend, two solutions can be envisaged: 1. Allow labour costs to adjust freely to differences in productivity; this would mean that wages would fall in the low productivity sector, thereby boosting growth in this sector. However, lower wages might conflict with maintaining standards of quality in childcare services and the professionalisation of the sector that ensures this quality. 2. Subsidising childcare services, either at the level of production or demand; the first approach is aimed at raising salary levels and improving the quality of services through the recruitment of qualified staff, while the second is aimed at helping more households to have access to childcare services.

4.3.2. Public investment in childcare National expenditure on childcare Public spending on childcare as a percentage of GDP is higher in Portugal and New Zealand (at over one-third of a percentage point of GDP) than in Switzerland (Table 4.3). However, per child enrolled, public childcare spending in relation to per capita GDP is similar in New Zealand and Switzerland, at 11%, and somewhat higher in Portugal, at 13%. In Switzerland, differences in formal care structures (including funding) across cantons hamper a cross-cantonal comparison of expenditure on

100


4.


childcare and preschool education. However, estimates of amounts spent on “youth protection”, including public spending on childcare in crèches, show important disparities across cantons (Table 4.3). Relevant outlays (in per cent of cantonal income) are higher than the national average in all three cantons under study, and highest in Vaud, reflecting efforts in that canton to develop formal childcare for very young children while fostering “extended opening hours” structures.

The impact of the organisation of public financing on childcare supply The structure of public financing (in terms of support given to childcare providers and users) and the rules for granting subsidies (e.g. fixed rate per child, deficit guarantee) contribute to understanding the characteristics of childcare systems with regard to capacity, duration of care, staff-to-child ratios, and fee practices. In Portugal, the development of childcare facilities providing care for relatively long hours per day is related to the growing number of mothers with very young children who engage in full-time employment. Apart from public services which are fully funded, the government also finances services provided by institutions that belong to the social solidarity network (not-forprofit service providers). Every year the Ministry of Social Security and representatives of the social solidarity network sign a “Protocol” which regulates the financial contribution of the State for various social services and childcare establishments. In return, service providers must comply with health and safety standards, certain pedagogical policies, but also fee regulations. At the same time, there may also exist “cooperation agreements” between a District Social Security Centre and institutions of the social solidarity network that reflect local conditions, e.g. the total number of children eligible for a particular service in a given area. The pre-school system operates on the basis of a 1997 law that regulates inter-ministerial co-operation, with the aim to ensure effective integration of the support provided for educational activities and for out-of-school-hours and social childcare. The Ministry for Education grants a subsidy to preschool institutions that fully funds five hours per day of educational activities; while the Ministry for Social Security and Labour adds in financing for noneducational activities, as for example extended opening hours and lunches (some municipalities will also provide financial or logistical support). Thus, access to preschool education is free of charge for families, while they only have to pay for social and leisure activities and lunches. In the institutions covered by the social solidarity network, almost 60% of the costs of such socioeducational activities are covered by public funds, while public subsidies only amount to 5% of the cost of child care in commercial institutions (MoE, 2001a; Chart 4.A.2 in the annex to this chapter).4


101


Table 4.3. Greater investment in early childhood education and care in New Zealand and Portugal than in Switzerland New Zealand (2002)

Portugal (2001)

Switzerland (2001)

Ticino

Vaud

Zürich

Percentage of cantonal income, 2001 Spending as % of GDP

0.35

0.36

Childcare only

–

0.25

Pre-primary education only

–

0.11

Percentage of total social spending

3.32

1.72

Childcare only

–

1.19


–

0.53

Annual spending in millions USD (PPP)

304

668

Childcare only

–

464


–

204

Annual spending per child enrolled in USD (PPP)

1 697

2 294

Childcare only

–

2 651


–

1 755b

Spending per child enrolled as % of GDP per capita

11.3

0.19a

0.25

0.35

0.25

–

–

–

–

–

–

–

–

–

–

–

–

0.58

324

–

3 314c

13d

Childcare only

15

–


10d

11.0

– Not available. a) Spending on the “protection of children and youth, including crèches”, data for 2001 provided by the Swiss Federal Office. b) This estimate account for children enrolled in public preschool only. Also accounting for children in private institutions leads to a much lower estimate of spending per child in preschool: about USD 850 per child. c) Spending per preschool child (from 3 to 6 years old) for 2000; OECD (2003c), Education at a Glance. d) If children in private preschool were also accounted for, the propotion would be 4.2 and the overall percentage of spending per child enrolled in childcare and preschool would be 9.2% (not 13%). Source: OECD estimates based on information supplied by national authorities.

The policy framework in New Zealand aims at both promoting participation of children in quality early childcare facilities and increasing labour market participation of low income groups. In particular there are two funding streams (Chart 4.A.1 in the annex). Firstly, the Ministry of Education manages the bulk of financing by granting subsidies to “education and childcare” facilities. A subsidy per child and hour is attributed to all chartered childcare institutions, without any difference in the rate of subsidy paid to either centre- or home-based, private or community-based facilities. The subsidy is somewhat higher for children up to the age of two than for older ones. In all cases the subsidies granted by the Ministry of Education are paid

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for a maximum of six hours per child per day (or 30 hours over the week). Under this system, childcare centres have relatively little incentive to supply care for more than 30 hours per week, except when they see this as an opportunity to meet demand from working parents. The resulting parental fee is, however, relatively high (Section 4.3.1). In order to raise the quality of care provided in formal structures, providers can receive higher rates of subsidies if they apply the highest standards of the staff-to-child ratio and/or employ most qualified carers. In addition, kindergartens (attended by three and four year olds) receive a bonus vis-à-vis other structures catering for children of the same age, since they are required to have 100% trained teachers – while other institutions are not.5 Kindergartens are de facto free or almost free of charge, but access is limited by capacity. This distinction is anomalous, but in line with the stipulations on qualified staff as in the 2002 Strategic Plan that will be phased out by 2012 (Section 4.3.3). The second funding stream concerns financial support for the use of formal quality care given to working parents (or parents in training) through the “Childcare Subsidy”. This means-tested programme is operated by the Ministry of Social Development. Financial support is granted to assist eligible families with the cost of regulated childcare centres, home-based care networks, chartered Te Kohanga Reo for preschool children and for approved OSCAR services for children aged 5 to 13 years attending school. The amount of the childcare subsidy payment is proportional to the numbers of hours of work: for a full-time job of 40 hours a week, a subsidy can be received for a maximum of 50 hours per week (40 hours of work plus two hours of travel each day).6 With similar rules, and for a maximum of 20 hours per week (or 50 hours during school holidays), the Out of School Care and Recreation Subsidy (OSCAR) is granted for school-age children in order to cover part of the costs of out-of-school-hours care.7 In Switzerland, preschools (kindergartens) are in most cases fully funded and their access is consequently free of charge to parents. Investment in childcare (and underlying funding rules) for very young children is diverse across the country, and differs from one commune or city to the other (Chart 4.A.3).8 However, in many cases, municipalities (e.g. Zürich) establish a contract with childcare service providers for the provision of a given number of places under certain conditions. In this manner, municipalities or firms9 can influence the nature of childcare provided towards what is considered as appropriate e.g. in terms of activities and opening hours. Another way of subsidising childcare services concerns cantons or municipalities granting a deficit guarantee to service providers: once the fee for parents has been set, each institution is guaranteed that it will recover the


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deficit that it incurs (the amount will vary with the number of children enrolled in these institutions). This system offers little financial incentives to providers to increase the cost-effectiveness of their operations and adapt their service supply to demand (for example, respond to the provision of service at certain hours). Although widespread in the past, the practice of deficit financing is now less frequent than other funding options. Nevertheless, in the canton of Zürich about 31% of all municipalities that financially support childcare services, do this at least in part through deficit guarantees. In Ticino, the six subsidised crèches are covered by a deficit guarantee, but the new law on family support (that will be applied from January 2005) involves this being replaced by a fixed subsidy to providers up to one-third of the costs (effectively, about 40% of staff cost). In addition, the canton of Ticino will pay the otherwise non-income tested fee for low-income families (up to a certain level so as to avoid some crèches setting very high fees). In the canton of Vaud, the practice of guaranteed deficit financing does not exist, except for municipal child care centres.10

4.3.3. The quality framework of services of care The quality of childcare services is crucial to support children’s social and educational development. Quality of childcare has many aspects such as standards of hygiene and safety, staff-to-child ratios and the size of groups, and compliance with certain educational policies, which are key factors for regulating quality, qualifications, training and remuneration of childcare staff (Kamerman, 2003). At the same time, the extent to which childcare is adapted to parental work commitments is less universally recognised as a component of quality. The objectives set and the means used to monitor and promote the adoption of high standards of quality differ across countries.

Regulating quality In New Zealand, since 1988 all education and care providers are regulated under the authority of the Ministry of Education (Meade and Podmore, 2002). Quality is co-determined by three main levers: staff qualifications and staff-to-child ratios; health, safety and building requirements; and the obligation to have a “program” that is based on the Te Whaariki curriculum. To be chartered (and thus to receive funding), providers must meet the “Desirable Objectives and Practices” that refer to a common set of principles, general goals and staffing standards settled by the Te Whaariki. To encourage providers to either raise the qualification of their staff (except in kindergarten where all staff is qualified) or to align their staff-to-child ratios to a higher than minimum standard, a bonus in the rate of subsidies is paid to providers that employ highly qualified staff or adopt the highest staff-to-child ratios (Table 4.4).

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Table 4.4. High staff-to-child ratios in New-Zealand Staff-to-child ratio in care facilities Switzerland New Zealand

Portugal Vaud

Children aged 0 to 3

To receive the higher rate of

To receive the lower rate of

subsidies

subsidies

1:4

1:5

For 0-2 year old

Ticino

with extended opening hours 1:10 for children 1:5 under 1 (+1 adult)

1:4 for children under 1 1:5 for 1-2 year olds

From 2 to 3 years old

1:6 / 2:18 for all-day care

1:6 / 2:20 all-day centres

1:8 / 2:26 sessional care

1:8/2:30 sessional care

1:8

1:4 for children cared by nannies (Family day care)

From 3 months to 3 years old Children aged 3 to 6

1:10 (+1 adult) for 1:7 children in crèches

1:11-12 for 4-hour sessions (in kindergartens)

Staff-to-child ratio 1:8 for sessions in preschool longer than facilities 4 hours long.

1:20-25

1:10

1:15

1:12

Source: Information supplied by national authorities. For New Zealand, based on the Early Childhood Funding Handbook.

In order to raise the future quality of service of care and further increase the participation in high quality services, the 2002 Strategic Plan for Early Childhood provides financial incentives for centres that currently do not employ registered teachers – mainly play groups and centres run by minority communities – to join the system of licensed centres. The goal of the “Strategic Plan” is to progressively increase the number of registered and qualified teachers, so that by 2012 all centres will be run by qualified staff (MoE, 2002). Portugal also has a curriculum that provides guidelines to assist teachers in decision-making on pedagogical practice. However, subsidies are not directly tailored to provide incentives for childcare facilities to increase their staffing levels or their level of vocational training. The development of quality is based more on the use of monitoring procedures used by District Social Security Centres before the signature of a co-operation agreement, and by audits and controls which issue recommendations for institutions to make changes and to adjust to quality standards. The recently implemented


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“Programme for the Development of Quality and Safety of Social Responses” is aimed at improving the quality of evaluations, thereby raising the quality of services. In Switzerland, the Ordinance of 1977 on child placement regulates authorisation and monitoring of non-parental formal childcare, and establishes a minimum of standards of quality. It is within the cantonal remit to set more detailed standards. As a result, regulation of quality varies considerably with the policies set established by cantons and communes, which have discretion to set health and security standards as well as norms for qualifications of staff and staff-to-child ratios (Table 4.4). However, some trans-cantonal associations play a leading role in disseminating quality standards and reducing the differences between cantons. For example, the Association of Swiss Crèches (covering all the German-speaking cantons) p ro m o t e s t h e e n fo rce m e n t o f t he O rd i n a n ce o f 1 9 7 7 t h ro ug h t h e dissemination of information and advocacy activities. In all three countries, ratios decrease with the age of children, with different levels according to the types and the duration of childcare. New Zealand is the only country where regulation on staff-to-child ratios gives financial incentives to service providers to improve quality: day-care centres applying the highest staff-to-child ratios receive the highest subsidies per child (Table 4.4). Compared to other countries (including those covered in previous Babies and Bosses reviews (OECD, 2002f and 2003g) staff-to-child ratios in New Zealand are high for children over the age of three who are in full day care in early childhood centres (in kindergarten, the staff-to-child ratio is 1 to 15.) At one to four or one to five, staff-to-child ratios for very young children (zero-three years of age) are not particularly high. There is concern about the quality of family day care in all countries. In New Zealand, quality in family day care is fostered through the requirement that the service network at hand must be headed by a teacher, while a higher rate of subsidy is paid when the service provider relies on qualified staff. Furthermore, some service providers aim to maintain and improve standards across the sector. For example, the Barnardos organisation supervises about 55% of the family-based childcare supply and ensures certain standards regarding the recruitment and training of carers. Similarly, the “Day Families” section of the Swiss “Pro Juventute” Foundation founded in 1974 co-ordinates a network of “day parents” by providing standard contracts and guidelines for the remuneration and training of childminders (Kohli-Aeberli, 1998). Lastly, in order to improve quality, District Social Security Centres in Portugal provide family-based crèches with technical assistance enabling childminders to take advantage of training and supervision programmes and provide mutual support. Participation in such

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4.


programmes may also increase awareness among unlicensed childminders to the benefits of obtaining a licence and lead to entry into formal sector employment.

Qualifications and remuneration of staff Quality of formal childcare services also depends on the qualifications and motivation of staff working in the early childhood sector. There are large cross-country differences in approaches toward increasing “professionalism” in the early childhood sector. In New Zealand, raising the average level of qualification of childcare staff has been identified as an important issue for developing the quality of childcare. Consequently, the Strategic Plan for Early Childhood Education adopted in 2002 aims to ensure that over the next ten years teachers in the early childhood sector attain the same level of qualifications and remuneration as teachers in the first level of primary education. 11 An expected result is that the quality of service will increase by attracting staff that are both motivated and more qualified, while also increasing mobility (and career opportunities) between the various levels of the education system. The introduction of pay parity among teachers and carers in New Zealand is estimated to lead to a 25% increase in the average salary in the early childhood sector. However, this strategy entails certain risks to the development of childcare capacity and access. The pay increase will lead to an increase in the cost of childcare, which, if passed on to parents, is likely to lead to a decline in demand, especially among low-income groups. Because of this, childcare providers in low-income areas are the most likely to reduce capacity.12 As a result, there is a risk that sole parents or second earners in low-income families will have to reduce working hours. (See the next chapter on the family assistance reform announced in May 2004.) In Portugal, the issue of parity in remuneration of teachers is not as pressing as in New Zealand, since teachers in public kindergartens and primary schools are normally paid along the same salary scale. Institutions of the social solidarity network are also encouraged to pay qualified teachers in charge of each group of pre-school children at the same level of remuneration as teachers in the public sector. However, increasing professionalism of staff responsible for young children is also seen as a key element for developing quality. This is particularly the case for unlicensed childminders, who are being encouraged to enter into a more formal framework and obtain formally recognised training. As an incentive, they are granted a monthly payment and are covered by the social security scheme for the self-employed; the childminder is also granted a payment towards the cost of food (a “green


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voucher”). Teachers working in crèches and kindergartens are now required to hold a certificate obtained after four years of university, the same as for primary school teachers. However, although there is a common curriculum for teacher training of both groups, the different specialisations for pre-primary and primary education prevent mobility between these two levels. The Minister of Education provides vocational training to staff who wish to update their skills or who do not hold a specialised education diploma. The impact of these programmes remains limited, however, since participation is on a voluntary basis. In Switzerland, staff qualification is also a key concern, and the structure of formal qualification for staff in charge of early childhood care is currently being revised, into a system applicable across the country with two recognized levels of education. A federally recognised professional education at upper secondary level (a three-year course) will replace the existing cantonal qualifications. This qualification will give access to employment (crèches, play groups and other preschool or out-of-school institutions) and higher (tertiary) education in childcare, across the country. At present, qualified childcare workers in the German-speaking part of Switzerland frequently have completed upper secondary education, while in French-speaking Switzerland childcare staff often have successfully gone through higher education programmes.

4.3.4. The affordability of childcare services In all three countries, parents often combine different types of childcare by using both informal resources (consisting mainly of grandparents and neighbours) and formal types of childcare. Although the use of informal care is often the preferred option for parents with limited childcare needs, it is more often the only option available for households with major childcare needs, for example, when a sole parent or both parents in a couple-family need to work full-time. In this context, the parental fee for childcare is one of the main determinants of the use of formal care.13 The share of childcare costs actually borne by parents varies across countries because of the direct and indirect subsidies granted to users and because of providers who try to tailor supply to the demand for childcare services, while dealing with the rigidities in the subsidy structure. Although in all countries fees for childcare are incometested in relation to household income, they also vary with the duration and type of childcare, while in New Zealand the childcare subsidy payments vary with the number of hours worked by parents.14

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Fees for full-time childcare for a child at age one Chart 4.1 presents the estimated fee of formal care paid in subsidised centres by parents with a one-year-old child. The fee for full-time childcare is lowest in proportion to average earnings in Portugal and Lausanne, where it amounts to roughly 10% of the earnings of a couple in which the primary worker works on a full-time basis and the spouse works part-time. Childcare fees are much higher in New Zealand, accounting for around 24% of a couple’s earnings at all income levels (Chart 4.1). Two factors help to explain this high parental fee for full-time day care: the maximum value of the subsidy paid to institutions (worth up to six hours per day per child); and a staff-to-child ratio that is higher than in the two other countries. 15 Chart 4.1.

Full-time day care fees are generally highest New-Zealand

Full-time childcare costs for couples and sole parents with one child, 2002a Zürich (city)

Lausanne

Portugal

New Zealand

% APW 35 30 25 20 15 10 5 0 100-33

100-67 Couples

100-100

33

67 Lone parents

100 % APW

a) 2003 for Lausanne. Data not provided for Ticino. Estimation for households with one one-year-old child. In New Zealand, childcare subsidy payment starts to be phased out at 80% of the APW (average production worker) earnings. It is assumed that a sole parent worker earning 67% APW is a 40 hours full-time worker, while the sole parent earning 33% of APW is for a 20 hours part-time worker. Hence, the latter is supposed to receive twice the support received by the first worker through the Childcare Subsidy. Source: Data provided by national authorities and OECD Database on benefits and wages.

By contrast, childcare costs in the other countries are quite progressive in relation to the income level of couple families – particularly in Zürich-city, where a dual-earner couple with an income of 200% of average earnings will pay nearly 2.6 times as much as a couple earning two-thirds of that. Although the rules governing subsidies and fees differ across cantons, fees for childcare are progressive in relation to family income in all three cantons reviewed.


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Fees vary with the duration and type of care Fees associated with part-time childcare are largely proportional to fulltime care fees, except in Portugal, where parental fees generally do not decline with part-time use of formal childcare. Thus, although the cost of full-time care is low in Portugal, the cost of part-time care is relatively high. This reduces the attractiveness of working part-time (Chapter 5). By contrast, in New Zealand, prevailing practices generally work in favour of part-time care: subsidies allow for a maximum of six hours per day, child-tostaff ratios are higher for full-time care, and extra-school activities are under-developed (Section 4.3.5). Most providers get around this issue by spreading subsidies across all parents using their centre (irrespective of parttime or full-time use): it can often be said that part-time care crosssubsidises full-day care. In general, childcare in the commercial (largely non-subsidised) sector is more expensive than in public institutions. In Portug al, private commercial institutions receive no public subsidy towards their operational outlays (and therefore do not apply an income-tested parental fee structure), and, in for example some parts of Lisbon, private childcare fees approximate 40% of the earnings of the average production worker. As discussed above, in New Zealand, publicly-funded kindergartens do not charge a parental fee care, although it may involve a small donation. Attending a private education and care centre generally costs between NZD 180 and 220 per week. In all three countries, parental fees for family-based formal childcare are not all that different as fees charged by centre-based providers. In Portugal, the calculation of the family fee for both crèches and childminders is very much the same, based on household income. The average cost per child is also substantially the same in both cases. In New Zealand, the cost of family day care is also no higher than the average cost of centre-based childcare – NZD 3.60 per hour in institutions belonging to the Barnados network, as compared to NZD 3.71 in centre-based care. In Switzerland, parental fees in day-care centres are usually as high as prevailing fees in family-based care; for middle and high income groups for whom centre-based care is not subsidised, centre-based care will be relatively expensive.

User subsidies: an instrument to increase access to services In all three countries, parents are in theory free to choose the childcare facility they want for their children, regardless of it being private, public or semi-public. In practice, however, there are a number of factors that limit parental choice. The lack of infrastructure in some (often rural) areas, limitations regarding the daily hours of childcare, the level of parental fees

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and the difficulties with using different types of childcare per day and/or week, limit the use of formal childcare by parents. One possible way to increase user choice is to subsidise demand (by paying allowances directly to parents) rather than supply (by granting subsidies to service providers). This approach has a number of advantages and combines greater efficiency with more equitable access to services. First, it allows for a better targeting of the distribution of subsidies to low-income families and a reduction of the inequalities in access that may exist across regions, despite preferential policies for regions with low childcare capacity. Furthermore, on the supply side, it promotes competition between institutions and makes providers more cost-conscious and more reactive to the demand of parents, for example, in terms of opening hours and flexibility. A “payment” to parents does not favour any specific types of providers as long as they are licensed and adhere to quality standards, while all parents who use quality-licensed facilities (including family day care) are eligible for financial support. Consequently, granting financial resources to parents should enable them to make their preferences felt more effectively on the childcare market and ultimately increase their ability to choose between childcare services. The effect of funding rules on demand and supply of childcare is an important issue of debate in all three countries. As discussed above, in New Zealand, “bulk funding subsidies” are given for a maximum of six hours per day (while the childcare subsidy payment is available for 50 hours per week). There is a distortion in the competition between centres that are open for a limited number of hours (e.g. kindergartens) and other structures for threefive years old children, who often offer more extended hours of care and also the same kind of educative activities. In Switzerland, although in declining number (e.g. Ticino reform to be introduced in 2005 as discussed above), a number of municipalities still fund childcare providers centres by means of guaranteed deficit financing. Such a practice eliminates any incentive mechanism encouraging providers to adapt rapidly to changes in parental preferences regarding types of childcare or opening hours of care facilities, and also leads to a distortion of competition detrimental to institutions (possibly with childcare services that are new to the area) wishing to enter the childcare market. In Portugal public funds mainly support providers from the public sector and the solidarity network, i.e. non-profit institutions. However, a recent experiment has tested the impact of a change in the subsidy allocation method by targeting users rather than providers. Although evaluation is preliminary, some positive effects can be identified (Box 4.2). Giving earmarked support to parents can lead to “new childcare demand” and may


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Box 4.2. Subsidising childcare users: the Algarve’s experience Recently, there was a one-year experiment in Algarve region wherein subsidies were targeted to families rather than childcare providers as part of the “Crèches 2000” Programme. Thereby, this initiative was aimed at enabling families to choose the type of childcare on the basis of their needs and give them a broader range of choices outside the solidarity network. This initiative was expected to have four effects: ● to increase the number of places available for social assistance clients,

who should not only have access to crèches run by the public sector and the solidarity network, but also to private sector facilities; ● to provide broader access to recognised high-quality services: families

receiving subsidies may only enroll their children in institutions that comply with the standards and rules authorised by the Social Security services; ● to increase choice of families, who are limited by their income level; and ● to better identify unlicensed private institutions and parental needs (e.g.

some facilities being overbooked). The intend was to be able to understand how these services are used and how effective this subsidy policy can be. An initial evaluation included the following findings: 1. Access to institutions in the private sector has increased, also for lowincome families; 80 crèches have participated in this experiment, of which 53 belong to the solidarity network and 27 to the commercial sector, with a total capacity of 2 983 children. During the second half of 2001, 48% of the children in these crèches were participating in this new programme, comprising 68% of all children enrolled in institutions in the commercial sector and 42% of those in the solidarity network. Poor families formed the large majority of users in the solidarity network and accounted for nearly two-thirds of all users in the commercial sector. The competition generated between institutions seems to be a partial explanation of this development since the fees charged by some institutions in the commercial sector were lower than those charged by institutions in the solidarity network. 2. Market access was provided for new demand: of the 1 421 requests satisfied by this initiative, nearly all came from new users, though keeping in mind that the economically weakest families benefiting from this programme were already known to the Social Security services.

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also improve quality as it can lead to non-licensed childminders to enter in a formal framework and adhere to quality standards.

4.3.5. The development of childcare capacity In all three countries, there is relatively broad consensus that childcare and out-of-school-hours care capacity is insufficient to meet parental demands.

Varying needs in terms of capacity There are significant inequalities in access to informal childcare resources. Many families have no access to support by relatives, friends or neighbours. Morever, low-income (and/or low-educated) groups often are most restricted in access to help from third parties (Wall et al., 2001). Secondly, occupancy rates of formal childcare capacities vary across countries and cantons, reflecting different needs and policies in terms of childcare capacity development (Box 4.3). Occupancy rates are particularly high in Portugal (94%), where practically full use is made of existing capacity, particularly for children under the age of three. The use of childcare capacity is generally lower in New Zealand, although subject to regional variations: the ECE survey reports a rate at 77% in 2002, with higher use in the Auckland area (82%) than in the rest of the country (74%). Occupancy rates are much lower for children under the age of two (58%), which reveals preferences on parental care for very young children at the prevailing price. To meet existing demand, it appears that in New Zealand priority should be given to increasing the use of existing capacity (by facilitating access) rather than to developing new capacity. This would imply some reallocation of services (and the increase in capacity in some areas), as existing capacity is not always in the same place as demand. Capacity shortages are most apparent for children under age three in Ticino, who rarely attend formal childcare. In Vaud, against the objective to provide childcare places for 15% of all children under age three a shortage of about 1 500 places is estimated in facilities providing extended hours of care for that age group (which corresponds to about one-third of the existing capacity in 2003). A similar lack of 6 000 places is estimated for out-of-schoolhours care. Despite a larger coverage rate, childcare shortages are also still found in Lausanne, where for instance only about two-thirds of families with a child younger than one year report to have found a “complete” care solution (Monot et al., 2003). In the city of Zürich the number of children on waiting lists is about 70% of the number of children cared in care institutions, and almost identical to the number of places available. Baumgarten (2003) finds that 21%


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Box 4.3. Plans for investing in childcare services Across countries, there is a wide variety in the way the development of childcare capacity is promoted. Some measures are aimed at increasing supply within existing facilities, while others are aimed at encouraging the creation of new facilities by fostering new partnerships between public and private entities. In Portugal, the development of childcare capacity over the past twenty or thirty years is attributable to increased private sector provision. In this way, as Wall has shown (2003), childcare in Portugal has developed from a childcare provision model on a network of public institutions to a model in which there are a variety of co-existing partnerships between the public and private sectors. The “Crèche 2000” Programme seeks to develop the capacity of the national childcare network for children not yet three years old and to raise its quality by promoting both the creation of new facilities and better adaptation of existing facilities. Under this programme, institutions in the private solidarity network as well as private and individual commercial businesses can request a subsidy covering a maximum of 80% of the eligible costs. In New Zealand, the Plan for Early Childhood Education recently adopted in 2002 is a ten-year childcare development programme. This plan aims to raise the participation of children in quality education and care structures, to increase quality of the service, and to promote collaborative relationships. Major changes in the education and care sector are required by the plan. Some of the biggest shifts are: i) new funding and regulatory systems to support diverse education and care services, ii) greater support to community-based services, iii) the introduction of professional registration requirements for all teachers in teacher-like services, such as those already applying in schools and kindergartens, iv) a better co-operation between education and care services, parent support and development and education, health and social services. Improvement of quality is sought through effective implementation; by promoting the professionalism of the early childhood sector through the gradual recruitment of qualified teachers in all types of service, and to establish and reflect on quality practices in teaching and learning. In late May, the 2004 budget announced additional support for early childhood education worth NZD 365 million over the next four years to implement the ten-year early childhood education strategy, “Pathways to the Future” (Nga Huarahi Arataki). This money will be used to increase quality and participation in early childhood education services from April 2005 and also contribute to the introduction of 20 hours free early childhood education a week for three and four-year-olds at teacher-led community-based centres as from July 2007.

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Box 4.3. Plans for investing in childcare services (cont.) In June-July 2004 the government has consulted early childhood education services and communities about proposals for the future regulation of early childhood education, in particular the best way to deliver the key quality improvements (e.g. adult-to-child ratios and group size, and legislating the Te Whaariki as the curriculum for all early childhood services) in the strategic plan. In Switzerland, the adoption of a programme to develop capacity by the Federal Assembly in 2002 was a significant development in that it was the first time that a federal action plan has been introduced in an area that until then had been the exclusive responsibility of the cantons. This eight-year framework programme is aimed at supporting the development of the supply of early childhood care. Parliament has approved a grant of CHF 200 millions for the first four years, after which a new financial commitment for the following years will be decided. The grants are primarily designated for new childcare structures, although they can also be granted to existing structures that are significantly increasing their services. It covers collective centrebased childcare, networks for co-ordinating family-based day care, education facilities open during out-of-school hours, provided cantonal requirements on quality are adhered to. Under this programme, each institution may receive a subsidy for a maximum period of three years. Since the programme does not involve a long-term federal commitment, the funding for at least six years must be assured and must include contributions from the canton, municipalities, employers or other third parties. The canton of Vaud is currently discussing an alternative way of financing childcare. This initiative involves the creation of a foundation, financed with public (cantonal and municipal) and private money (from employers and donations, as for example, lottery funds), which will co-finance childcare facilities for children of preschool- and school-age. The aim of the project is to foster co-operation between the different actors, and to match as closely as possible the demand for childcare services. An observatory associated with the foundation will be responsible for planning the development of childcare facilities and promote the creation of new places. Raising quality of childcare services is another key objective of the reform project. Existing criteria fixed by the cantonal authorities will have to be fulfilled by institutions providing childcare. In addition, specific grants will go towards training programmes that support skill development of the current staff. The project also provides incentives (and obligations) to make it attractive for childminders to register and enter into the formal and certified quality childcare sector.


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of parents do not use childcare facilities because conditions (e.g. opening hours) do not match their needs or because they cannot afford it.16 Limited childcare investment by some Swiss communes is partly explained by the financial implications for communal budgets. First, local demand is not always sufficiently large for each commune’s investment to be cost-effective. Second, the potential benefits of childcare investment are not always clearly perceived by municipalities. Müller-Kucera and Bauer (2003) estimate very high returns for childcare investment for the city of Zürich: every Swiss franc invested is estimated to generate 3-4 francs for society in economic returns, through direct and indirect taxes paid by additional childcare personnel, increasing parental labour supply and through reducing social assistance expenditure.17 The authors estimated that the returns would be higher than the public investment in childcare even from a narrow fiscal perspective, because public costs of 18 million Swiss francs would be off-set by at least 29 million Swiss francs of additional tax revenue and reduced public spending on social assistance. However, the balance for the city of Zürich is negative because half of the 14 million Swiss francs is accrued to the cantonal and federal authorities. This helps to explain why so many municipalities are reluctant to invest in childcare. There are two approaches that would allow for a better apportionment of costs and benefits between the different levels of government. First, investment could be increased at the federal and cantonal levels, and the development plan voted in 2002 by the Confederation is a step in this direction with an expected allocation of 200 millions of CHF over a four-year period (which however represents only 0.5% of annual GDP). Second, partnerships can be developed between communes that could reduce the unit cost of investment and achieve economies of scale. In the canton of Zürich, the intermediate administrative level of districts provides the institutional framework to support such partnerships. The role of these districts is currently limited in the childcare area, but is likely to increase in the future.

Matching formal care practices and school-hours with work practices Increased parental labour market commitment has raised the demand for childcare facilities that match workplace practices in all countries.18 In view of this, the compatibility of childcare with parents’ work schedules is an important variable in choosing a type of childcare, together with its accessibility, cost and quality. For example, the decision to use a family-based setting or a commercial institution can be motivated by the possibility of having children cared for a longer and more flexible period than is provided in collective and/or public facilities. The importance of these issues varies across countries and with the age of children, and depends on the number of hours

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that daily care is available, the number of weeks per year that facilities are closed, and existing out-of-school-hours care capacity. In Portugal, relatives are a frequently used source of childcare for very young children (36%), but almost a quarter of children not yet three years of age attend formal childcare facilities (Section 4.2.2). For those parents who have access to these facilities, their organisation generally facilitates full-time employment. Compared to spending on childcare facilities, spending on outof-school-hours activities (for children of up to 12 years of age) is high at 16%. As discussed above (Section 4.2.2), the issue in Portugal is not so much about the compatibility of working hours and operational practices in existing early childhood education and care centres,19 but about access to those centres. The poor match between childcare and work schedules is also apparent in New Zealand, where the average weekly duration of childcare stands at 18 hours whatever the type of care, which, on its own is not compatible with a full-time job. The ceiling of six hours per week for which institutions can receive subsidies may restrain providers to considerably enlarge the amount of time of care supplied for each child. Furthermore, the development of outof-school-hours care is limited as the resources allocated to this form of care are relatively low: out-of-school hours care is not supported through (bulk)funding by the Ministry of Education. Despite a recent increase in funding of out-of-school-hours services, spending constitutes less than 2% of the total of childcare spending and concerns only 0.3% of children younger than the age of 14. In Switzerland, two federal initiatives reflect the increasing concern with ensuring a better match between non-parental childcare and the prevailing workplace practices. First, the federal government initiative described in Box 4.3 also covers the creation of out-of-school-hours care facilities. Second, an initiative to change school schedules so that all public elementary and primary schools would adopt similar hours is still being considered by federal parliament. Matching work and care schedules is an explicit policy objective in Lausanne (and to a lesser extent for Vaud), where a major effort is under way to increase childcare coverage to 50% of children not yet seven years old for 10/12 hours per day. The Unités d’Accueil pour Écoliers (day-care units for schoolchildren) and the Ecoles de Jour (day schools) provide older children with this kind of extensive support. In Ticino, the lack of day-care facilities for children under the age of three limits the work opportunity of parents with very young children. By contrast, infant schools with qualified teaching staff are widely accessible from age three-four onwards, and closely integrated with the primary education system. However, opening hours are much shorter than


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working days (generally from 8.30 a.m. to 15.45 p.m. and schools are closed on Wednesday afternoons) and school holidays are long (17 weeks per annum). In the absence of a systemic approach across the canton, a few municipalities such as Lugano and Chiasso address the issue by offering out-of-school-hours activities for Wednesday afternoons or during holidays. Compatibility of school and working hours is also limited in Zürich, despite the development of continuous block childcare sessions in kindergartens (which concern nearly all facilities in Zürich-city and about half of the kindergartens in the canton) and primary schools. All-day school structures and out-of-school-hours childcare are underdeveloped: only 8.8% of 6 to 13 year-olds have access to such services, with strong variations across the canton. At 18.3% of children, Zürich-city has the highest coverage rate in the canton, but with almost as much unmet demand.20

4.4. Conclusions New Zealand, Portugal and Switzerland have all increased public support for childcare in the last decades to enhance educational and social development of children, while childcare facilities also play an important role in fostering a better work and family life balance for parents and children. Among the three countries under review, use of formal childcare is highest in New Zealand: about 40% of children aged zero-three attends early childhood services, often on a part-time basis, while the use of such services is almost universal among children age three to six. New Zealand childcare policy is largely developed, supervised and financed by the Ministry of Education and aims to increase quality and participation in early childhood and education services, while increased investment in full-day services reflects growing recognition of work/life issues. Quality objectives (and considerations on pay equity among teachers) will continue to lead to a gradual increase in remuneration levels of early childhood staff relative to that of primary school teachers. The improvement of quality is also pursued through encouraging the largest possible number of staff to obtain a teaching diploma (rather than having a fully-qualified teacher and an assistant working in tandem). For children aged three-six years, staffto-child ratios required in New Zealand are the highest of all three countries. The result of the current policy will be an increase in wage costs so increasing childcare costs and potentially parental fees. There is a risk that this policy will lead to a reduction of childcare capacity, especially in poorer areas, and/or make childcare unaffordable for low-income groups. Financing of childcare in New Zealand is mainly through “bulk-funding” of specified amounts per hour and per child (with subsidy rates depending on

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quality standards that are being adhered to), for a maximum of six hours of care per day (reflecting primary school hours). This financing structure (which does not cover out-of-school-hour services) certainly helps parents who work parttime, but does not fully cater for parents working full-time. The financing structure invites centres that wish to run care facilities for under two year olds (which is relatively costly to provide) or provide care for more than six hours per day to either make these services very expensive to parents or cross-subsidise it with funds acquired for the care of (older) children for six hours per day. Enhancing a better match of operational aspects of good quality early childhood services with parental working hours is a key policy challenge in New Zealand. In terms of financing, the role of the New Zealand Childcare Subsidy which provides income-related childcare support to parents is limited compared to “bulk-funding”. Nevertheless, with it New Zealand authorities have a programme that focuses support on parents rather than providers. A move towards subsidising users rather than providers can exert positive effects on the bargaining power of parents in all three countries. In New Zealand, such a policy could encourage the adaptation of supply to the changing demand and enlarge the range of choice for parents, who could, for example, choose providers which offer more extended hours of care. Owing to considerable investment since the 1970s, coverage of childcare services among children not yet three years of age in Portugal has increased threefold to 22-23%. Portuguese policy efforts (including attention for out-ofschool-care services) have been geared towards developing all-day services in order to facilitate full-time female employment and a greater compatibility of work and family life. However, the restricted capacity of subsidised facilities in some areas exerts a strong constraint on parents who are complied to rely on private institutions in which parental fees are much higher. Furthermore, the relatively high fees for part-time care in Portugal can be a real obstacle for any growth in part-time work. In Portugal, there are indications that many mothers perceive their working hours as a major deterrent to devoting as much time to their children as they would like, while there is a concern that in some cases young children might be left unattended. In these circumstances, enlarging the range of choice for parents towards existing but not affordable services is a priority. The recent experiment in the Algarve region of redirecting subsidies towards parents has increased access to private providers for low-income families. Such reallocation of resources could also make family-based care more affordable, care which is preferred by many parents, especially of very young children, for its flexibility and the family environment. As in Portugal, the coverage of childcare services remains rather low for very young children in Switzerland (where investment is also lower as a


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percentage of the GDP). However, the situation varies from commune to commune and canton to canton. In Zürich-city, only one out of four children from age zero to five attends formal childcare service, on a part-time basis. Sessions in kindergarten for older children do not exceed three to four hours per day, and often cover two or three days per week. Ticino is yet another case: childcare is virtually unavailable for children under age three but coverage of threeto four year olds in cantonal infants’ schools is almost universal. However, opening hours are much shorter than working days (generally from 8.30 a.m. to 15.45 p.m.), with 17 weeks of holidays. In such circumstances, fulltime employment of second earners in couple families (often mothers), requires a combination of several types of (formal and informal) care resources to facilitate full-time employment (or part-time employment of close to 30 hours). By contrast, in Lausanne childcare policy is strongly focussed on helping parents to reconcile work and care commitments: financial support for childcare centres is mainly to facilities that cater for extended hours of care (10/12 hours per day for 46/48 weeks per annum). Municipal policy aims to cover 50% of all kids aged zero-seven by the end of 2006. In Switzerland, the federal structure poses specific challenges to childcare policy. While a strong integration of policy at cantonal level exists for children over age three in Ticino (but not for younger children), communes in Vaud and Zürich operate at their own discretion, although the latter sometimes co-operate at “district level” to pool resources. There are considerable geographical differences in service provision across the country. In general, however, weak municipal returns (in terms of public finance) from any investment in childcare limits investment in childcare by Swiss municipalities. And while this practice is becoming less frequent, some communes still finance childcare facilities through the very inefficient practice of deficit financing. A new federal initiative, although small, encourages communes to invest in childcare facilities. In this respect, Vaud is one of the most innovative cantons as a reform project is intended to create a new foundation to pool diverse (private and public) resources and match the development of childcare facilities to parental needs. Vaud (and its capital Lausanne in particular) is also more interventionist in the sense that investment focuses almost exclusively on facilities that provide extended hours of care. The cost of this strategy is, however, high and there is no evidence that other cantons would be ready to engage in such a strategy. In any case, subsidising parents rather than the providers of childcare services would improve the bargaining power of the first and increase the efficiency and adaptability of the childcare market.

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Annex to Chapter 4 Chart 4.A.1. Childcare funding flows in New Zealand

Kindergartens NGOs, Foundations Contribute to the financing of most of kindergartens and of some private institutions

They are largely publicy financed but parents and NGOs contribute through donations.

Ministry of Education Provides through “bulk funding” subsidies for a maximum of 6 hours per day (or 30 hours per week).

Childcare providers Community-based and private organisation receive public funding if they are chartered. CCS and OSCAR are paid to providers chosen by parents.

Ministry of Social Development Support for low income families: Childcare Subsidy (CCS) and the Out of School Care and Recreation Subsidy (OSCAR).

Work and income agency Managers organise childcare support for low-income parents.

Parents The access to kindergartens is free, but parents can make donations.


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Chart 4.A.2. Childcare funding flows in Portugal

Ministry of Education

Childcare providers

Direct funding to providers to deliver five free hours of education.

Public providers are fully funded by public administration. Public funds cover about 60% of the cost of childcare services provided through the social Solidarity Network and only 5% of cost in private centre.

Ministry of Labour and Social Security Funding of “extraeducation” hours (often including the provision of meals), and socio-cultural activities.

Parents Parental fees cover 38% of financing of non-commercial services provided through the Solidarity Network and 95% of the cost of private commercial care.

Local support Municipalities and districts may provide additional support to public and non-commercial childcare providers.

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Chart 4.A.3. Childcare funding flows in Switzerland

Private firms

Cantons Very limited cantonal support in Zürich. The canton of Vaud contributes to the cost of centres providing extended day care. In Ticino, some childcare providers benefit from financial support by way of deficit guarantess from municipalities and from the cantona

Communes

Firms occasionally provide their own childcare service or contribute to parental fees: in Zürich, this does not concern employees who have access to publicly subsidized childcare place. In Vaud, through co-funding structure.

Childcare provider (public or private) Subsidies to childcare providers

Financing via provider contracts (Zürich), subsidies to places with extended hours of day care (Lausanne), or financial support by way of deficit guarantess (Lugano).

Parents

Federal government Limited support as under the Federal Act on Financial Assistance for Complementary Childcare, to create new places, to offer after-school services.

Some cantonal tax systems allow childcare cost deductions. In return for subsidies childcare centres apply income-tested fee systems. Parental fees cover more than 40% of the total cost in Vaud, and one-third in Zürich.

a) Canton pays up to 40% of labour costs for crèches and contributes to childcare costs for low-wage families. This chart refers to childcare services outside the education system. That means that kindergartens (Zürich), scuola dell’infanzia (Ticino) and école enfantine (Vaud) are not covered.


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Notes 1. In 2001 over 69% of children cared in formal facilities in New Zealand are from European ethnicity, whereas a more than 18% are Maori, and less than respectively 7 and 5% belong to Pacific and Asian communities (MoE, Data Unit Management, 2004). 2. In 1998, almost half (46%) of children attending formal care were cared for less than 10 hours per week. More specifically, 29% of children were cared for a weekly duration between 11 and 20 hours, 19% for 21 to 40 hours, and 6% for a longer duration. The duration of care depends on the type of care: more than 90% of children attending playgroups were cared for a maximum of ten hours, while three in four children attending education and care centers were cared for a maximum of 20 hours per week. A reliance on formal care longer than 10 hours was also observed to be more frequent in the Maori community, with Maori children typically attending Kohanga Reo for the duration of 21to 30 hours per week (DoL, 1999). 3. Children often do not enter the Scuolla dell’Infanzia in Ticino before age four. In around 20% of municipalities, infant schools do not accept three-year old children. 4. In Portugal, childcare facilities in the private commercial sector do not receive any operating assistance, except on an exceptional basis when the childcare provided locally by other institutions is insufficient. 5. As of July 2001, three different payment rates are used in subsidising childcare centres in New Zealand: 1) licensed centres receive NZD 2.76 per child and hour for children older than two and NZD 5.33 for younger childrens; 2) rates for facilities which conform to higher standard of quality are NZD 2.96 and NZD 5.92, respectively; and 3) kindergartens receive NZD 3.56 per child and hour when their service do not exceed 1 080 hours per year, or rate (2) otherwise (MoE, 2001b). 6. Non-working parents are also entitled to the Childcare Subsidy in New Zealand but only for up to nine hours per week at most. Over one-third of all users of Childcare Subsidy fall into this category. 7. Since 2002, financing of childcare in New Zealand has been supplemented by a programme of “financing to promote equity”. This programme provides additional assistance to childcare centres targeting ethnic minorities. The amount allocated to this programmes is 10.8 million NZD for the fiscal year 2002-03. Furthermore, the Family Start Initiative is run in co-operation with the education and health services, and provides decentralised action aimed at helping municipalities to set up family assistance services, particularly in the field of childcare. The facilities supported by this programme are not required to sign a charter or to be licensed or follow the normal curriculum, but this programme seeks to monitor and promote the quality of their services through action through, for example, family visits and health checks for children. 8. The institutional framework is quite specific in the canton of Zürich because three operational levels are intertwined: the cantonal level, the municipal level, and an intermediate level of 12 districts that span the 171 municipalities of the canton. Districts are an administrative level created to treat issues and to pool resources that would be inefficiently managed at the municipal level. Their role in childcare area remains limited, however, because districts are only responsible for accreditation and supervision of childcare centres (which must comply with cantonal directives) but do not participate in the funding of running cost. As a consequence, municipalities remain the main investor in the development of child care facilities.

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9. Several large firms in the canton Zürich buy childcare places for their employees. The resulting parental fee is not dissimilar to fees paid by parents who have access to (income-tested) city funded services. 10. To be eligible for cantonal childcare subsidies in Vaud, childcare institutions must provide extended opening hours and be managed in an associative framework (or by a foundation or a municipality) on a non-profit basis. Specific conditions are formulated for firms to receive subsidies. Subsidies are mainly granted to support the recruitment of educators, the payment of salaries and training. The conditions for receiving subsidies also more restrictive in Lausanne than elsewhere financing of private providers only occurs when these comply with the rules established for municipal facilities (e.g. quality and fee standards) and if enrolment average at least 90% of maximum capacity. 11. The 2002 Strategic Plan for Early Childhood Education in New Zealand phases in a requirement that candidates recruited as heads of early childhood centres and coordinators of family-based care hold a teaching diploma. Since January 2002, a teaching diploma has been required of all new recruits to positions of responsibility in the early childhood education sector. In 2005, all heads of childcare institutions (whether collective or family-based) will have to be licensed teachers. Finally, the aim is that by 2012 all services in the sector will be staffed by licensed teachers. 12. The cost increase associated with the pay-parity initiative in New Zealand, potentially has the biggest effect when pay is low (i.e. where the proportion of registered teachers is lowest). This is related to regional differences, while remuneration is generally somewhat lower in the private commercial sector than in the community-based sector (Mitchell, 2002). 13. In Portugal, parents whose financial or social situation is considered to be precarious are general given priority access to childcare facilities in the public sector and solidarity network. Those who are unable to obtain a place in a public institution or a facility belonging to the solidarity network are sometimes granted assistance by the municipality that enables them to meet the cost of a place in a private institution. In New Zealand, parents looking for work may receive the assistance of their local placement agency in finding a place in a childcare institution for their children. 14. In New Zealand, Childcare Subsidy rates increase with the number of hours worked, and this effect can be significant (Childcare Subsidy is also available for parents in training or not in work for a maximum of 9 hours per week). For example, a sole parent working full-time at two-thirds of average earnings will get more childcare support than a sole parent working part-time at one-third of average earnings (Chart 4.1). 15. For those not receiving Childcare subsidy payments in New Zealand, parental fees are generally digressive with the number of hours being used per week. The ECE Survey of November 2002 shows that the average hourly fee is about NZD 4.98 for children under two years and NZD 4.68 children over two years, the rate is strongly reduced (respectively NZD 3.54 and NZD 3.31) when childcare is provided for over 40 hours per week. 16. Baumgarten (2003) cites the following parental reasons for not using childcare services in the city of Zürich: 32% of parents prefer to provide parental care on a full-time basis; 20% reported to have found alternative childcare solutions, 15% could not find a place in either a Crèche (Krippe) or Out-of-school care facility


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(Horte), while 10% of parents respond that they cannot afford using a formal childcare facility. 17. This cost/benefit ratio calcualted by Müller-Kucera and Bauer (2003) has to be interpreted with caution, as estimates are highly sensitive to the assumptions made (the estimates cited in the text for Zürich are of a similar magnitude as those found by Barnett (1996). On the other hand, Cleveland and Krashinsky (1998), for example, report much lower returns for the US and Canada. 18. For example, 43% of Swiss households in which two parents work on a full-time basis use the services of a third party, as against only 10% when one parent is working. Similarly, in New Zealand, nearly 80% of pre-school age children with both parents working are regularly watched by a third party, as against just over 50% when a single parent works. 19. Long working hours give makes some parents feel guilty that they do not give their children the attention necessary for their development (Torres and da Silva, 1998). 20. There are 745 places in all-day schools in Zürich canton-wide (9 out of 13 institutions that provide this service are located in the city of Zürich). In addition, the city of Zürich has 210 centres that provide out-of-school-hours services which cover about 5 000 children.

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Chapter 5

Balancing Adequacy with Work Incentives

Tax/benefit systems influence the standard of living of working families and of families temporarily or permanently without income from work. In doing so, they also influence the choice parents make regarding working and caring for their children. This chapter first gives a concise summary of the three countries’ tax regimes and main family benefits. It then discusses policy issues with a focus on second earners in couples and sole parent families. In all three countries, some groups of parents face a situation in which work, or more work, does not sufficiently pay – be it because available benefits are high relative to earnings or because parental childcare fees are so high or both. All three countries need to reconsider this balance so to make work pay for all.


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5. BALANCING ADEQUACY WITH WORK INCENTIVES

T

ax and benefit systems influence the conditions of family life in many

ways. They influence the take-home pay of working families and the level of income of families temporarily or permanently without income from work. Because they have such an impact on the family’s standard of living, they also influence the choice parents make regarding part- or full-time caring for their children: tax/benefit systems affect the extent to which it is possible for parents (or for one parent) not to work, or to work fewer hours, and whether it pays for parents to work, or to work more hours. Needless to say there are other factors and policies which may well be equally important for any decision to work or not to work, such as the availability of formal or informal childcare, labour market opportunities and parental preferences, but the tax/ benefit system does play a distinctive role. In most OECD countries, New Zealand, Portugal and Switzerland among them, policy aims to provide choice to parents in allocating their time between work and care for their children. Policy needs to acknowledge that it is dealing with different groups of families for which different policy issues arise. Income rich families generally have options and need little direct financial support on any grounds other than horizontal equity. They can afford to employ a full-time child carer or to have one parent caring full-time for their children for a number of years. These families are generally not the immediate target of public policy, nor of this chapter. However, also for them gender equality concerns arise, which can translate into social problems if relationships break up. Then there are income poor families who often have little choice, either because they cannot afford not to work or because they do not have work, or enough work. For the latter, breaking intergenerational benefit dependency by getting parents into work is often a key issue, while for the former making work pay appears crucial. These families are priority groups for family policy and also for this chapter. And then there is the majority of middle-income families for whom the tangible degree of choice is to a considerable extent influenced by the policy setting. The work decision (no work, part-time work or full-time work) of the second earner in relation to the age and the number of children in particular is subject to the combined influence of personal preferences and a country’s family policy scenery. In addition, many families are constrained in terms of time available for parenting especially when they have to work long and unsuitable hours. This raises concerns on the quality of childhood development, in particular if resource constraints hamper the use of formal quality childcare. Such a situation can often be characteristic for sole

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5.

BALANCING ADEQUACY WITH WORK INCENTIVES

parents that are both main breadwinners and main caregivers. Sole parents are thus given special consideration in this chapter. This chapter first gives a concise summary of the three countries’ tax regimes and of the intricacies of their main child-related benefits (details on which can be found in the Background Annex to the review). It then discusses policy issues with a focus on two different groups (second earners in a couple family – usually the mother – and sole parents) and two different though related issues (income adequacy and work incentives). The chapter concludes that balancing income adequacy and work incentives, perhaps the greatest challenge for social policy in general, is also one of the key challenges for family/work reconciliation policy, and that challenges are quite different for the countries (and also the Swiss cantons) at hand. Policy aims to fulfil employment objectives (i.e. help to keep and get parents into employment) as well as equity objectives (i.e. help to secure sufficient resources for income poor families). Policies that fulfil only one or the other of the two objectives are not good enough.

5.1. Main characteristics of tax/benefit systems 5.1.1. The tax system Tax systems differ vastly between the three countries. 1 Swiss tax revenues come from four sources of approximately equal importance: federal government tax (most of which is not income tax), cantonal government tax, municipal government tax, and social security funds (Table 5.1).2 Collecting income tax at three different government levels makes the Swiss system more complex than that of most other OECD countries and also raises a number of policy coherence issues (Chapters 2 and 4). In Portugal and New Zealand, income tax is only collected by the central government. While New Zealand has no compulsory social security contributions, in Portugal 28% of total revenues go to the social security funds.3 Structurally, Portugal is quite different from most OECD countries in that indirect taxes on goods and services constitute 55% of total tax revenues, and income tax only 25% (not including social security contributions; Table 5.1). Low revenues for income tax are partly explained by not many people paying income tax, in particular among some groups of self-employed (independent professionals and small business; see also OECD, 2001b). Despite variation in indirect tax rates across goods and services, the overall effect is that within the Portuguese tax system as a whole, vertical redistribution seems to be not very effective (OECD, 2003i), with redistribution arising mainly from the operation of the benefit system. In Switzerland and New Zealand, in contrast, the structure of the overall tax system results in some vertical redistribution towards low-income groups (Box 5.1).


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Table 5.1. Portugal suffers from a low income tax base and thus relies on indirect taxation Structure of tax revenues in 2001, by government sub-sector and by type of tax (in percentage) New Zealand

Portugal

Switzerland

Federal government

94

65

34

Cantonal government

–

–

24

Government sub-sector

Local government

6

Social security funds Total tax revenue

7

17

–

28

26

100

100

100

Tax category Personal income tax

45

25

43

Corporate income tax

14

15

14

Taxes on goods and services

36

55

31

5

4

12

100

100

100

Taxes on property Total revenues minus social security Source: OECD (2003j), Revenue Statistics.

Box 5.1. Different approaches to income taxation The income tax system in New Zealand is fully individualised. At 19.5%, income tax rates are relatively high at average earnings when compared with other countries, but this reflects the non-existence of social security contributions. Tax rates are flat up to almost 150% APW earnings (see notes in Table 5.4), and with no tax deductions, the system is relatively progressive above that level. A lowincome tax rebate available for people working 20 hours per week or more means that effective tax rates below some 23% of APW earnings are about 15%. Income taxation in Portugal is based on the family unit: spouses’ incomes are added and divided by a factor of two (income splitting). In theory this leads to higher marginal tax rates on second earners than would be the case if the tax unit were the individual, and can therefore be said to favour single-earner families. In practice this is not a big issue in a country where most couples are dual earners. Cohabiting couples can be treated like married couples (this is optional), while separated but not yet formerly divorced couples are submitted to individual taxation. Income tax rates are reasonably high and progressive, but a large number of tax deductions mean that effective tax rates are relatively low. A couple at APW earnings, for instance, does not pay any income tax, just compulsory social security contributions at 11%. Tax deductions comprise general deductions for taxable persons and dependants, and special deductions for particular expenses (30% of health care expenses, 30% of childcare costs (up to a maximum), and 25% of retirement savings plans).

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Box 5.1. Different approaches to income taxation (cont.) The Swiss federal income tax system is also family-based. However, despite there being a different tax rate schedule for singles and couples, the absence of any income splitting means that the tax bill of married couples is often higher than that of two single persons and, hence, also of that of cohabiting couples (Knupfer, 2003). Concern about this has led to reform of the federal income tax scheme, which is planned to be implemented during 2005 (Section 5.2.3). Federal income tax is rather low, so a family’s tax burden largely depends on the structure of the cantonal tax regime. Federal as well as cantonal income tax schemes are characterised by a large number of different rates and – compared to many other OECD countries – a low level of progression. Cantonal tax regimes in Ticino and Zürich also use a different tax rate schedule for singles and for couples. Most cantonal tax systems also have special deductions for dependents (though in Ticino only for spouses) and some minor deductions for the costs of childcare (Section 5.2.2). The income tax system of Vaud is exceptional in mirroring the form of the French tax system: it uses family splitting on the basis of a “quotient familial”, which is 1.0 for a single person, 1.3 for a sole parent, 1.8 for a couple and – depending on the family situation – an additional 0.0 to 0.5 for each child in the family. Thus, effective tax rates in Vaud are generally lower for larger families.

5.1.2. The family benefit system Compared with most OECD countries, Portugal and Switzerland target most of their social spending towards people over age 60 (Chapter 2). Both countries have low social spending on family policies, with 1.14% and 1.35% of GDP spent on child-related benefits in 2001 (including mandatory private spending by Swiss employers, see more on this below). This is about as much as New Zealand spends on its sole parent benefit (Section 5.3), while the total spending on cash benefits and services related to children amounts to 2.52% of GDP in 2002 – around the OECD average (Table 5.2). In Portugal there is a rough equivalence between spending on cash benefits and expenditure on services (mainly childcare), whereas Switzerland and New Zealand spend only one-sixth of their total child-related expenditures on services. In Switzerland the share of cash transfers would be even larger if the value of tax deductions for children – estimated at 0.54% of GDP in 2000 (Bauer et al., 2004) – were included. In all three countries, family spending as a percentage of GDP has changed little over the last decade. In New Zealand, from 1997 to 2002 family spending has gradually fallen to its 1996 level, following a 0.4 percentage points increase in 1997 as a result of the 1996 family assistance reform package.


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Table 5.2. Family spending in Portugal and Switzerland is below OECD average Public and mandatory private spending on child-related benefits as a percentage of GDP (of cantonal income for Swiss cantons), latest available year New Zealand Portugal Switzerlanda Switzerland Ticino

Vaud

Zürich

Percentage of cantonal/national income, 2001c

2002

2001

2000

Maternity and parental leave benefits

0.05

0.13

0.09

0.12

0.14

0.11

0.10

Lone parent benefit

1.18

–

–

–

–

–

–

Family allowance and other cash benefits

0.89

0.53

1.03

1.22

1.22

1.44

0.78

Total

2.12

0.66

1.12

1.34

1.36

1.55

0.88

Cash benefitsb

Services Childcare services

0.34

0.37

Other services

0.06

0.11

Total

0.40

0.48

0.23

0.21

0.27

0.37

0.27

2.52

1.14

1.35

1.55

1.63

1.92

1.16

16

42

17

14

17

19

23

Total public family spending Share of services in % of total Other family-relevant transfers Tax deductions for childrend Housing benefits going to families

–

n.a.

0.54

0.24

0.13

n.a.

– No sole parent benefit in Portugal and Switzerland, and no tax deductions for children in New Zealand. n.a. No estimates available for the value of tax deductions in Portugal and housing subsidies in Switzerland. a) Cash benefits in Switzerland are mandatory private payments paid by the employer. b) New Zealand's tax credits are included, but the value of tax deductions, such as for the costs of childcare, are not. c) Provisional cantonal estimates for Switzerland provided by the Swiss Federal Statistical Office (estimates exclude administrative costs). d) The value of tax deductions for children in Switzerland is an estimate taken from Bauer et al. (2000). Source: OECD Secretariat calculations from information supplied by national authorities and OECD (2004c), Social Expenditure Database.

Provisional estimates by the Swiss Federal Statistical Office suggest that the level and structure of spending on family policies in Ticino resembles that of Switzerland as a whole (Table 5.2).4 Vaud spends significantly more than Switzerland on average and Zürich significantly less. Public family assistance in New Zealand is largely offered in the form of refundable tax credits (Tables A2 and A3 in the Background Annex). All family benefits are resource-tested and so are targeted to poorer families. Generally,

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families around average earnings would not qualify for any payment. In addition, two tax-funded benefit programmes can be important in helping families make their ends meet. Domestic Purposes Benefit is targeted at sole parents who are the primary carers for a qualifying child. Accommodation Supplement is designed to help households with high accommodation costs.5 The main family cash benefit programme in Portugal, Child Allowance, has gone through major reform during 2003 to ensure better targeting to poorer families. High-income families with a reference income over five times the national minimum wage lose eligibility.6 In total, around 10% of all families fall above that ceiling. In addition, the reference income grid that determines the benefit level has been refined at the bottom end (Background Annex). For children aged 12 months or less, payment rates are four times the normal payment rate. Child Allowance is partly financed through social security contributions of employers and employees and partly through general taxes. Switzerland does not have a nationwide system of child-related family benefits, except for agricultural workers and small self-employed farmers, although Article 116 of the Federal Constitution says that the “federation can introduce regulations on family allowances and run a federal family fund”. However, each canton has its own system of family allowances (Background Annex). Strictly speaking these are not public benefits, but mandatory payments by the employer paid through the respective family compensation funds.7 Twelve of the cantons of Switzerland, including the three cantons under study, also have income-tested benefits for parents with very young children that are paid from cantonal budgets. These cantonal infants’ allowances vary in terms of eligibility, payment levels and duration (Background Annex).8 Infants’ allowance is paid for the first two years after childbirth in Zürich and for the first three years (and at a significantly higher rate) in Ticino. In both cantons this allowance is designed so to provide choice to low income families who want to provide (full-time) care to their children for a certain period. Ticino is unique in Switzerland as it also has an income-tested supplementary family benefit that is paid to low-income families with older children (up to age 15). This benefit, which is designed to cover the basic costs of children, was introduced in July 1997. Together with the income-tested infants’ allowance (which is more generous than in any other canton) and the basic cantonal family allowance (which is not much different from that in other cantons), this has become known as the “Ticino family benefit model”, or simply the “Ticino model”.9 The financing of the unique supplementary benefit in Ticino is quite complex, but largely involves cantonal funds and the family compensation funds.10


133


5.1.3. Redistribution through the benefit system In New Zealand, public family assistance is targeted to those most in need, as a consequence of which the majority of families is excluded from any state support. 11 Hence, there is considerable vertical redistribution from middle- and high-income groups to low-income families, while there is virtually no horizontal redistribution from those without children towards middle-income families with children. Non-indexation of family benefit levels and, more importantly, of abatement thresholds in the last few years (Section 5.2.3) has aggravated this situation. Compared with New Zealand, the Swiss system involves more horizontal redistribution towards large families and much less vertical redistribution to the poor. There is more redistribution in Ticino with its system of supplementary family benefits targeted to low-income families with a child not yet 16 years of age. The Ticino model was introduced in response to the changing structure of poverty – the marked increase in working-age poverty. In terms of poverty outcomes these extra payments to income-poor families have been evaluated quite positively. The new model has managed to reduce poverty, especially among larger families, but has been least effective in reducing poverty for sole parent families with one child (Vaucher de la Croix and Marazzi, 2001). As in Switzerland, the Portuguese family benefit system combines elements of vertical redistribution to poorer families with horizontal redistribution to larger families. However, by and large redistribution is mild. Recent reform of Child Allowance, implemented in October 2003, has introduced a stronger element of targeting. As wages are low, sole parent and single-earner couple families are the most vulnerable, an aspect that is better reflected in the new family allowance thresholds and levels. Cash benefits not targeted at families also play an important role for some groups of families, especially those without income from work (Background Annex). One way to measure the redistributive impact of the entire tax and social protection system is to look at the difference between pre- and post-tax/transfer poverty rates for different types of families. In New Zealand, targeting of benefits is fairly effective in reducing high pre-tax/transfer poverty despite relatively flat tax rates. After-tax/transfer poverty levels of working-age households with children are similar in Portugal and New Zealand, at over 13%, compared to less than 10% in Switzerland (Table 5.3).12 Overall effects on all types of families mask considerable differences across family groups, and countries. The high pre-tax/transfer poverty rate of singleearner couple families in Portugal confirms that it is difficult to secure a decent family income with just one earner. The tax/transfer system, however, has little impact in terms of reducing working poverty for this vulnerable group (Table 5.3). This stands in contrast to New Zealand, where similarly high pre-tax/transfer

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poverty levels of single-earner couple families are cut in half. In Switzerland pretax/transfer working poor rates of single-earner families are relatively low, at 10%, suggesting that it is mostly wealthier families that choose this form of family life. Table 5.3. The tax/benefit system reduces working-age poverty in New Zealand considerably Percentage of families with an equivalised family income below 50% of the median, before and after taxes and transfers New Zealand

Type of working-age

Portugal

Switzerland

Before

After

Before

After

Before

After

householda

Lone parent, working

55.0

21.3

21.2

20.3

24.9

11.9

Dual-earner couple family

100.0

87.6

87.3

84.8

77.7

44.1

One-earner couple family

6.6

4.1

3.8

4.8

7.7

8.2

Couple family, none working

29.5

14.5

34.3

32.4

10.0

8.8

Couple family, none working

97.4

43.3

91.4

50.6

92.4

47.2

All working-age households with children

24.1

13.6

13.4

13.1

11.2

9.5

a) Calculations are household-based. Couple families comprise all households with two or more adults. Source: Förster, M. and M. Mira d’Ercole (2004), “Income Distribution and Poverty in OECD Countries in the Second Half of the 1990s”, OECD Social, Employment and Migration Working Paper, Paris, forthcoming.

For working sole parent families, in New Zealand and Switzerland, sizable poverty reduction is achieved through the tax/transfer system (Table 5.3). However, Portuguese sole parents in work are not relatively worse off than in New Zealand. This is partly explained by the high incidence of full-time employment among sole parents in Portugal (Chapter 3), and contributes to relatively low pre-tax/transfer poverty rates. In Portugal and New Zealand, one in five working sole parent families are income-poor, and one in eight in Switzerland (Chapter 2). These outcomes contribute to prevailing concerns on working poverty in all three countries under review. The three countries’ tax/benefit systems appear equally effective in reducing the incidence of poverty among jobless couple families – despite high after-tax/transfer poverty rates of around 40-50% for that particular group (Table 5.3). Hence, while family benefits in Portugal are too low to change the income position of families, the Portuguese social assistance programme, Social Insertion Income, contributes to sizeable poverty reduction for this group (see Background Annex for more details on that programme).13 Poverty rates after taxes and transfers are highest for jobless sole parent families, at over 80%, both in New Zealand and in Portugal.


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5.2. Disincentives to work for second earners Tax and benefit systems have a strong impact on eventual family income and thus quality of life. This important function of tax/transfers systems must be analysed together with the other side of the coin – the extent to which these systems introduce work incentives and disincentives, and thus influence families in their decision to choose to seek paid work or to provide parental care on a full-time basis. Structurally, the three countries all have some but not very strong regulations that support a single-earner family model, at least for low-income groups. Weak work disincentives for second earners from the tax/benefit system, however, can turn into strong hindrance to maternal labour supply when parental childcare fees are taken into account.

5.2.1. Second earners with access to free childcare A common way to look at work incentives for second earners is to assume that their work decision is independent from that of the main earner. In the following it is assumed that the main earner has earnings at the level of an average production worker (see OECD, 2003j). 14 What, in this case, is the impact of different work choices on average effective tax rates for second earners? This can be measured by comparing a family at different earnings levels with a family with a single earner (labelled 100-0 because one parent has 100% of APW earnings and the other parent has no earnings). Three different earnings levels of second earners (one-third, two-thirds and 100% of average earnings, which can be interpreted as reflecting different numbers of weekly hours worked by the second earner) are compared. Assuming that parents have access to free child- and out-of-school-hours care (by grandparents, other relatives, neighbours, etc.), work pays for second earners in all three countries.15 Average effective tax rates on earnings of the second parent are quite similar at around 20% or so, with little variation with the earnings levels (Table 5.4; see footnote to the table on how average effective tax rates were calculated). In all three countries effective tax rates increase somewhat with higher earnings.16 The situation in New Zealand and Ticino is different if couple families with lower earnings are considered. Repeating the same analysis with a first earner at two-thirds of APW earnings shows that targeting benefits to poor families lowers work incentives for a second earner considerably. The results are actually very similar in the two territories: the average effective tax rate on earnings of the second earner is as high as 50% if the second spouse earns at a level of one-third of average earnings, and around 35% would the second earner bring in the same as the first earner (the percentages are somewhat higher in Ticino than in New Zealand; see Table 5.A.1 in the annex to this

136


Table 5.4. For middle-income families with access to free childcare, work pays for the second earner

80

80

Net income in % of gross earnings

Net income in % of APW earnings

17

107

80

0

19

133

80

0

166.7

21

159

79

0

200

96

96

7

100

11

125

94

5

133.3

17

151

90

4

166.7

20

176

88

3

200

100-0 100-33 100-67 100-100

Portugal

94

5

13

96 124

96

7

17

151

90

4

100 133.3 166.7

20

176

88

3

200

100-0 100-33 100-67 100-100

Ticino

90

90

6

100

17

118

88

4

21

143

85

3

133.3 166.7

24

166

83

3

200

100-0 100-33 100-67 100-100

Vaud

92

92

6

100

17

119

90

5

21

144

86

4

133.3 166.7

24

167

84

3

200

100-0 100-33 100-67 100-100

Zürich


Source: OECD Secretariat calculations.

a) APW earnings or “average earnings” refer to the annual earnings of an Average Production Worker (APW) in the manufacturing sector. In 2003, these were USD 23 850 (NZD 41 452) in New Zealand, USD 8 020 (€ 8 677) in Portugal and USD 41 120 (CHF 65 265) in Switzerland (OECD, 2003k, Taxing Wages). Adjusted for the costs of living, average earnings in USD were 28 590 in New Zealand, 12 690 in Portugal and 34 710 in Switzerland. b) Average effective tax rates on second earners are calculated as the difference between the increase in gross earnings and the inrease in net income when a second earner starts work at 33%, 67% and 100% of APE earnings, expressed as a proportion of the change in gross earnings.

Average effective tax rates on second earnersb

0

Family benefits in % of gross earnings

133.3

100-0 100-33 100-67 100-100

Gross wage earnings (in % of APW earnings)a 100

Wage level (first adult-second adult)

New Zealand

Family benefits and net income for couple families at different earnings levels with two children and a first earner at average earnings, and resulting average effective tax rates on second earners


137


chapter). Depending on the earnings potential of the second earner these high effective tax rates can pose significant barriers to seeking work. The situation also changes in all three countries for low-income families with a very young child. However, special benefits for this group are either not very high (New Zealand, Vaud and to a lesser extent also Portugal) or limited to a very small number of families (Ticino, Zürich) (Box 5.2).

The distribution of work between spouses Tax/benefit systems can also affect the distribution of paid and unpaid work between spouses because tax payments vary with the distribution of earnings between the spouses. This issue is analysed using a family with 133% APW gross earnings as an example, and assuming that the couple is married. Despite significant differences in the tax unit – individual assessment in New Zealand, joint assessment in Switzerland and splitting of the tax base in Portugal – outcomes are similar. Firstly, in all three countries tax/benefit systems are less favourable for single-earner couples, whose tax bill is some 2-5 percentage points higher than that of a dual-earner family (Table 5.A.2 in the annex to this chapter). In New Zealand this is a consequence of tax progression; in Portugal this is due to an individual tax deduction for each taxpayer worth 72% of the annual national minimum wage; and in Switzerland it is the effect of an individual tax deduction (worth much less than in Portugal) and of non-linear contributions to occupational pension funds. Secondly, all three systems are virtually neutral towards the distribution of earnings in dual-earner couples, at least at the earnings levels assumed here. In sum, tax/benefit systems do not seem to have a big effect on the distribution of paid work in couple families before accounting for childcare fees.

5.2.2. Accounting for parental childcare fees As discussed in Chapter 4, parental fees for childcare differ a lot between countries and across different income groups within countries. The maximum fee for subsidised full-time childcare is highest in Zürich, at 30% of APW earnings for one child, and lowest in Portugal, at 12% (Table 5.5).17 All three countries have some type of subsidy system for lower income groups.18 In the following, the fees for half- and full-time childcare and for out-ofschool-hours care are included in the calculations. Part-time childcare may be useful where one parent works relatively few hours, or where part-time care is sufficient because the remaining hours are organised through informal care or flexible work. 19 It is assumed that both children in pre-school age are in formal childcare, which is significantly more costly than kindergarten in either New Zealand or Switzerland. However, as the latter provides care and education for only a few hours, especially in Zürich, usually this would not

138


5.


Box 5.2. Situation of families with a very young child Many OECD countries provide special benefits to parents with a very young child to make it possible to reduce or interrupt work while the child is very young. Often this benefit is income-tested or income-related, so to increase options for income-poor families which otherwise have little choice. The duration of such benefits varies. Sometimes benefit duration relates to the age at which childcare facilities become (widely) available. In that case, such policy reflects a signal that the benefit is a substitute for otherwise unavailable or insufficiently subsidised childcare. New Zealand and Vaud offer little extra-payments to parents with a very young child. In New Zealand, families with up to 140% of APW earnings are eligible for Parental Tax Credit, payable during the first eight weeks after childbirth for those not entitled to paid parental leave (Chapter 6). Vaud pays a flat-rate maternity allowance for a period of six months after childbirth, which is resource-tested so that around one in two families qualify. Both of these benefits are relatively low (worth around USD 700 in total) and thus unlikely to influence parents’ work decisions, although in Vaud a supplementary allowance (which is also resource-tested) can be paid for each additional child in the family if the mother’s income was reduced. In Portugal, at average earnings the income-related special benefit for children under age one raises family income by 10% of APW earnings. The moment the youngest child reaches the first birthday, net income of a twochildren family declines accordingly, from 106 to 96% of APW earnings. At two-thirds and one-third of average earnings, the corresponding decline in family income would be around 15% and 25%. Hence, child allowance provides a flat-rate benefit for the first year, especially for low-income parents, which effectively can be seen as a complement to unpaid parental leave (Chapter 6). Infants’ allowances in Ticino and Zürich have a more distinct impact on family income for some, but income-tests are strict and eligibility is limited. The actual number of recipients of infants’ allowance in 2000 was around 700 in Zürich (Werner, 2002) and 300 in Ticino (Hüttner and Bauer, 2003), which in both cantons corresponds to less than 4% of all households with children in the age group in question. Broadly speaking, in both cantons a two-child couple family at around two-thirds of APW earnings would not qualify. Thus, work behaviour of second earners in Ticino and Zürich is only influenced by the benefit system where the main earner has very low earnings. In Ticino, for a small number of (mostly sole parent) families the combined effect of infants’ allowance and supplementary family allowance can be very strong (see Section 5.3).


139


enable parents to work full-time. As before, it is assumed that the first earner earns the average APW wage. In all countries, financial returns to second earners shrink greatly when accounting for childcare fees. Work disincentives vary considerably across countries and earnings levels. In New Zealand, none of the couple families considered qualify for childcare subsidies, which are phased out at lower earnings levels and thus largely affect work incentives of sole parents (Section 5.3). Average effective tax rates on second earners are very high, unless the second earner can organise to work full-time without needing full-time childcare. Part-time work at one-third of average earnings in combination with half-time childcare hardly pays, nor does full-time work at two-thirds of average earnings in combination with full-time childcare Table 5.5). This helps explaining why mothers in New Zealand often drop out of the labour market after childbirth until the youngest child reaches school age (Chapter 3). An earlier return to the labour market will only really pay in this country when the youngest child is old enough to attend a kindergarten, provided a place is available (Chapter 4). The main finding for Portugal is that part-time work with half-time childcare results in higher average effective tax rates for second earners than full-time work with full-time childcare. A second earner therefore is better advised to move into full-time work directly – which may contribute to the low incidence of part-time work in Portugal (Chapter 3). This finding is explained by the fee structure: full-time fees are lower than elsewhere but as there is no fee reduction for part-time childcare, the latter is relatively expensive. In Switzerland the situation is exactly the opposite: part-time work pays while full-time work often does not. This is particularly true for Zürich, where average effective tax rates on full-time working second earners are around 80% were the second earner to need full-time childcare for both children (Table 5.5). Thus, the current tax/transfer system encourages part-time work for the second earner in a couple family. This, together with attitudes towards working mothers of young children, the non-availability of childcare outside urban agglomerations and the short school hours, goes a long way in explaining the large share of part-time work among women in large parts of Switzerland (Chapters 3 and 4). Disincentives for full-time work of second earners are much less pronounced in Vaud when compared to Zürich. Out-of-school-hours care fees for families at or above average earnings are not dissimilar in the three countries under study. As a consequence, effective tax rates on second earners are similar, too. Broadly speaking, average effective tax rates on second earners increase from around 20% with access to free OSHcare to 35-45% when taking OSH-care fees into account. Thus, work for second earners pays as soon as children reach school age, and – apart from Vaud – the higher the wage the lower the effective tax rate (Table 5.5).

140


Table 5.5. Childcare costs significantly reduce financial returns to second earners

45%

153%

With full-time childcare for both childrenc

58%

40%

19%

14%

87%

53%

19%

45%

23%

100-67

Couple

34%

21%

14%

66%

43%

21%

45%

23%

100-100

Couple

45%

11%

11%

62%

62%

11%

17%

17%

100-33

Couple

42%

17%

16%

58%

58%

21%

24%

24%

100-67

Couple

Portugal

36%

20%

16%

46%

46%

22%

24%

24%

100-100

Couple

36%

17%

6%

66%

41%

17%

16%

8%

100-33

Couple

36%

21%

10%

60%

40%

21%

26%

13%

100-67

Couple

Vaud

37%

24%

13%

58%

41%

24%

35%

17%

100-100

Couple

41%

17%

8%

83%

48%

17%

22%

10%

100-33

Couple

33%

21%

8%

73%

46%

21%

35%

17%

100-67

Couple

Zürich

32%

24%

8%

84%

53%

24%

60%

29%

100-100

Couple



a) APW earnings or “average earnings” refer to the annual earnings of an Average Production Worker (APW) in the manufacturing sector. In 2003, these were USD 23 850 (NZD 41 452) in New Zealand, USD 8 020 (€ 8 677) in Portugal and USD 41 120 (CHF 65 265) in Switzerland (OECD, 2003k, Taxing Wages). Adjusted for the costs of living, average earnings in USD were 28 590 in New Zealand, 12 690 in Portugal and 34 710 in Switzerland. b) Average effective tax rates on second earners are calculated as the difference between the increase in gross earnings and the increase in net income when a second earner starts work at 33%, 67% and 100% of APE earnings, expressed as a proportion of the change in gross earnings. c) Due to the relationship between earnings and hours worked and thus hours of childcare needed, some situations are more likely to occur than others. For instance, a person working full-time is unlikely to earn 33% of APW earnings; a person earning 100% of APW earnings is more likely to do need full-time rather than part-time childcare; and a person earning 33% of APW earnings will often not need any OSH-care to be able to work.

17%

Without OSH-care fees

With OSH-care for both childrenc


Out-of-school-hours (OSH) care fees in % of APW earnings 14%

85%

School age children (aged 7 and 9)

17%

Without childcare fees

With part-time childcare for both childrenc


23%

Full-time childcare fees in % of APW earnings

100-33

Part-time childcare fees in % of APW earnings

Young children (aged 1 and 4)

Gross wage earnings (in % of APW earnings)a

Couple

New Zealand

Average effective tax rates on second earners for couple families with a first earner at average earnings, with and without childcare fees


141


5.2.3. Improving work incentives for second earners Switzerland In Switzerland, policy concern about female employment is driven by economic considerations: to secure economic growth through a sufficient supply of qualified labour. Avoiding labour shortages will require getting more mothers into work and, even more importantly, increasing average hours worked by women (see Chapters 3 and 6). In this context, disincentives from the tax/benefit system on second earners are an increasing concern. Calculations above show that full-time work in particular often does not pay for mothers who have to pay for formal childcare. Schedules of kindergartens and primary schools (which are cheap or feeless) certainly only allow for parttime work for quite a long period, and even only for very limited part-time work in large parts of Zürich where no block hours are offered (Chapter 4). Concerns about work incentives for second earners are aggravated by concerns about the unequal treatment of married and cohabiting couples due to joint tax assessment of spouses. With the proposed introduction of a splitting factor into the federal income tax system, single earnership would still remain attractive (Box 5.3). Eliminating the tax disadvantage of married vis-à-vis non-married couples may also be achieved by introducing individual taxation, which would further reduce work disincentives that second earners face. Rejection of proposed tax reform in a referendum in May 2004 could be taken as an o ppo rtunity to re -evalu ate the pro po sal and to solve discrimination within the tax system while suppressing any negative effects the system may have on female labour supply. There are other policy initiatives underway which could be refocused to improve work incentives for second earners in Switzerland. The success of the Ticino family model in reducing poverty has led to a parliamentary initiative that has asked for implementation of a similar model for all of Switzerland. Indeed, many cantons aim to improve their systems along the lines of that model. However, this should not be done without taking due account of the model’s negative impact on work incentives for low-income groups, and differences in that respect between the infants’ allowance (paid to families with a child under age three) and the supplementary allowance (paid to families with a child up to age 15). The structure of the Ticino model is likely to contribute to sustaining the high proportion of single-earner families in this canton, especially among families with a very young child (Table 5.6). In late March 2004, federal parliament started a consultation process20 on a policyinitiative that embodies significant improvements to the Ticino model in terms of work incentives. The proposal involves the calculation of family income including specific “hypothetical income component”. Families would have a

142


5.


Box 5.3. Family tax reform plans in Switzerland Addressing concerns about the inequitable treatment of married and unmarried couples, Swiss parliament approved reform of family taxation in June 2003. However, in a referendum held on the 16th of May 2004 the Swiss electorate rejected a reform package that also included issues of public financing other than reform of the tax treatment of individuals and households. It is not unlikely that another proposal to reform income taxation will be brought to the public again, and such a proposal may well be similar to the elements in the reform package concerning tax treatment of individuals and households. Overall, the proposed reform would have reduced taxes paid by married couples and families with children substantially, corresponding to about 20% of revenue from direct federal tax on individuals. The reform contained the following elements: 1) an introduction of a splitting factor of 1.9 (only for married couples, cohabiting couples continue to be treated as two singles, and with no consideration of the number of children in the family); 2) an increase in the level of child deduction; 3) a deduction of effective costs of childcare services up to CHF 7 000 per year for married and unmarried couples; and 4) an introduction of a special tax relief for sole parents. If reform had been approved, the proportion of individuals who would not have had to pay any direct federal income tax would have increased from 20% to 37%. Nevertheless, the reform proposal was contested, as only wealthier families would have been able to benefit from the proposed deduction of the costs for childcare to the fullest extent (Bauer, 2001). This could potentially have been overcome by making the childcare credit refundable so even those with low taxable income could have benefited fully from the credit. Furthermore, in comparison with individual taxation, the proposed tax splitting implied that second earners in a married couple would have had weaker incentives to look for work, in particular in the light of childcare costs (Section 5.3.2) and the unavailability of childcare places (Chapter 4). Upon request of the federal parliament, an official report on the consequences of the introduction of individual taxation at federal and cantonal level will be prepared. And become available by the end of 2004. In response to the reform, many cantonal tax regimes would have had to change, too, as the current regimes were established to complement the current federal income tax regime, and also because cantons would have been obliged to introduce a splitting system (though they would have been free to choose the splitting factor). Cantons would also have been required to introduce deductions for childcare costs and for obligatory sickness insurance premiums (but, again, they would have been free to determine the exact amounts as long as they guaranteed that subsistence costs were tax exempt).


143


Box 5.3. Family tax reform plans in Switzerland (cont.) Therefore, the full impact of the tax reform to a large extent would have been determined by cantonal decisions and adaptations, given the size of the relative tax burdens. Interestingly, cantonal tax schemes have generally resolved the issue of unequal treatment of married and unmarried couples, following a Federal Supreme Court judgement in 1983 that obliged them to do so (while the same judgement has no legally binding impact on federal tax regulators). All cantons have revised their systems in the last twenty years and largely eliminated the disadvantages of married couples, using a variety of measures such as splitting procedures, flatter tax rates or specific tax relief.

strong incentive to at least earn up to this hypothetical level, as this would be de facto disregarded in calculating benefit payments. For a two-child couple family, for example, the proposed income threshold is CHF 2 610 per month, or CHF 1 960 if the youngest child is under age three (the respective thresholds for a sole parent are CHF 1 300 and CHF 655). Income between this first threshold and a second (yet to be determined) threshold will be abated at 80%. The actual level of these two income thresholds will crucially determine the benefit’s effectiveness in terms of both work incentives and poverty prevention. Similarly, there are several policy initiatives to harmonise cantonal family allowance regulations, and to raise benefit levels.21 Harmonisation will be difficult to achieve given that cantons are unwilling to give up their formal responsibility for this matter and that employers (who currently pay for these benefits) have little faith in public intervention. Harmonisation would be desirable to secure equity between families (so that each family gets the same, irrespective of where it lives or works) but also between employers (so that the burden does not lie on only those employers who engage parents). Raising the level of family allowances would help reducing (working) poverty, but not efficiently and at extremely high costs because of the lack of any targeting. The two initiatives just described, introducing cantonal supplementary benefits for income poor families and raising the level of the basic, employerprovided benefit, could be modified – and maybe combined – to achieve the poverty reduction objective without spoiling work incentives. The best way in doing this is to link part of the family benefit to the use of recognised childcare and to the work status of the second parent – so to make the use of childcare affordable and work of second earners pay. Reform to supplementary family benefits in Ticino in 2003 goes some way in this direction, because benefit recipients can get the actual costs for childcare reimbursed, However,

144


5.


Table 5.6. Single-earner couple families are most frequent in Ticino, and rarest in Portugal Employment status of couple families by age of the youngest child, in per cent (total = 100) Country/canton

New Zealand

Portugal

Switzerland

Ticino

Vaud

Zürich

Age of youngest child

Single-earner families

Dual-earner families

Jobless families

Child age 0-2

46

46

8

Child age 0-16

29

64

7

Child age 0-2

28

69

3

Child age 0-16

27

70

3

Child age 0-2

48

50

2

Child age 0-16

39

59

2

Child age 0-2

57

39

4

Child age 0-16

50

46

4

Child age 0-2

43

54

3

Child age 0-16

38

59

3

Child age 0-2

49

49

2

Child age 0-16

37

61

2

Source: National authorities, see tables in Chapter 2.

marginal effective tax rates for second earners (and also for sole parents, Section 5.3) can still be very high. As discussed above, design features will determine how effective a future federal supplementary family benefit might be in both improving work incentives and alleviating poverty for low inincome families.

Portugal Portugal has a comprehensive child-related leave model but only few families can afford to make use of it (Chapter 6). Irrespective of the age of the youngest child, seven in ten couple families have two (usually full-time) earners (Table 5.6). One reason obviously is the low level of wages in this country. But the model calculations above also show that part-time work does not sufficiently pay for parents needing childcare. Even if wages were higher (and part-time jobs available), the use of part-time parental leave and parttime special leave is unlikely to increase for this reason. If the government is serious about making part-time work more attractive, modifications in the way childcare fees are determined and subsidised are needed. In particular, reasonably priced part-time childcare would have to become available.


145


In contrast to the childcare leave scheme, the Portuguese tax system has not yet been set up so to facilitate family/work reconciliation. As foreseen in the new Swiss family tax reform, the income tax system in Portugal is currently based on tax splitting for married couples. Potentially this is quite attractive for single earner families, which actually make up one in four of all families with a child under age 16. While reform is not that urgent as long as wages remain low, it would seem time to start preparing an income tax system that makes work pay for everybody. Individual taxation, for example, is appropriate for this, and it would also complement Portugal’s policy focus on gender equality (Chapter 1). Ongoing concerns about working poverty have, perhaps surprisingly, not stimulated much of a debate on the relatively low degree of progressiveness in the Portuguese income tax system (despite relatively steep nominal tax rates). There are, for example, various (partly child-related) tax deductions that largely benefit wealthier families. Refundable tax credits, for instance, could help reducing income inequality and working poverty. Alternatively or in addition, working poverty of families with children could be addressed through the benefit system. Recent reform of child allowance that has introduced a larger degree of targeting is a step into the right direction. The impact of that reform should be closely monitored, and resources further targeted at low-income families if needed.

New Zealand In New Zealand, the policy debate is dominated by a concern about the decline in both the level of family benefits and the proportion of families eligible for these tax benefits. Unabated entitlements and abatement thresholds for Family Support, the main public family programme, have indeed remained (virtually) unchanged since the last family assistance reform in 1996.22 Over the six-year period from 1997 to 2003, consumer prices have increased 0.8% annually, and nominal earnings 1.3% annually. As a consequence, the gross cut-out point for Family Support for a family with two children under age 12 fell from 110% of APW earnings in 1991 and 105% in 1997 to 88% in 2003 (Table 5.7). In response to these concerns, policy makers in New Zealand announced a comprehensive family reform package in May 2004. The package “Working for Families” is designed to put more money in the pockets of New Zealand’s low- and middle-income families (Box 5.4). Effectively the reform not only closes the gap to the 1996 levels of family assistance and abatement thresholds, but raises the maximum payment level and thereby also the ultimate cut-out point considerably. The implications of this change are complex because different groups are affected in different ways (see

146


2 412

2 444

01-avr-03

1%

1997-2003

1997-2003

0.1%

2.6%

2%

43%

1 664

1 632

1 144

Additional child

Source: OECD and national authorities.

0.7%

0.1%

1991-1997

Average annual change

10%

1991-1997

Changes in %

2 184

01-avr-97

Eldest child

Unabated entitlements

01-avr-91

Values in NZD

Date

0.0%

1.0%

0%

14%

20 000

20 000

17 500

0.0%

0.0%

0%

0%

27 000

27 000

27 000

Lower threshold Upper threshold

0.0%

0.8%

1%

12%

36 493

36 277

32 393

Gross cut-out point with two children

Abatement thresholds

0.8%

0.8%

12%

12%

114.8

102.9

92.1

Consumer price index (1995 = 100)

1.3%

1.2%

20%

17%

41 452

34 602

29 485

APW earnings

For comparison:

Unabated entitlement and abatement regime for Family Support vis-à-vis CPI and APW earnings, 1991-2003

88%

105%

110%

Gross cut-out point (two children) over APW

Table 5.7. The real value of family benefits in New Zealand has drastically declined in the last six years



147


Section 5.3 for the impact on sole parents). Effective tax rates for second earners remain high at certain levels of earnings of the main earner, although the income at which work disincentives are greatest goes up. More particular, second earners with a first earner at APW earnings face significantly higher effective tax rates than before reform. Work incentives for low-income families are to a certain extent improved, because significantly higher income from work is allowed before the entire public assistance (partly in the form of in-work payments) is lost, although the higher level of benefits has the opposite effect. In all, the new family assistance package involves major income gains for low- and middle-income families with children, while it also provides better financial incentives for families to move off benefits. However, despite modification of in-work payments, the reform does not improve the marginal effective tax rate structure that second earners in couple families face. Further reform should address this issue by strengthening financial support to parents (such as the Childcare subsidy) that directly links parental working hours with childcare support. Calculations above show that high fees for childcare often mean that work, or more work, barely pays for a second earner. This is part of the explanation for the high frequency of single-earnership among couple families with a child under age three, but not among those with older children (Table 5.6). The way childcare in New Zealand is subsidised contributes to this outcome, and the role of Childcare Subsidy n the context of “Working for Families” should be extended, so as to lower effective tax rates of second earners at most earnings levels. Paying subsidies to users directly (as proposed in the previous chapter) and in doing so linking payments partly to the work status of (both) parents would help making work pay for parents seeking work. The current system of childcare fee subsidies targeted at low-income groups (see Section 5.3) could easily be brought into such a new funding model. Similarly, family assistance payments could be incorporated in an integrated family assistance system that aims to establish a better balance between adequacy and work incentives. Such integrated family and childcare support could consist of a basic per child payment in relation to family income (like Family Support) plus additional components depending on the age of the child, the parents’ work status and the number of hours of paid childcare used. Integrated delivery will require some administrative adjustments, because tax benefits and childcare subsidies are currently operated on the basis of different time periods and managed by different authorities, but such adjustment should be feasible. In integrating the system mechanisms should be sought to be able to deal with changes in circumstances (e.g. in family income) quickly.

148


5.


Box 5.4. “Working for Families”: 2004 family benefit reform in New Zealand In May 2004, the government of New Zealand announced a new family assistance package to help low- and middle-income families with children, and to make work pay for parents who move off benefit into work. The total amount delivered by this package will build to NZD 1.1 billion a year when it is fully implemented in 2007. The value of the package is considered as having the potential to transform the lives of many families, especially children living on or below the poverty line. (For comparison, the total value of all family tax credits currently is about NZD 1.2 billion.) Essentially this package has four components. First, maximum Family Support rates will increase (by around 75% until 2007) and Family Support will be available to more families (partly because the abatement threshold will be increased from NZD 20 000 to NZD 27 500). Working parents will get an InWork Payment (which is paid per family) that replaces and pays more than the previous Child Tax Credit (which was paid per child). Second, accommodation supplement will be available to more working people, and many people will be entitled to more assistance (through up-grading of certain areas and new, higher rates in some parts of Auckland). Third, childcare subsidy payment rates will increase (by 10% each in 2005 and 2006), and by raising eligibility thresholds it will be available to parents earning higher incomes. Finally, simplification of the system and more consistency between the tax authority (Inland Revenue) and the benefit authority (Work and Income) should make it easier for people to know what they are entitled to and how to get it. The first component, the increase in Family Support and the new In-Work Payment, is estimated to add up to NZD 1 billion by 2007, which is roughly 90% of the costs of the entire “Working for Families” package. The costs of the childcare subsidy component are estimated at NZD 35 million or 3% of the package. One consequence of the reform is that as of 2007 for a family with two children family benefits will cut out at around 150% of APW earnings (taking Family Support and the In-Work Payment together), compared to roughly 100% before the reform (in this case taking Family Support and Child Tax Credit into account). Similarly, childcare subsidies will be granted up to about 140% of APW earnings, compared to 93% today.

5.3. Sole parent families struggling with joblessness Being the main earner and the main carer, many sole parents without either financial or everyday support from the other parent have to cope with particular resource constraints. In nearly all OECD countries sole parents are the group most often found to be income poor. This is largely, but not only, a


149


consequence of the high degree of joblessness in one parent households. In the three countries covered in this review, one in five working sole parents and almost all jobless sole parents are income poor (Chapter 2). To a lesser extent this is also related to low proportions receiving maintenance payments.23 Sole parenthood is particularly frequent in New Zealand, where almost one in four children grow up in such a family (Chapter 2). In addition, employment rates of sole parents are particularly low in New Zealand (Chapter 3). As a consequence, almost 12% of all children in New Zealand live with a jobless sole parent, compared to only around 2% in Portugal and Switzerland (Table 5.8). There are different reasons why employment rates among sole parents differ across countries, but countries with separate benefit arrangements for sole parents as in New Zealand, generally have the lowest employment rates for this population group (OECD, 2002f and 2003g). Table 5.8. One in nine children in New Zealand lives with a jobless sole parent Children age 0-16 living in sole parent families, by parent's employment status

Joblessness of lone parents

Children living in working one-parent households

Children living in jobless one-parent households

23.7

49.6

11.9

11.7

8.4

22.1

6.6

1.9

Switzerland

10.4

21.7

8.2

2.3

Ticino

11.3

30.3

7.9

3.4

Country/canton

New Zealand Portugal

Children living in one-parent household

Vaud

12.2

22.0

9.5

2.7

Zürich

11.6

21.4

9.1

2.5

Source: National authorities, see tables in Chapters 2 and 3.

It is not surprising that sole parents, many of whom are Maori, receive particular attention in the policy debate in New Zealand. This is apparent in the recurring reforms of sole parent benefit and the changes in the balance between benefit eligibility and work incentives (see below). In Portugal and Switzerland, the high poverty risk among sole parent families and especially working poverty among sole parents (some of them working full-time, others also dependent on social assistance) is seen as a major social problem where policy intervention is needed. De facto, thus, sole parents end up being one of the main target groups for social policy, but not on the basis of their household composition.

5.3.1. The policy approach to sole parents Sole parent families in all three countries are over-represented on benefits. In Portugal and Switzerland, like in most non-English speaking OECD

150


5.


countries, sole parents are not entitled to special benefits, but they are found on certain benefits more often than others. For instance, in Portugal 40% of families receiving Social Insertion Income are sole parent families. In Switzerland, about one in three sole parent families receive social assistance, often as a top-up to income from (part-time) work, thus forming a large part of the entire social assistance caseload. Formally there is no age at which Portuguese and Swiss sole parents with a young child are expected to seek work. The infants’ allowance in Ticino is designed to enable low-income families, and sole parents in particular, to stay with their child for the first three years. A similar allowance in Zürich does so for the first two years after childbirth. Benefit systems in Vaud and in Portugal offer additional payments for the first six months (Vaud) and for the first year (Portugal). Differences between employment and social service offices and across cantons are huge in Switzerland. Recommendations of the Swiss Conference for Social Welfare advise that social assistance authorities should not require sole parents to take a job while the child is not yet three years of age. In practice, except for the first year after childbirth, social welfare officers would expect lone mothers to make some effort to find at least a very low hours’ part-time job. Cantonal social assistance benefits are generally provided under a regime of mutual obligations. Within the unemployment insurance system, care responsibilities are not accepted as a reason for not engaging in job search.24 In order to receive daily allowances, the insured person must be available for work. A person is considered to be available for work if he or she is prepared, entitled and in a position to accept suitable work and to take part in re-integration measures. Mothers would typically have to prove that (during working hours) continuous childcare is guaranteed. Sanctions are frequent and often family-related. In Portugal, social assistance clients increasingly have to sign an individual caseplan. Authorities are relatively clear on the work expectation of recipients of Social Insertion Income. If there is no other problem, such as the unavailability of childcare, and if clients are offered a job or training place three times by the public employment office, sanctions will follow. This also applies to sole parents who, like other parents, are expected to go back to work within three months. If affordable childcare is unavailable, however, sole parents with a young child will not be pushed very hard. This must be seen in the context of priority in access to public childcare being given to families “at risk” – which basically refers to the level of income of the household, but also comprises socio-economic risk groups such as sole parents.


151


Neither Portugal nor Switzerland have specific employment programmes targeted at women returners, be it sole parents or mothers living in a couple family. In New Zealand, in contrast, benefit authorities and employment services treat sole parents as a target group. Sole parents with caring responsibility for a child under age 18 can receive a special benefit, Domestic Purposes Benefit (DPB), and they also receive special support to find work (see below). From the perspective of other mothers, this means they cannot access special employment support that sole parents can (and if the husband has a sufficiently high income, they are not entitled to any subsidies for childcare either, see Section 5.3). However, the jobless spouse in a couple family in New Zealand has access to all programmes to which jobseekers are entitled, provided they are available for full-time work of 30 hours or more where their youngest child is 14 years or over, or for part-time work of 15 hours or more where their youngest child is aged between 6 and 13 years. No work test applies to unemployment benefit spouses whose youngest child is under six years. Unemployment assistance recipients have to accept any job irrespective of the suitability in terms of qualifications (which is “harsh” by international standards), while relocation to be able to take up a job is considered unreasonable (which is “soft” compared with many other countries).

Operation of Domestic Purposes Benefit in New Zealand Prior to DPB reform in 1999, there were limited work requirements for sole parents on such benefit. With the comprehensive benefit reform in February 1999, a full-time work test was introduced for sole parents with a child aged 14 and over, and a part-time work test for those with a child aged 6-13 (just as for unemployment benefit spouses). Clients with a child under age six had to do an annual work preparation interview and be involved in an employment preparation activity once the child turned age five. The 1999 reform also brought several other modifications, such as an alignment in the abatement regime for full-time work-tested clients, measures addressing work disincentives, and increased funding for facilitative measures (DoL/MSD, 2002). Only three years later, with a change in government this reform was followed by yet another comprehensive reform. The main purpose was to address the imbalance in mutual obligations introduced in 1999. While the new work tests indeed (successfully) pushed sole parents off benefit, the authorities failed to complement the new work obligation with sufficient support to help sole parents find adequate work. The key characteristic of the 2002 reform is the focus on mutuality. Firstly, work obligations were reformulated as work expectations, meaning that case managers need to take the clients specific situation into account irrespective of the age of the youngest child.25 And secondly, enhanced case management is being introduced.

152


5.


To improve employment outcomes further, new programmes are being developed (this is done through the parallel “Jobs Jolt” initiative)26 and funding for existing instruments such as the Training Incentives Allowance (which is designed to cover the trainee’s transport and childcare costs) has been increased. The 2002 reform also did away with obvious obstacles that existed previously. Notably, until 2002 access to training programmes for DPB recipients was limited because of a quota according to which their share on such programmes could not exceed 17%, because until then priority was given to (especially long-term) unemployment benefit recipients. Rules like this made the work test toothless. The central feature of the new reform is enhanced case management. As a first necessary step, since October 2002 caseloads are being reduced from around 250 to 150 clients, through recruitment of new case managers. This process is nearly completed (at the end of 2003, the nationwide average caseload stood at 161), but full specialisation of case managers is still ongoing (at the moment some 10-20% of the caseload of a typical case manager responsible for DPB recipients are clients on other benefits). The second step is to manage clients properly. This is done through Personal Development and Employment Plans (PDEP) which case managers have to develop together with their clients. Such plans ought to be developed for all clients between March 2003 and March 2004, and they also have to be updated on a regular basis. By September 2003, nearly 80% of all DPB clients already had a DPEP. Clients with young children tend to have PDEP steps that focus on education and training, while plans for clients with older children focus more on employment. Older women with no dependent children have higher than average plan steps focusing on health and social participation (DoL/MSD, 2003). Other intermediate evaluation findings suggest that client satisfaction has increased and that case managers support the new policy.27

5.3.2. Work disincentives from the tax/benefit system The policy approach to sole parents is reflected in each country’s tax/ benefit system. Echoing the analysis in Section 5.2, this section asks “what is the impact of different work choices on marginal effective tax rates (METRs) on additional earnings of single parents?” Sole parent families at three earnings levels are compared (one-third, two-thirds and 100% of average earnings, which again can be interpreted as reflecting different numbers of weekly hours worked), with and without access to free childcare. In Portugal, Vaud and Zürich, the conclusion for sole parents is similar to that for couple families: additional work pays. Sole parents actually face lower marginal effective tax rates on additional earnings than second earners (Table 5.9, Panel A, see footnote to the table on how marginal effective tax rates are calculated). In Vaud and Zürich this is a consequence of the tax


153


regime, whereby the disadvantage of joint tax assessment of married couples and tax progression both play a role. In Portugal this is due to the lower income tax rate (as income tax effectively only kicks in at around 150% APW family earnings) as well as the higher child allowance payment, entitlement to which is related to family income. When adding the fees for childcare, additional work still pays for sole parents in Portugal, Vaud and Zürich at the assumed earnings levels. However, when moving from two-thirds to average earnings, METRs are exceedingly high both in Portuga-l and in Zürich if full-time childcare is needed (and in Portugal also even if only part-time childcare is needed). In Zürich this finding is likely to contribute to the large share of part-time work among sole parents. Childcare fee subsidies in Vaud mean that actual fees for formal care are increasing very gradually, so that marginal effective tax rates remain under 50% (Table 5.9, Panel B).28 The situation is different for sole parent families in New Zealand. Sole parents at one-third of average earnings are eligible for the highest rate of Family Support and Child Tax Credit (together worth some 14% of APW earnings) as well as Family Tax Credit (FTC), a guaranteed minimum after-tax income. As FTC cuts out at around 44% of APW earnings (Background Annex), increasing earnings implies, first, losing Family Tax Credit, and, at higher earnings, losing all other child-related tax credits. Resulting marginal effective tax rates are over 50% both when moving from one-third to two-thirds APW earnings and when moving further on to average earnings (Table 5.9, Panel A). Work disincentives in New Zealand are huge for sole parents with young children if childcare fees are included into the calculation. Rapid phasing-out of childcare subsidies at family income between around 80 and 90% of average earnings implies that the parental fee for full-time childcare for two children triples when increasing earnings from two-thirds to 100% of APW earnings. As a consequence, net income falls dramatically when increasing work efforts, with an METR of 189% if full-time childcare is needed, and still 122% if only part-time childcare is needed (Table 5.9, Panel B). For a sole parent work above around one-third of average earnings does not pay for this reason, unless sole parents have access to free childcare. In Ticino the situation is different from that in other parts of Switzerland, as well as from that in New Zealand. Income-tested supplementary family benefits are phased out abruptly so that marginal effective tax rates also change abruptly. METRs are very low up to 50% of APW earnings, when a sole parent with two children would be entitled to the maximum amount of supplementary family allowance, and again above 70% of APW earnings (Chart 5.1, panel A). Between 50 and 70% of APW, when supplementary allowance is cut-out on a franc-for-franc basis, additional work does not

154


33.3

66.7

100

33.3

Full-time childcare fees in % of APW earnings

77 97

With full-time childcare costs for both children

0

189

122

54

45

23

54

80

80

25

4

4

38

114

42

42

11

10

10

11

68

101

12

66.7

Portugal

74

74

21

18

18

15

96

96

7

100

..

..

56

169

75

33.3

..

..

100

..

..

58

69

104

12

66.7

Ticino

..

..

20

..

..

20

96

96

7

100

0

0

33

99

6

33.3

20

15

11

3

1

11

62

93

6

66.7

Vaud

48

33

20

9

4

20

89

89

6

100

18

9

35

106

13

33.3

61

34

9

17

8

9

65

98

9

66.7

Zürich

79

49

24

18

9

24

91

91

6

100



. . Not available. a) APW earnings or “average earnings”refer to the annual earnings of an Average Production Worker (APW) in the manufacturing sector. In 2003, these were USD 23 850 (NZD 41 452) in New Zealand, USD 8 020 (€ 8 677) in Portugal and USD 41 120 (CHF 65 265) in Switzerland (OECD, 2003k, Taxing Wages). Adjusted for the costs of living, average earnings in USD were 28 590 in New Zealand, 12 690 in Portugal and 34 710 in Switzerland. b) Marginal effective tax rates on additional earnings are calculated as the difference between the increase in gross earnings and the increase in net income when a lone parent increases working hours or income from 33% to 67% and from 67% to 100% of APE earnings, expressed as a proportion of the change in gross earnings.

58

With part-time childcare costs for both children

13

Without taking childcare costs into account

Marginal effective tax rates on additional earningsb

7 29

Part-time childcare fees in % of APW earnings

7

58

64

50

15 96

41 150

Panel B: The impact of childcare fees for children aged 1 and 4

Marginal effective tax rates on additional earningsb



Family benefits in % of gross earnings

Panel A: Sole parent families with access to free childcare and children over age 3

Gross wage earnings (in % of APW earnings)a

New Zealand

Family benefits and net income for sole parent families at different earnings levels, and resulting effective tax rates on additional earnings (Panel A) Marginal effective tax rates on additional earnings for sole parent families, with and without childcare fees (Panel B)

Table 5.9. Work generally pays for sole parents in Portugal, Vaud and Zürich, but much less so in New Zealand and Ticino


155


increase net income at all.29 Hence, sole parents in Ticino with children who need to be taken care of (children up to age 12 or so), have strong incentives to earn less than around half of Swiss average earnings (and this level would be considerably lower, if information on parental childcare fees could be accounted for on a more comprehensive basis). This helps explaining why, since 2003, the system includes a reimbursement of childcare fees for lowincome families. Ticino is also different because incentives change with the age of the child. As long as a sole parent has a child under age three, entitlement to infants’ allowance (together with supplementary benefit) means that work below 70% of APW earnings does not pay at all (Chart 5.1, panel B). There is no financial reason for such a sole parent in Ticino to consider working. Again, this is the conclusion without taking fees for childcare that would or could arise when moving into work into account. Would childcare fees be included, work would not, or hardly, pay over a much longer income range. The situation for sole parents with very young children is similar in Zürich, where they can also receive an infants’ allowance though only for up to two years after childbirth. The lack of supplementary family benefit in Zürich, however, means that total benefit income would be significantly lower (around 45-50% rather than 70% of APW earnings), thereby lowering the ensuing financial disincentives to work.

The effect of Domestic Purposes Benefit and Accommodation Supplement in New Zealand Most jobless and low-income sole parents in New Zealand are entitled to Domestic Purposes Benefit, a special benefit targeted at sole parents, and many of them will also receive Accommodation Supplement that is designed to help families and other households with high accommodation costs.30 For these families, actual work disincentives can be much larger than just described above. Chart 5.2 shows how net income for a sole parent with two children increases with earnings, while gradually losing eligibility for Domestic Purposes Benefit (DPB), Accommodation Supplement, Family Support and Child Tax Credit (all of them having a different abatement-free zone).31 With no earnings, income of this two-child sole parent family would be close to 50% of average earnings. Up to one-fourth of APW earnings part-time work pays, although even then marginal effective tax rates are close to 50% (see also Nolan, 2002, for a similar calculation). Above that earnings level, when one after the other benefit is abated, work hardly pays. Increasing work effort from one-fourth to three-quarters of APW earnings only increases net income by some 15% – not taking additional costs that are likely to arise (e.g. fees for childcare, costs for transportation) into account. At higher earnings,

156


5.

Chart 5.1.


Work does not pay for a sole parent in Ticino with a child under age three

Net income and marginal effective tax rates for a sole parent in Ticino with two children, by age of the children Family allowance

Supplementary allowance

Net income

Marginal effective tax rate

National currency per year 140 000 Panel A. Sole parent in Ticino with two children aged 6 and 4

Marginal effective tax rate 140

120 000

120

100 000

100

80 000

80

60 000

60

40 000

40

20 000

20

0

0 0

10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 % of APW

Supplementary allowance Family allowance

Infant’s allowance Net income

Marginal effective tax rate

National currency per year 140 000 Panel B. Sole parent in Ticino with two children aged 1 and 4

Marginal effective tax rate 140

120 000

120

100 000

100

80 000

80

60 000

60

40 000

40

20 000

20

0

0 0

10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 % of APW

Notes: Between 48% and 72% of APW earnings: supplementary allowance is abated on a franc-for-franc basis (METR equal to 100%). Up to 48% of APW earnings: infant's allowance is abated on a franc-for-franc basis (METR equal to 100%). Source: OECD


157


when DPB has already been cut out, marginal effective tax rates first fall to around 60% until Family Support and Child Tax Credit cut out at around average earnings, and then to 33%.

Chart 5.2.

Beyond 24% of average earnings work hardly pays for a sole parent in New Zealand

Net income and marginal effective tax rates for a sole parent in New Zealand with two children under age 13 Domestic Purposes Benefit Family Support and Child Tax Credit National currency per year 70 000

Accommodation Supplement

Net income

Marginal effective tax rate Marginal effective tax rate 140

60 000

120

50 000

100

40 000

80

30 000

60

20 000

40

10 000

20

0

0 0

10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 % of APW

Notes: For the first dollar of earnings: Full DPB payment, but 25% abatement on Accommodation Supplement (METR = 46%). Around 10% APW earnings: DPB starts being abated at 30%, Accommodation Supplement stops being abated at 25% (METR falls to 44.7%). Around 24% APW earnings: Domestic Purposes Benefit starts being abated at 70% (METR increases to 76.3%). Around 50% APW earnings: Family Support starts being abated at 18% (METR further increases to 94.3%). Around 68% APW earnings: Family Support starts being abated at 30% (METR increases to 106.3%). Around 73% APW earnings: DPB and AS payment stops, Family Support compensates threequarters of that loss (METR peaks and falls to 51%). Around 95% APW earnings: NZD 38 000 rebate ends thus raising the income tax rate (METR increases to 63%). Around 105% APW earnings: Child Tax Credit stops (METR equal to income tax of 33%). Around 150% APW earnings: Income tax rate increases from 33% to 39% (METR increases accordingly to 39%). Source: OECD

158


5.


In conclusion, the combined effect of all those benefits is that a sole parent is likely to make sure not to earn more than 24% of APW earnings (the level when DPB starts to be abated at 70 cents for each dollar), or not to work at all. This is true for all sole parents, but even more so for those with a child under age five in formal childcare. This conclusion holds despite the fact that each benefit has its abatement regime so designed to limit work disincentives, and although phase-out ranges differ (Background Annex).

5.3.3. Reducing poverty among sole parents Poverty of sole parent families is a key concern in Portugal, Switzerland and New Zealand. Whereas this is primarily a matter of working poverty in Portugal (mostly due to low wages) and also in Switzerland (to a large degree caused by part-time work), it is predominantly a concern about joblessness and benefit traps in New Zealand. While, as a consequence, policies solutions ought to differ, one way or the other all countries may have to consider policies to make work pay (Box 5.5).

Box 5.5. Lessons from policies to make work pay Making work pay (MWP) policies address employment and earnings opportunities of certain groups at the margin of the labour market, especially people with low skills and work productivity and people with little work experience. MWP policies have two broad motivations (Pearson and Scarpetta, 2000): to get people isolated from the labour market into employment (increase employment and economic inclusion), thereby if possible also trying to increase the work effort of those labour market participants working less than full-time, and to raise the rewards from low productivity full-time employment (reduce working poverty through redistribution). Policies to m ake work pay can b e im plem en ted either thro ugh employment-conditional benefits and tax credits, or through employment subsidies and tax rebates given to employers. Different policies have shown to be effective in different situations, but by and large make work pay policies work best when the distribution of earnings is wide (which is true in all three countries), when earnings are low (which is true in Portugal and to a lesser degree in New Zealand), and when tax rates are low (which is at least to some extent true in all countries, especially in Portugal). Research findings suggest that MWP policies tend to increase labour supply of first earners, especially sole parents, but not of second earners. The impact on overall labour supply thus also depends on the initial distribution of families across work/family status. Positive overall labour supply effects have been shown for the Earned Income Tax Credit in the US (e.g., Eissa and )


159


Box 5.5. Lessons from policies to make work pay (cont.) Hoynes, 1998; Meyer and Rosenbaum, 1999) as well as for the Working Families Tax Credit in the UK (e.g. Dilnot and McCrae, 2000; Blundell et al., 2000). In theory and depending on the design of the programme, first and second earners already in work may have some incentive to reduce working hours, due to the discontinuity in the implied marginal tax rates. Overall one can safely conclude that MWP policies work best in getting sole parents into work, but often accept favouring single-earnership in couple families. New Zealand currently has two in-work benefit programmes, Child Tax Credit (CTC) and Family Tax Credit (FTC). Child Tax Credit is a refundable tax credit effectively providing a one-third upgrade to Family Support for lowincome working families. Entitlement requires that a family is independent from state assistance, while there is no limit on weekly working hours. Family Tax Credit can be much more generous, because it provides a minimum after-tax family income of NZD 15 080, but it is so designed that take-up is very low (essentially FTC was born in 1986, though under a different name, to prevent a small number of losers from the tax/benefit reforms of that year). For sole parents, Domestic Purposes Benefit is far more attractive as it does not require them to work for at least 20 hours. Couple families, who must work a combined 30 hours per week, rarely qualify (even those with just one earner) because FTC cuts out at around 44% of APW family earnings. In contrast to CTC that is abated together with Family Support, FTC is cut out on a dollar-for-dollar basis. As of 2006, CTC will be replaced by an In-Work Payment which will require the same working hour limits as FTC. The new In-Work Payment, which will be paid per family and not per child (as was the case for CTC), continues to be abated together with Family Support. Design features make a big difference for the success of any in-work benefit or tax credit. If a balance is to be achieved on poverty and work incentives outcomes, conflicting aims have to be addressed (see also Hüttner and Bauer, 2003). One such conflict is between work incentives and the costs of a programme. An in-work benefit scheme will be most efficient in reducing poverty if it provides for exactly the difference between actual earnings and subsistence income. But such design would imply a 100% marginal tax rate on additional earnings and is thus inadequate from an employment and gender equity perspective.

160


5.


Portugal The Portuguese tax/benefit system does not give strong incentives for sole parents to stay out of work. Indeed, at 78%, employment rates of sole parents in Portugal are very high in a comparative perspective. As a consequence, work incentives for sole parents are not an issue. Since nine in ten working sole parents work full-time, and still 84% of those with a child under age three, increasing work efforts of sole parents already in work is not an issue either. Despite high full-time employment rates, however, poverty among sole parent families is high. The pre-tax/transfer poverty rate among working sole parents is 20%, and so is the post-tax/transfer poverty rate. Apart from investments in improving labour market skills more broadly, this issue can also be addressed through the tax/benefit system. The introduction of an employment-conditional refundable tax credit (financed through higher taxes for middle- and high-income groups) could be one solution to raise after-tax income of low income groups. Such a measure would help single parents as well as single-earner families. A similar effect could also be achieved through the benefit system, for example, through higher child allowance payments for low-income working families. In addition, phasing-out of income-related subsidies to childcare fees could be extended so to increase returns from work for sole parents at various earnings levels.

Switzerland Broadly speaking, the situation in Switzerland is not dissimilar. There are no particular benefits for sole parents, and employment rates for this group are as high as in Portugal. In contrast to Portugal, however, over 50% of the sole parents work part-time, which is part of the explanation for the high rate of working poverty in this country. Ticino is the only Swiss canton that offers a supplementary family allowance that directly addresses family poverty through covering the difference between actual family income and deductible expenditure, up to subsistence needs for the child or children. A disadvantage of this model is that, while it can de facto function as an in-work benefit for low-income families, it is also (and predominantly) payable to jobless families. Hence, it is a pure poverty programme and not aimed at making work pay. The success of the “Ticino model” in reducing poverty may lead to the introduction of a similar model in other cantons, too. In doing so, employment effects cannot be ignored. While the design of the model ensures efficiency in regard to poverty reduction, its 100% effective abatement rate on additional earnings damages work incentives. Recent changes in Ticino put in force in 2003 (no longer requiring one parent to work for no more than 50%, and


161


compensating eligible families for the actual costs of childcare occurring while being in work) were important steps but have not addressed the fact that supplementary benefit is still abated on a franc-for-franc basis. Moreover, while working poverty is very high in Ticino, justifying the introduction of a benefit that addresses poverty, it is not nearly as high in any other canton of Switzerland. Hence, other cantons as well as Ticino need to consider modifications to this model so to make work pay, with supplementary family benefits partly being employment-conditional.

New Zealand In New Zealand the discussion about poor income conditions of families is somewhat different, as the large number of jobless families with children is the overriding policy issue.32 In 2001, around 19% of all households with a child under age 16 were jobless, and 22% of those with a child under age three (Chapter 3 and above). The jobless rate is much higher than this, however, among sole parent families: 50% for those with a child under the age of 16, and over 70% for those with a child under the age of three. The situation has improved over the 1990s, partly in response to reform, but is still far worse than in most other OECD countries. The high rate of joblessness among sole parents in New Zealand is in part a response to available government transfers. Domestic Purposes Benefit in particular generates inactivity traps, thereby creating poverty traps. It is too early to judge what the impact of the 2002 DPB reform will be. A main issue for the future is the quality of case management, and the ability to develop proper pathways to work, with an early intervention to facilitate the transition into work. Analysis has shown that many sole parents have great potential, also for higher goals (DoL/MSD, 2002). So far preliminary evidence suggests that the latest reform has improved the motivation of DPB clients. Moreover, recently much more vocational training is offered to DPB clients, short- and long-term, with coverage of training costs of up to NZD 3 000 per year. This is promising though it potentially carries the risk of putting DPB clients into training so that case managers fulfil their targets, without any longer-term employment effects. Even with enhanced case management, however, there is a risk that abolishing work testing sends the wrong policy signal and that the recent stabilisation in the increase of the number of DPB recipients since 1999 will be reversed. Also, latest DPB reform has not reduced the financial disincentives for sole parents moving into work. It will be difficult if not impossible to convince a sole parent to go back into work that hardly pays. Constant evaluation and monitoring of the impact of the latest reform currently underway, and enforcement of mutual obligations if outcomes do not match policy expectations, are thus critical.

162


5.


It is not Domestic Purposes Benefit alone that generates the benefit trap for a sole parent. The interaction between DPB and other benefits contributes as well. This is true for Family Support, which raises marginal effective tax rates to almost 100% over a considerable earnings range. But this is equally true for Childcare Subsidy which is phased out more or less at exactly the moment when work would otherwise start to pay. Successful reform of DPB and reduction of poverty among sole parents, thus, seems difficult without an integrated reform of the entire family benefit system. Family benefit reform announced in May 2004 (“Working for Families”) will have a significant impact in this respect. Because of the increase in Childcare Subsidy abatement thresholds, sole parents will, in most cases, be eligible for the maximum subsidy rate; this reduces work disincentives at (close to) full-time earnings levels significantly. At the same time, however, the higher Family Support payment rates imply that non-working sole parents may have even less incentive to move into work. In any case, therefore, modification of Domestic Purposes Benefit itself should also be considered so to make work pay.33 One option would be to lower the basic payment rate and to introduce an employment-conditional increment. The latter could be designed so to make it attractive to increase work effort, say, from 10 to 20 hours weekly employment (to stimulate substantial rather than marginal part-time work). For sole parents who can work, this would moderate the benefit and poverty trap substantially. The idea behind such policy is that those who can work should have a strong incentive to do so, whereas those who cannot work should not be on DPB but on other types of benefits, such as Invalids Benefit. The trade-off of such policy is that those who solely rely on DPB would be worse off. Alternatively, if it is unacceptable to cut the DPB payment rate for this reason, additional in-work payments could be introduced to make work pay. Such scheme would obviously be more expensive. In either case, phasing-out should be flattened to lower marginal effective tax rates. Employment-conditional elements aimed to increase the wedge between income from welfare and work could either be limited to DPB recipients or be introduced more broadly for all low-income families. Either type of in-work benefit could have a phasing-in whereby the amount of the benefit first increases as wages and/or work hours increase, similar to the US Earned Income Tax Credit. At the end of the day, changes in the system of family and sole parent benefits must be seen in the context of the ongoing broader discussion on the future of the New Zealand welfare system. Categorical entry into different types of benefits is considered ever less appropriate, not least because people with the same sort of “problem” are increasingly found on different types of benefits. In the long–term, the New Zealand social protection system might


163


evolve into a single programme system with different degrees of support which for a large part would be determined by the distance of a potential beneficiary to the labour market. Future changes to the current family benefit system should be in line with envisaged reform of other benefits.

5.4. Conclusions Past policy for sole parents in New Zealand has not been sufficiently successful. The proportion of sole parents is much larger than elsewhere (with the exception of the US). Domestic Purposes Benefit, spending on which is high, creates dependency traps and does little to raise beneficiaries’ selfsufficiency. The combination of different means-tested public benefits, and the way these are cut-out with earnings, means that sole parents face very high marginal effective tax rates. At the same time, there is little horizontal redistribution towards families with children in the tax/benefit system. Middle-income couple families, especially larger families, are relatively worse off than in other countries, and they also face high average effective tax rates as long as they need to pay for childcare for pre-school age children. The new family assistance package addresses most of these issues, but much remains to be done in terms of improving financial incentives to work for second earners in couple families. Portugal, a country with a relatively wide income distribution and a large low-wage sector, suffers from high working poverty, especially among singleearner families. The tax/benefit system has little impact in reducing poverty of working families. The present tax scheme seems not to provide significant vertical redistribution, and family benefits are relatively low despite recent benefit reform aimed at better targeting. As transfers are low, on the other hand, the work incentives structure is not distorted very much, with one exception. Childcare fee structures are such that part-time work will often not pay. This may not be a big problem because most people in Portugal want to work full-time and need to work full-time to make ends meet, but it may become a concern in the future. In Switzerland, second earners in couple families, most often mothers, are confronted with high average effective tax rates when they need formal childcare when in work. Work disincentives, therefore, are usually a temporary problem. However, as school hours are short and in many cantons not even offered in a block, temporary will often mean ten years or more, which makes a career impossible and explains why so many mothers never return into a full-time job. The new phenomenon of working poor in this country, one of the richest in the OECD, is also (but not only) related to the tax/ benefit system, which is characterised by a lack of targeting.

164


5.


In all three countries, therefore, some groups of parents face a situation in which work, or more work, does not sufficiently pay. This may be because available benefits are high relative to earnings (especially certain low income families in New Zealand and Ticino) or because parental childcare fees are so high (middle-income families in all three countries) or both. All three countries need to reconsider the balance between the adequacy of their benefit levels and the financial incentives to work. To make work pay, to reduce (working) poverty among families and children, and to secure future labour supply, all three countries should consider introducing appropriate employment-conditional elements into their tax/benefit systems, and where possible to link these with the subsidies currently available to make childcare affordable.


165


Annex to Chapter 5 Table 5.A.1. For low-income families, work incentives for second earners are low in New Zealand and in Ticino Family benefits and net income for couple families at different earnings levels with a first earner at two-thirds of average earnings, and resulting average effective tax rates on second earners New Zealand

Ticino

Wage level (first adult-second adult)

67-0

67-33

67-67

67-0

67-33

67-67

Gross wage earnings (in % of APW earnings)

66.7

100

133.3

66.7

100

133.3

Family benefits from government in % of gross earnings

15

0

0

34

7

5


96

82

81

124

98

93


64

82

108

83

98

125

47

34

55

38

Average effective tax rates on second earners Source: OECD Secretariat calculations.

Table 5.A.2. Tax/benefits systems only have a minor potential impact on couples' distribution of work Family benefits and net income for couple families with two children, three distributions of paid work at 133% of APW earnings New Zealand

Portugal

Ticino

Vaud

Zürich

Gross wage earnings (in % of APW 133-0 100-33 67-67 133-0 100-33 67-67 133-0 100-33 67-67 133-0 100-33 67-67 133-0 100-33 67-67 earnings) Family benefits from government

0

0

0

5

5

5

5

5

5

4

4

4

5

5

5


76

80

81

91

94

94

92

94

93

87

88

88

88

90

89


102

107

108

121

125

125

122

124

12

115

118

118

117

119

119


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5.


Notes 1. In line with international conventions (OECD, 2003j, Revenue Statistics 1965-2002), the use of the word tax refers to both income tax and social security contributions. Tax deductions are amounts deducted from gross income to arrive at taxable income, and tax credits are amounts deducted from tax liability. If the latter are paid to the taxpayer where the tax credit exceeds the tax liability, these are referred to as refundable tax credits. 2. The total social security payroll tax in Switzerland, which is shared equally by employers and employees, is close to 19% at average earnings, but lower at the lower and the upper end of the income scale. This is due to the floor (at around 44% of APW earnings) and the ceiling (at around 116% of APW earnings) on contributions to the mandatory occupational pension system, as a consequence of which 35% of all employed women and 13% of employed men are not covered by second pillar benefits (Sousa-Poza, 2003). 3. The total social security payroll tax in Portugal is 34.75%, two-thirds of which is paid by the employer. There is no floor and no ceiling. 4. Social spending data for the Swiss cantons are crude estimates based on Eurostat’s ESSPROSS methodology for estimating the family function from global accounts of social protection. The data must be used with caution because data sources and definitions are of poor quality. 5. The value of Accommodation Supplement going to families in New Zealand was around 0.24% of GDP in 2002. Similarly, housing benefits paid to families in Portugal were around 0.13% of GDP in 2001. 6. Reference income for calculating entitlement to Child Allowance in Portugal is determined as total family earnings divided by the number of children eligible for the allowance plus one, e.g. divided by a factor of three for a family with two children. For a couple with two children, thus, a reference income equal to five times the national minimum wage corresponds to around 750% of APW earnings. 7. There are a large number of family compensation funds in Switzerland, structured both by cantons and economic sectors. The situation is complicated as the (responsibility for) benefit payment to a particular family depends on where parents work. 8. Except for Ticino, Zürich and Schaffhausen, duration of payment of infants’ allowance is 6-12 months. In 2000, reflecting differences in coverage and payment levels, Zürich accounted for 37% of total spending on such benefits in Switzerland and for 31% of all recipients; Ticino for as much as 23% of total spending for only 7% of all recipients; and Vaud for 11% of total spending for as many as 36% of all recipients (Hüttner and Bauer, 2003). 9. The Ticino family benefit model was developed in response to a study that was commissioned in 1994, the Year of the Family. After its introduction in 1997, as determined in the then regulation, the law was officially approved in 2002 and its effectiveness has again to be reconsidered by the legislator in 2006. 10. More specifically, the funds for supplementary family benefit in Ticino consist of five components: 1) an intra-cantonal transfer from social assistance funds assumed to cover 40% of the total costs, 2) savings in the family compensation funds resulting from non-indexation of family allowances, 3) contribution from the self-employed who, though not entitled to the basic family allowance, can receive supplementary and infants’ allowance (this covers some 6-7% of the total costs), and 4) cantonal budget and 5) family compensation funds, the latter two


167


each covering half of any remaining deficit (which was 25-45% of total costs in the 1999-2001 period). 11. In 1995, New Zealand appeared to be one of the least generous OECD countries when it comes to public benefits to all families, but in an average position in the OECD when considering jobless families on benefits (Stephens and Bradshaw, 1995). This situation has changed very little since then. 12. Comparative poverty statistics in this report are based on a poverty threshold of 50% of median income. This leads to lower poverty figures than the official poverty figures used in Portugal (namely in official documents like the National Action Plan for Inclusion) that use 60% of median income as a reference. 13. In 2002, almost 60% of the recipients of Social Insertion Income (SII) were families with children, of which 40% were sole parent families. The poverty reducing effect of SII, however, is only partially supported by findings from the evaluation of Minimum Guaranteed Income (MGI), the predecessor of SII. MGI was found to benefit the 20% poorest among the poor, with the main effect of the programme being a substantial reduction in the intensity and the severity of poverty (Rodrigues, 2001; Bruto and Costa, 2002). 14. Throughout, “average earnings” refer to the annual earnings of an Average Production Worker (APW). This concept, recently also referred to as Average Production Employee, refers to the average gross wage earnings of adult, full-time workers in the manufacturing sector in each country. In 2003, in USD PPP these were 28 588 in New Zealand, 12 686 in Portugal and 34 711 in Switzerland. 15. All empirical findings for the three cantons of Switzerland reported in the following refer to the capitals of the cantons, Bellinzona (the capital of Ticino), Lausanne (the capital of Vaud) and Zürich City. This is important because tax regimes and childcare funding rules differ not only between cantons but also across municipalities within the same canton. Overall conclusions, however, generally hold for the entire canton. 16. Overall, for middle-income families tax rates are highest in New Zealand and lowest in Portugal, with the Swiss cantons in between. Among the three cantons, tax rates are highest in Vaud and lowest in Ticino. 17. Data on childcare costs for different income families in Table 5.5 also take tax deductions for the costs of childcare into account. For the 100-100 APW earnings couple, this deduction is worth 1.86% of APW earnings in Portugal, 0.83% in Zürich and 0.34% in Vaud. For a single parent at average earnings this deduction is still worth 0.63% of APW earnings in Zürich and 0.25% in Vaud, while the tax liability of the same single parent in Portugal is nil and, thus, no deduction can be given. New Zealand also has a small rebate for childcare costs that can be granted under certain conditions; as this rebate is not much granted it is not included in the calculation. In Ticino, costs for childcare are not tax deductible. 18. This is not true for all 26 cantons in Switzerland and also not for all communes in the three cantons studied. In the following calculations, for the canton of Zürich the fee subsidy system of the city of Zürich is taken as a reference, because the majority of childcare places available in this canton are offered in the capital. The subsidy system in Vaud is applicable in all communes. Ticino has not provided information detailed enough to be considered in the model calculations. 19. Part-time childcare is frequent in Switzerland and (though to a lesser degree) New Zealand. In many cases, particularly in Switzerland, parents do some sort of “childcare packaging” i.e. they combine different care solutions (e.g. two days

168


5.


formal childcare, one day grandparents, one day a neighbour and one day one parent). Constraints in terms of available and affordable childcare capacity contribute to parental juggling with many different childcare solutions (Chapter 4). 20. Reflecting the political process in Switzerland, the first stage in policy making is to consult (procédure de consultation) relevant groups and (government) departments. For instance, this proposal was sent to cantonal governments, political parties, social partners, cantonal equalisation offices that are responsible for paying income-tested supplementary disability and old-age pensions, other authorities and institutions (for example, the “conference of cantonal social directors”), and relevant non-government organisations. 21. Different initiatives on family allowances in Switzerland are pending. One of the trade unions has launched an initiative for raising family allowances to CHF 450 per month per child throughout Switzerland, which is more than twice of what most cantonal systems are offering. 22. Similarly, all other family tax benefits (levels as well as thresholds) in New Zealand have remained unchanged since 1996. Childcare subsidies have been inflation indexed since 1996 (though the rates were not indexed for the years 1991-1996), but the thresholds have not been changed since 1991. 23. All three countries have regulations on advance disbursement of maintenance payment for the subsistence costs of children of custodian sole parents: Child Support managed by the Inland Revenue Department in New Zealand; Maintenance Allowance paid by the Guaranteed Maintenance Allowance Fund for Minor-Aged Children in Portugal; and maintenance advance payments covered by the municipality (with some cantonal subsidy) in Switzerland. In all three countries actual advance payments are quite low and targeted to poorer families. In Portugal household income of an eligible sole parent must not exceed the national minimum wage (about 50% of APW earnings). In Zürich – as one example for Switzerland – monthly income of a sole parent with one child must be below CHF 3 500 (about 64% of APW earnings). In New Zealand, Child Support payment mainly concerns beneficiaries – usually recipients of Domestic Purposes Benefit which for a sole parent with two children is cut-out at 62% of APW earnings. 24. Eligibility for unemployment benefit requires that a person has been in an occupation with mandatory contributions for at least 12 months within the two years prior to registering as unemployed. For persons who, before registering as unemployed, have been caring for a child under age 10, this two-year framework period can be extended to four years so that earlier contribution periods may serve to justify claims by women returners. 25. For the jobless spouse in a two parent family in New Zealand, the work-test related to the age of the youngest child that had been introduced in 1999 for recipients of Domestic Purposes Benefit and for those on Unemployment Benefit still applies. 26. Since late 2003, the “Supporting Sole Parents into Work” initiative, targeted at sole parents making the transition from benefit to employment, aims to help sole parents achieve employment-related outcomes that may include training, education and/or placement into work. For 2003/2004, a fund of NZD 1.575 million is available on a contestable basis, rising to twice that level in the two subsequent fiscal years. The initiative is expected to assist 1 000 DPB clients in the first year, and 2 000 in the following two years.


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27. New Zealand’s MSD and DOL are undertaking a three-year evaluation to assess the implementation, delivery and outcomes achieved by the 2002 DPB reform. The final evaluation is due by December 2005. Among other things, the evaluation includes monitoring of quantitative outcomes (coverage and content of Personal Development and Employment Plans, support received by clients, sustainable employment outcomes), of client satisfaction, and of views of case managers on the policy and its delivery. 28. In Switzerland, marginal effective tax rates on sole parents’ additional earnings would be some five percentage points higher were mandatory health care premiums included. Health care in Switzerland is not a public programme. Instead, everybody is obliged to buy health insurance on the regulated insurance market. Health care premiums vary with family type and insurance provider, but not with income. To make premiums affordable, federal legislation obliges cantons to provide a system of income-tested subsidies for such premiums. Systems vary across cantons, with subsidies being cut out at around 100-130% of APW family earnings. For a low-income sole parent at one-third APW earnings, the cantonal subsidy covers around 80% of the premium in Vaud and in Ticino, and around 50% in Zürich. Subsidies are phased out most rapidly in Ticino and most smoothly in Vaud. The gradual loss of the health care premium subsidy with higher earnings implies an increase in effective tax rates when increasing work hours. 29. The level of income at which supplementary family allowance in Ticino is phased out varies with the family’s actual costs for housing. The result described is based on the assumption that housing costs are equal to 20% of APW earnings, which is roughly the maximum deductible cost for a sole parent household. With lower housing costs, supplementary allowance is phased out at a lower level (e.g. with housing costs of 10% of APW earnings, the allowance is phased out completely at 62% of APW earnings). 30. As at March 2002, 56% of the recipients of Accommodation Supplement were households without children (Nolan, 2003). Of those with children, the large majority (81%) were sole parents. Moreover, nine in ten recipients were beneficiaries of some other benefit, among sole parents predominantly people on DPB. 31. The model assumes rental costs equal to 20% of APW earnings. This assumption is arbitrary but important, because the subsidy payable is directly related to actual housing costs: the higher the costs, the higher the subsidy. In addition, Accommodation Supplement is payable at three different rates depending on where a person lives. In the model calculation it is assumed that the person lives in Wellington. 32. In the literature, the term “work poor” is often used to denote joblessness (e.g. Singley and Callister, 2003). To avoid confusion with the issue of working poverty, we do not use this term in this review. 33. The new pathways benefit is not designed as an in-work benefit but as a bridging benefit during the transition into work. The concept coming from the UK, this is meant to make sure that parents moving into work and not informing the authorities right away would not cumulate too high a debt in the beginning (as they would have had to pay back the DPB payment from day one of their new job). In other words, this is designed as a transition-to-work benefit to increase security in the transition phase.

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Chapter 6

Time-related Workplace Support for Parents

Workplace practices as flexitime, and part-time work, play a key role in determining to what extend parents can match their work and care commitments. This chapter takes a closer look at why and how public policy might intervene to procure time-related familyfriendly workplace support. The chapter then goes on exploring why employers might be interested in providing family-friendly policy measures, and why some parents (especially fathers) may not always use them, even when available. The chapter ends by illustrating that future labour supply concerns related to demographic trends, can be addressed by making better use of female labour force potential: the case for family-friendly policies is getting stronger every day.


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6. TIME-RELATED WORKPLACE SUPPORT FOR PARENTS

P

arents and potential parents (and unions pursuing the interests of their

workers) want to reconcile work and family life; employers desire a sufficient supply of motivated and productive workers; governments wish to enhance the well-being of citizens, foster economic and employment growth and promote equity among the sexes; and, children want to spend quality time with their parents. All parties involved thus aspire to a better reconciliation of work and family life, and one aspect of this is a better allocation of time between different activities. This chapter first takes a closer look at the publicly-provided time-related family-friendly workplace measures that are available in New Zealand, Portugal and Switzerland, and the policy objectives that underlie their provision. It then goes on to discuss why employers might be interested in providing family-friendly policy measures, and why parents may not always use them even when available. This structure should not be taken to mean that the provision of family-friendly workplace measures is primarily a public policy matter. In fact, there are strong arguments for industrial bargaining being the principal arena for determining the appropriate balance of leave and working time flexibility. The case for government intervention is most apparent when market outcomes fall short of securing employer and worker interests, parental needs and avowed public policy objectives.

6.1. Family-friendly policy measures: setting the scene Time-related workplace support is most generally available around childbirth. Indeed, Chart 6.1 shows that the Portuguese model of maternity, parental leave and long-term special leave can, if taken sequentially, provide a parent (usually the mother) with employment protection until the child is about 2.5 years old, and policy also provides entitlements to work on a parttime basis for another two years (Box 6.1). By contrast, in the other two countries, duration of employment-protected leave ends much sooner: after 16 weeks in Switzerland, and at the child’s first birthday in New Zealand. However, effective duration of leave periods is largely determined by the extent to which they are paid, and in this regard differences between Portugal and New Zealand are not that big, where about two/thirds of mothers are entitled to income support during leave of absence around childbirth of about three to four months. In Switzerland, there is no maternity insurance: public sector workers are entitled to 16 weeks of paid leave; private sector workers may


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age 6 months

age 1

Up to 12 weeks of paid parental leave – 100% of earnings up to NZD 334.75 (USD PPP 230) per week Coverage: around 2/3

+ 2 years working part-time

Share of children (0-3) in formal childcare: 28% in Vaud, very low in Ticino, 35% in Zürich (city)

+ child benefits worth 30 € maxi per month

+ 2 years long-term special leave

About 56% of children (0-3) in formal chidcare

age 5

+ federal child benefits worth CHF 160 (USD PPP 85) per month + cantonal family allowances (CHF 183 in Ticino, CHF 150 in Vaud, CHF 170 in Zürich)

3 months unpaid parental leave

age 4

About 38% of children (0-3) in formal chidcare

age 3

+ child benefit/credit (family support) worth NZD 203 (USD PPP 140) per month

Unpaid parental leave up to 1st birthday

age 2

Income-tested child benefits programmes in three countries, so benefit rates depend on the income assumption. New Zealand: in 2002, public spending is 0.05% of GDP on leave, and 0.34% of GDP on childcare (including kindergarten). Portugal: in 2001, public spending is 0.13% of GDP on leave, and 0.37% of GDP on childcare (including kindergarten). Switzerland: in 2000, public spending is 0.09% of GDP on leave, and 0.22% of GDP on childcare (including kindergarten).

Employment protected unpaid maternity leave until 16 weeks upon chilbrith – during this period, about half of female employees receive employer payments depending on length of service

Maternity leave for 4 weeks before and 12 weeks after birth. Paid at 100% of earnings Coverage: 2/3 + child benefits: 120 € maxi per month

Unpaid maternity leave for 6 weeks before and 14 weeks after birth

-8 -6 -4 -2 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 weeks

Birth

Policy models: key child benefits,a leave and formal childcare support during the early years up to age 6

Portuguese parents in employment are entitled to look after their young children until they are of pre-school age

Source: Informations supplied by national authorities.

a) b) c) d)

SWITZERLANDd

PORTUGALc

NEW ZEALANDb

Weeks

Chart 6.1.


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have access to income support as regulated by collective agreements (about 35% to 40% of female employees are covered by a collective agreement), while other female workers have to rely on a system of “sickness payments”, wherein the duration of payment varies with the length of service (Box 6.1 and Background Annex to the review). In the absence of hard data, it is estimated that less than half of mothers receive income support for about three months or more. As pre-school services in New Zealand and Switzerland generally only become available for children from age three-four onwards (Portuguese children are often in childcare at age two), parents face considerable challenges as to how to reconcile the demands on their time in the intermediate period. Furthermore, the issue of work and care reconciliation goes well beyond these early years, as in all countries parents face considerable challenges in matching work hours with school-hours and the restricted capacity of out-of-school hour services (Chapter 4). Pare n t s o f t e n a dj us t wo r ki n g ho u rs t o s q u are wor k a n d c a re commitments, but except for the part-time work entitlements and the legal stipulation of pro-rata compensation of part-time workers in Portugal, such matters are generally left to individual and collective employment agreements (see below). Another source of support to working parents with children concern the “sick child care days” – days parents can take off work to care for their children when they are sick: parents in Portugal may have access to 30 such days per annum (Box 6.1).

6.2. The public case for family-friendly policies There are several different factors that shape family-friendly policy development that include:

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●

Non-discrimination. All three countries have employment protection for working mothers with children (Box 6.1) and leg islation ag ainst discrimination of pregnant workers, but it is impossible to be precise on the number of pregnant workers who feel harassed but have little desire to seek legal support (because of costs, little faith in the process or to avoid further deterioration of the employment relationship).1 All three countries forbid both direct and indirect discrimination on basis of family status, which encompasses parental care responsibilities.2

●

Promote (gender) equity. Market outcomes often raise equity concerns which lead governments to intervene to extend entitlements to all workers, regardless of their employment status, gender, age, or otherwise. In particular, Chapter 3 showed that in terms of employment outcomes the gender-equitable society is some way off. In response, Portuguese policy emphasises gender equity by, for example, providing financial incentives



Box 6.1. Public time-related support for parents Typically, specific public regulation of time-related support for parents concerns protection of pregnant workers and child-related leave. Such timerelated support includes the following measures: ● Protection during pregnancy. All three countries have health and safety

measures to protect pregnant workers. For example, workers are sometimes prohibited from working long and/or non-standard hours (e.g. night shifts), or are allowed to take off time for pregnancy-related reasons. In Portugal for example pregnant workers and mothers with infants are exempted from working at night for 112 days, and can attend medical appointments during pregnancy when necessary. In New Zealand legislation provides for ten days of special leave for pregnant workers to attend medical appointments, pregnancy classes, etc., prior to (the anticipated date of) childbirth. Up to 30 days of maternity leave may be taken before childbirth in Portugal and New Zealand, while in Switzerland pregnant workers can leave work upon simple notice. ● Leave upon childbirth. Mothers in Switzerland are not allowed to work until

eight weeks after childbirth, while they are protected from dismissal if they do not wish to work until 16 weeks have passed. In New Zealand, mothers are entitled to take eight weeks of maternity leave after childbirth, while extended leave is available to one of the parents (entitlement is transferable) until the child’s first birthday. Maternity leave is 120 days in Portugal, of which 90 days must be taken upon childbirth. Mothers only have to use the first six weeks of maternity leave upon childbirth; thereafter entitlement can be transferred to the father. Upon use of the maternity leave entitlement, parents may take parental leave of three-month’s duration if taken on a full-time basis; parental leave can also be taken on a part-time basis, for the total duration of 12 months. Parental leave periods can be taken until the child is six years of age. If parents have used their parental leave entitlement, they may access long-term special leave on a full-time basis for two years (three years when it concerns the third child or more). In addition, there is an entitlement to work part-time for two years. This can be taken until the child is 12 years of age. ● Paternal leave options. In addition to the entitlements above that can be shared

with the mother, Portuguese fathers are entitled to two “paid paternity leave periods” in their own right: 1) five weekdays of leave that have to be taken in the first month upon childbirth, 2) 15 calendar days of paid leave, to be taken upon use of the five-day leave period or the shared “maternity leave” period. In Portuguese legislation the later 15-day paid leave period is part of the “parental leave legislation”. Fathers are entitled to two weeks of (unpaid) paternity leave in New Zealand, while such leave is not legislated in Switzerland and is rarely provided voluntarily, even among large enterprises.


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Box 6.1. Public time-related support for parents (cont.) ● Portugal is the only country that provides grandparents living with their

grandchildren access to financial support for 30 days, if the child is born to a parent not yet 16 years of age, and if the spouse of the applying grandparent is also at work or mentally and/or physically incapacitated. ● Income support during leave. Maternity leave in Portugal is paid for four

months at 100% of basic pay (on average [euro] 17.8 per day in 2002), the “ five - d ay ” a n d “ 15 - day ” p er i o d s f o r fa th e r s a re a l s o p a i d, a s i s “grandparent” leave. However, parental leave that is not restricted to fathers and long-term special leave are not paid. In New Zealand parental leave is paid for 12 weeks (and is transferable) at 100% of earnings up to a maximum of NZD 334.75 per week (about 70% of the average female wage). Proposed reform will gradually extend paid parental leave in New Zealand to 14 weeks paid leave as from December 2005. On absence during “Sick leave” in Switzerland, mothers are paid their previous wage for a period of time (one to five months), dependant on the length of service (see Box 6.2). In 2002, public spending on income support during leave ranged from to 0.05% of GDP in New Zealand to 0.15% in Portugal (Chapter 5). ● Short-term absences. These include “sick child care days”. In Portugal

parents can take up to 30 days per annum (paid at 65% of the basic wage) for children not yet 10 years of age who are ill or had an accident (in case of disabled children or chronic diseases there is no age-limit); this is five days in New Zealand while the Swiss labour law provides for three days. Portuguese and Swiss law specifically entitles parents to take short-term work-breaks for breast and/or bottle feeding and in Portugal also to attend school meetings (breast feeding entitlements are given in New Zealand case law). Paren ts may also use annual leave for child-related contingencies: the holiday entitlement in Portugal is 22 weekdays, 20 days Switzerland and 15 in New Zealand, although there is a parliamentary initiative to increase this to four weeks. ● Term-time leave (taking time-off during school holidays while maintaining

an employment-relationship) and or leave saving arrangements that grant greater flexibility during working-life (OECD, 2002f; EFILWC, 2003), are generally unknown in New Zealand, Portugal and Switzerland.

for fathers to take leave for 20 days in their own right, and also allowing transferral of paid maternity leave six weeks after childbirth (Box 6.1). ●

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Health objectives. Periods of repose prior to childbirth and recovery thereafter are medically desirable. Legislation also protects pregnant



workers from working overtime, nightshifts, etc. (Box 6.1). In addition, biomedical literature suggests there can be significant health-benefits (for both mothers and children) from breastfeeding for a substantial period (e.g. six months), so there is a need for facilitating workplace arrangements for working mothers with young children (Galtry, 2003). Also, there is a growing body of research that investigates the impact that stress-related health impact of work and family conflict (e.g. Geurts and Demerouti, 2004; and Allen et al., 2000). ●

Child development. Employment reduces the risk of poverty hence reduces the likelihood of deprivation damaging child development. On the other hand, child development is promoted by quality care, if not by a parent, then by professional carers. Nevertheless, maternal employment during infancy may have negative effects on children’s cognitive development (e.g. Baum, 2003; and Ruhm, 2004), but there remains uncertainty on the age of the child as from which this may be so – from six to nine months until twothree years (but these latter studies often refer to low quality informal care). Many studies still treat maternal employment as a uniform phenomenon. However, it seems that from a Child development perspective, regular workschedules are better then non-regular (and/or very long) working hours (Kamerman et al., 2003).3

●

Fertility concerns. Public policy may also wish to intervene to ensure that (part-time) leave periods and/or child allowances are of longer duration and/or more highly remunerated because childbirth is valued and there is a wish to reward those who give birth, either for reasons of social citizenship or because of concern over whether parents feel they can have as many children as they desire (Sleebos, 2003). Despite its low fertility rate (and the high number of childless women) this issue does not appear to be driving Swiss policy, nor does it feature much in New Zealand debate (Callister, 2002a and 2002b). Concerns about the fertility rate have recently emerged in the Portuguese public policy debate, but cannot (yet) be linked explicitly to policy measures.

●

Labour market objectives. The withdrawal of skilled workers from the labour market can contribute to labour supply concerns, which are exacerbated by demographic trends. This may lead governments to intervene towards making labour force participation more attractive for (potential) mothers as well as other groups of workers (OECD, 2003l). On the other hand, legislation on worker discrimination, child-related leave, childcare support, equitable treatment of casual and/or part-time workers and a wider access to flexible working hours incur costs for employers. In short, such public intervention comes at a price – it increases labour costs, and thus needs to be considered in view of its implications for economic growth.


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Budget concerns influence the scope of public intervention. From a longterm budgetary perspective it pays to support working parents. Indeed, working parents generate tax revenue, while not supporting working parents gives rise to two potential sources of increased public expenditure: 1) income support may become necessary; and 2) employment support (including childcare) may also be granted to assist parents finding and holding employment. However, the size of initial outlays (as for example on childcare for very young children), and the state of current budget constraints limit the scope of immediate investment (Chapter 2). It is impossible to be precise which objectives play the bigger role in overall policy formulation, but clearly gender equity objectives play a much larger role in Portuguese policy development than in the other two countries, and indeed many other OECD countries. On the other hand, Swiss policy seems to be the most concerned about employer costs, and the private nature of any decision regarding the family (Chapter 3): it appears to be the most noninterventionist.

6.2.1. Balancing different policy objectives, the example of child-related leave In Portugal child development issues have come to the fore, as there are concerns about young children who might sometimes be left unattended by parents who need to work to secure minimum levels of family income (Torres et al., 2000). The system of entitlements to prolonged leave and/or part-time work gives children in couple families the right to be cared for by either parent until pre-school age, and signals the government’s desire to parents making greater use of part-time employment as a work and care solutions. Budgetary concerns also play a role: prolonged and partial leave may not be paid, but its use is nevertheless advocated by the government, as this widens parental choice. New Zealand policy is also driven by a mix of health, child development, (gender) equity and non-discrimination concerns as well as employer costs and budgetary considerations (Callister, 2002a). The model provides employment-protected leave to working parents up to their first birthday of the child. However, the period of income support is restricted to 12 weeks. Employer cost and budget concerns influence access to leave programmes in both countries: in Portugal, access to maternity/paternity leave depends on the contributory record, while in New Zealand access to parental leave depends on continuous service with an employer for one year. In both Portugal and New Zealand about one third of mothers are not covered by maternity insurance/paid parental leave. As from December 2004, New Zealand reform will increase access to paid parental leave to workers with six months of continuous service (rather than the current 12 months). This reform may well increase coverage to close to 80%.

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The emphasis in Portuguese policy on gender equity appears to have had some effect. The 15-day paid father quota was introduced in 2000 and was used by 16 000 fathers in 2002, and 27 000 fathers in 2003: about 30% to 40% of eligible fathers in Portugal. In the same year about 9000 fathers (almost 12% of maternal beneficiaries) made some use of shared maternity leave. In New Zealand, by comparison, only 1% of eligible mothers transferred their parental leave entitlement to the father of the child at some point during leave. The 2002-2003 increase in take up of the father quota in Portugal is related to increased awareness of benefit conditions and entitlements. Nevertheless, traditional gender attitudes in workplaces play a role in depressing paternal take-up. Child-related leave is a contested policy issue, especially in Switzerland which does not have a maternity insurance system, although employer opposition to its establishment seems to be weakening (EIRR, 2003). The organisation of maternity insurance is explicitly recognised in the Constitution as being within the federal remit (Box 6.2). In fact, various proposals on introducing maternity insurance in Switzerland have been put to the electorate in referenda, but all failed to receive popular approval, most recently in 1999, because of a variety of reasons (concerns about labour costs, family affairs are frequently considered to be entirely private matter, and the prevailing attitude among large parts of the electorate that mothers should be at home with their young children, Chapter 2 and 3). Another proposal to introduce maternity leave for 14 weeks paid at 80% of previous earnings has been approved by parliament and will be subject to a referendum, probably in autumn 2004. The current “Triponez” initiative might have a bigger chance on being approved as previous proposals, as it is supported by most employers’ organisations and since funding would be guaranteed through the existing compulsory insurance system that regulates compensation for absence due to military service (to which employers and employees contribute). There is considerable emphasis on labour market objectives in the Swiss child-related leave debate. In certain circumstances, the evidence suggests that short, paid child-related leave programmes can increase the attraction to staying in employment, reduce potential loss of human capital and increase labour supply.4 Individual preferences vary (see below), but considered from this narrow labour supply perspective there is some evidence which suggests the optimal period of maternity leave is about five months (Jaumotte, 2003). In fact, the Portuguese government is considering introducing budgetary neutral reform that would allow parents to extend the period of receipt of income support from four to five months paid leave at 80% of current monthly pay. In Switzerland, some large employers are increasingly aware that making paid work more attractive to mothers with very young children can keep them in their workforce. For example, the Banque Cantonale Vaudoise is considering


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Box 6.2. Improving the design of child-related leave programmes In spite of the absence of maternity insurance, many Swiss working mothers have access to continued (partial) wage payments around childbirth. The “Code of obligations” (part of collective labour law) prescribes employer payments in case of absence due to sickness (including maternity) depending on the length of service: i.e. payments equal to one month’s wages for those in the 2nd year of service to four months for those with ten or more years of service. In fact, employers are likely to pay slightly more on average, from 7.1 weeks of pay for those in their first year of service to over 21 weeks of pay for those with more than ten years of service (see Background Annex to the review for details). Access is not universal, but nevertheless about 50% of female workers in the private sector are covered (EIRR, 2003). Since compensation in case of maternity is financed directly by the employer of the worker, employers have financial incentives not to hire younger women. Given their financial and organisational capacity, smallsized firms are most likely to have difficulty coping with continued wage payments during leave and covering the cost of a replacement worker, and as result, financial disincentives to hire young women are most strongly felt by small enterprises. To remove these financial disincentives (and increase the attraction of work and female labour supply), the cost of maternity pay is in most other countries spread among all employers (and employees). Such a situation can be brought about by introducing a financing system based on insurance principles (as in Portugal and as embodied in the “Triponez” initiative) or as in New Zealand, a payment financed out of general taxation. The cost of people taking leave is greater than just the cost of continued wage payments: employers bear the cost of lost production due to absence as well as the possible hiring and training of possible replacement workers. Public intervention can reduce such costs, and thus employer resistance towards the introduction of such policies. For example, the Portuguese authorities provide wage subsidies to employers who hire unemployed workers for the duration of the leave period (“Employment-family programme”). As predictability is an important cost consideration, it seems fair to give employers (and indirectly, replacement workers) due notice on the date of return from leave. In New Zealand, however, those on parental leave for a year do not have to inform their employer of their intentions to return to work or not up to three weeks prior to the child’s first birthday. Prolonged leave periods also exist in Portugal (“special leave”, see Box 6.1), and the relevant notice period that social partners have agreed upon is 30 days (15 days if not the entire period is taken). This seems unnecessary short; a two to three month period seems more appropriate (Alewel and Pull, 2001), although in practice this is not much of an issue in Portugal as take up of special leave is limited.

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an increase in maternity pay to about five months, as at present about 75% of female employees still do not return to work after childbirth.5 Enterprises in all three countries also try to strengthen workplace attachment among paren tal leave-takers by ke eping the m inf orm ed about workplace developments, through newsletters, regular meetings, etc. The Postal company in Switzerland, for example, has established such a “come-back pool”.

6.3. Family-friendly workplaces The family-friendliness of workplaces depends on both public policy and the outcome (and structure) of the industrial bargaining processes (Box 6.3). The family-friendliness of workplaces thus depends in large part on how important the work/family-life balance issue is to employers and unions. The motives of unions depend, of course, on the composition of their membership. Women are most likely to adjust their labour market behaviour in view of family commitments and make negotiating for family friendly policy support a priority. However, female union membership rates are relatively low in all three countries (Box 6.3), and family friendly policy support is not always a priority of unions engaged in enterprise or sectoral bargaining. Family-friendly policy support does not appear to be a central priority of employers either. When it really comes to the crunch in bargaining processes, pay-related matters rather than family-friendly policies are the priority issues of concern. For example, 91.3% of all clauses negotiated in agreements in Portugal during the January-October 2002 period concern pay, with working time and paid leave being far less common issues and then often just reflecting legislation (EIRO, 2003). On their part, employers have a “business case” to grant family-friendly workplace support, as such support serves to motivate and retain the existing workforce and/or attract new staff – i.e. to “be an employer of choice” – to reduce workplace stress and enhance worker satisfaction and productivity. If successful, employment adjustment and training costs will go down. Against these benefits, there are costs associated with making workplaces familyfriendly. Scheduling of flexible hours may not always be possible, or be very expensive if it involves abandoning cost-reducing shift production. And at any given level of output and productivity, a reduction in hours worked per worker implies more workers in the workforce, and thus involves higher employment adjustment and training costs. As employment adjustment costs vary across workers (e.g. they often increase with skill levels), employers face stronger incentives to provide leave benefits to employees whom are most expensive to replace. For different reasons, there are nonetheless many companies that provide universal access to workplace support. Employers may do so because


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they wish to avoid risking reduced motivation among parts of their workforce, or if they have a significant proportion of female workers (e.g. financial and legal service providers). Other objectives may also come into play. The Swiss postal company, for example, regards “reliability” as a prerequisite for all their staff regardless of grade, and in this logic workplace measures to motivate workers cover all staff. “Leadership” is crucial to making workplaces more family-friendly (both in terms of provision and their use, see below). The decision to introduce family-friendly measures often depends on a personal decision by someone (or small group of people) in a senior management position on how a company should behave and profile itself (in larger companies this is necessary to overcome institutional barriers). This might be because of profit-seeking behaviour (see above), a strong (almost paternalistic) commitment to the local community (e.g. the Delta Coffee company in Campo Maior, Portugal), and or a mixture of social obligations and a desire to lead by example that often drives public employers.

6.3.1. An overview of employer-provided family-friendly workplace support Comprehensive information on the prevalence of employer-provided family-friendly workplace support does not exist, but some indicators can nevertheless be obtained from a variety of sources. In Portugal, many collective agreements include clauses on holidays, parental leave and part-time work. In general, however, firms do little in terms of family-friendly policy that goes beyond what is legally required (Guerreiro et al., 2003). EIRO (2003) reports a 2001 Portuguese survey which found that about 66% of employees have no flexibility

Box 6.3. Industrial bargaining systems Industrial bargaining structures differ considerably across countries: sectoral and to a lesser extent enterprise agreements are most important in Portugal, while in Switzerland, the level at which bargaining plays out largely depends on the sector of economic activity. Compared to the other two countries, industrial bargaining in New Zealand, involves a relatively great reliance on enterprise and individual employment agreements. Governments in all three countries are generally reluctant to intervene in the industrial bargaining processes or override its outcomes. Nevertheless, as legislation on time-related workplace support around childbirth suggested (Box 6.1), the notion of non-intervention is strongest in Switzerland.

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Box 6.3. Industrial bargaining systems (cont.) As part of the structural reform process that unfolded in New Zealand during the 1990s (Adema and Pilat, 1999), the highly centralised and distortionate bargaining system that sustained the single-breadwinner notion, was reformed with the introduction of the Employment Contracts Act in 1991 which in turn was superseded by the Employment Relations Act in 2000. The latter was introduced to promote observance of ILO conventions on the freedom of association and collective bargaining and to enhance productive employment relationships as underpinned by a code of “good faith” bargaining principles (DoL, 2001a and 2001b; and OECD, 2000b). The current government promotes the role of unions which has diminished during the 1990s: union membership fell from 44.6% in 1991 to 21.9% in 2003. The role of unions is strongest in the public sector, where unionisation rates are 57% compared to 15.3% in the private sector. Since 1991, industrial bargaining in New Zealand has seen increased reliance on enterprise and individual employment agreements, which has contributed to increased diversity in employment arrangements. The reliance on individual employment arrangements in New Zealand may compound differences in access to family-friendly workplace support: while workers who have skills in short supply, or who are otherwise expensive to replace, may hold some sway in the bargaining process, other (particularly unskilled) workers are in a much weaker position. In Portugal, sectoral bargaining covers about two thirds of all collective agreements, while enterprise agreements make up about a further quarter. The remainders are agreements between different enterprises (not organized in an employers’ association) and one or more unions (Menezes Leitão, 2001). Small-sized firms may be covered by sectoral agreements (which generally establish “basic” employment conditions) that can be topped up at enterprise level. About 30% of the workforce is covered by a collective agreement, compared with a unionisation rate of around 20 to 25% (ILO, 1998), and significantly higher in the public sector. In Switzerland, there are about 250 collective agreements at national level, many of which are “framework” agreements leaving it up to sectors and enterprises to specify further detail. Collective agreements can be extended (as they are in e.g. the construction and hospitality sectors) if 50% of employers and 50% of workers were party to the initial agreement (EIRR, 2003). Collective agreements cover about 35% of jobs, while slightly over 20% of Swiss workers are members of a union. Female union membership is much lower: in 2002, 22% of the members of the Swiss Federation of Trade Unions (which covers almost half of all unionised workers) were female (Ackermann, 2003a and 2003b). Unionisation in the service sector (where many women work) is probably below 10%.


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in work schedule (74% of women). The Banking sector – with many female employees – is arguably the sector in Portugal with most comprehensive workplace support: it provides for a 36 hour working week, flexible working times between 8 a.m. and 8 p.m., limits overtime to two hours per day for at maximum 160 days, and provides career plans and training at the “Instituto de Formação Bancaria” with the explicit aim of fostering a more gender-equitable allocation of jobs among the workforce (Guerreiro et al., 2003). In Switzerland, collective agreements whose coverage is limited (Box 6.3) often regulate maternity payments,6 child benefits (Chapter 5), working hours (recent developments include standard working week reductions to 4041 hours in some sectors, see Ackermann, 2003a) and the remuneration of part-time workers. In general, pro-rata remuneration of part-time workers applies to those who work at least 50% (sometimes 30%) of the standard working week in the sector/enterprise at hand. Otherwise, the nature of family-friendly provisions in collective agreements is often phrased in a vague or non-binding manner (Fankhauser, 2002). Business surveys give some indication on the prevalence of family-friendly workplaces. A survey among enterprises in the German-speaking cantons of St. Gallen, and the half Cantons of Appenzell Ausser Rhoden and Appenzell Inner Rhoden revealed that 86% of firms offer part-time work and 70% flexible hours (Pro Familia Suisse, 2001). Tele-working and job-sharing are far less common at around 18%. Childcare support heavily depends on firm-size, almost 50% of larger enterprises (in urban areas) and just 10% of small firms (less than ten employees) giving some such support (see also USS, 2002). The same survey held across Switzerland had a very low response rate (below 10%), but even among the employers that did respond, results indicated much lower availability of support measures for working parents. Nevertheless, it provides some support for the notion that part-time employment is more widespread in German-speaking Cantons than in French-speaking ones and certainly when compared to Ticino. Almost all employees covered by a collective agreement in New Zealand can take days off work to care for sick children; three out of four could work part-time if they so wished; one in two has access to paid child-related leave (public paid leave was only introduced in 2002), while only 1 in 10 has access to some sort of childcare support or flexible working hours schedule (Table 6.1).7 Given the limited coverage of collective agreements in New Zealand (these data concern less than 20% of all employees and less than 2% of employers), these results should be interpreted with care, although many people on individual agreements are likely to have comparable employment conditions to those on collective agreements. Meyer et al. (2001) use econometric techniques to find that tele-working or home-working (which obviously does not suit all production practices) and

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Table 6.1. Workplace support in New Zealand often concerns care-days and part-time work Employee coverage of family-friendly policy support as in New Zealand collective agreements %

Stipulation in collective agreement on:

Employer-paid Possibility child-related to work leave part-time

Flexible working hours

Care days for sick children

Childcare support

Proportion of employees as share of: Employees covered by coll. agreement All employees

49.1

74.4

9.9

92.8

11.5

9.0

13.6

1.8

17.0

2.1

Source: Information supplied by Department of Labour.

granting care days for sick children are likely to increase productivity, in part because the knowledge of being able to deal with child-related contingencies reduces work-related stress and increases motivation. On the other hand, they find that job-sharing seems to have a negative effect on profits reflecting the diseconomies of scale associated by two or three workers doing the job of one person. Gray (2002) finds that job-sharing may have a positive impact on enterprise productivity, but less so than measures (flexitime) which support a more visible (full-time) workplace engagement of the worker. Finally, while worker satisfaction from childcare support may be considerable, the cost of employer-provision is high, so that the overall rate of return to the firm is limited, or even negative.

6.3.2. The effect of labour market characteristics as firm size and atypical employment This review draws together three economies with a high proportion of small-sized firms (Chapter 2), who given their financial and organisational capacity, are often opposed to any public move towards increasing labour costs, even if such an initiative redistributes costs on a wider basis (and limits risks for individual employers, see Box 6.2). This is often exacerbated by resistance among owner-managers towards any perceived interference on how they should manage their enterprise. However, some managers of small enterprises in New Zealand have indicated they would be interested in receiving “third-party” support to gain knowledge on how to set up and manage family-friendly initiatives (UMR Research, 2003). In all, small firms have relatively limited resources to make (family-friendly) investments in workers,8 who frequently perceive their employment relationship to be of a short-term nature, and, hence, are less likely to make access to family-friendly measures a priority in their employment relationship. All this is not to say that small enterprises are necessarily bad at providing family-friendly workplace


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support. In fact, the “shorter distance” between workers and management in smaller firms could well lead to much more flexible (and satisfactory) familyfriendly workplace solutions in individual cases. Labour market cost and workforce flexibility considerations lead some employers in all three countries to use atypical labour, which is relatively cheap. Such atypical workers are often concentrated in certain sectors (such as hotel and tourism industry and personal and domestic services – Chapter 2), more often than not concern female workers, and include many contract workers who are nominally self-employed. Flexible work under atypical contracts is not necessarily “bad” for the workers involved, if they themselves choose flexibility. In particular, non-standard work options optimize satisfaction for self-disciplined, self-motivated workers who are happy to manage their time themselves (Spoonley et al., 2002). However, these workers and those with a limited employment history are often constrained in their access to family-friendly workplace support, if they have access at all. This issue is significant, as eligibility to maternity and parental leave in Portugal and New Zealand shows: only about two thirds of childbirths are covered in a given year. Cross-border workers who at 18% of the workforce are a particularly important group of workers in Ticino will have access to employer-provided child benefits (as stipulated by cantonal law), but are not always covered by collective labour agreements (as in the tourism and textile sectors). Therefore, their access to family-friendly workplace measures is relatively limited.

6.3.3. How to procure more family-friendly support in workplaces One reason for these issues not being a priority is a limited awareness of the importance of family-friendly measures among those in the bargaining process. Hence, in all three countries, government and/or employer-financed institutions and umbrella organizations of employers and unions try to raise awareness on the benefits of family-friendly workplaces to employers as well as workers. In Switzerland they do this through campaigns – e.g. “Fair Play at Home” and “Fair play at work” as sponsored by the Federal Office for Equality of Women and Men in Switzerland, while the employer association (Union Patronale Suisse) organised awareness campaigns on the themes of families and work in 2001, and promotion of female careers in 2004. There are several prizes for best-practice employers in Switzerland, for example, the “Prix Alliance F” of the Swiss Alliance of Women’s Societies, the “Prix Égalité” of the Swiss Society of Commercial Employees, the “Entreprise du Mois” of the Platform for Family and Employment (Pro Familia, Union Patronale Suisse, and Pro Juventute). In Portugal, the Equality is Quality Prize is organized and financed by the Committee for Equality in Labour and Employment, while the Equal Employment Opportunities Trust in New Zealand (co-financed by the

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government, and member employers) promotes the business benefits through research, information dissemination, and also the annual EEO-Trust Work & Life Awards.9 The New Zealand Government is aware of its leadership role as an employer and in setting work/life policy. In that role it has initiated a new work/life balance initiative under supervision of a steering group that includes representatives from different government departments, the National Advisory Council on the Employment of Women, and the EEO trust. The initiative is aimed to increase awareness, explain and understand what work/ life balance issues mean to different groups in the population (e.g., the unemployed), generate practical solutions, and strengthen existing partnerships (e.g. with employers) to achieve change. The programme is currently taking stock of existing practices in New Zealand, and has also involved consultations with many different stakeholders. At present, the programme is in its policy development phase: an initial policy statement was made in August 2004 as part of an ongoing government work programme in this area. Public intervention sometimes extends to subsidizing particular measures. The new Portuguese Government aims to foster “social coresponsibility” among employers by getting them to provide more familyfriendly support through, for example, a system of social vouchers that employers can procure for their workers with children not yet seven years of age. In return employers can deduct the relevant expenditures from their taxable income. However, thus far, employers in Portugal hardly use this scheme. In Switzerland subsidies are given to an organisation which organizes projects and gives tailored advice on family-friendly issues to enterprises and schools (in 2002, it was active in 124 institutions), and individual couples. There also seems to be demand in New Zealand for such a facility (UMR Research, 2003). Tailored advice on family-friendly policy measures that are best suited for a particular workplace is most effective when it involves recurrent assessment of companies, and thus provides for continuous enterprise commitment to family-friendliness. Such initiatives exist in, for example, Austria and Japan (OECD, 2003g). In the Austrian Work and Family Audit a consultant identifies enterprise needs through discussions with both management and employees covering different areas (e.g. working time, management competence, available support services). Subsequently, an enterprise plan is established with goals to be achieved in a set period. At the end of this period, an external auditor assesses achievements, and, ideally the process is then repeated – with new goals – to ensure the ongoing nature of the process. Enterprises taking part in this initiative are reimbursed (through government subsidies) for a share of the costs. The 2001 Japanese Childcare and Family Care Leave


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Act encourages enterprises to appoint a “work and family life reconciliation promoter” oversees the implementation of at least one of the five measures towards reconciling working and family life as laid down in that Act, and otherwise advises on family-friendly policies that are best suitable to the enterprise. The question arises what mix of policy tools – encouragement and tailored advice, a greater use of tax incentives or legislative stipulation is the most likely to generate greater access to family-friendly workplace support? The general employer response would be that financial or fiscal support is the way forward, rather than legislation, as the latter would be costly (and “unfair” to small enterprises) and inevitably involves introducing measures that simply do not fit the workplace in question. However, legislation could be of a framework nature (as in Japan), stipulating the provision of a minimum of one or two particular measures out of a range of workplace options to choose from.

6.3.4. Using workplace support, reducing hours of paid work as a reconciliation strategy Families’ decisions about how much time to take out of work in order to look after their children are influenced by the amount of earnings which they will forgo. How exactly reduced earnings affect the parental work and care decision, depends on parental preferences (on providing personal care and engaging in work which is one of the most important societal activities), spousal earnings and other sources of family income, the cost of alternative care solutions (which often varies with the age of children).10 In general, the smaller the loss of income, the more likely are parents to take time-out of employment. A survey among mothers who took leave during the 2003 year in New Zealand illustrates this pattern: during the 12-week period in which parental leave is paid, only 2% of mothers went back to work; 12% of mothers took the 12 weeks leave period while: while 32% were taking, or intending to take between 13-51 weeks, and 45% intended to take the full 52 weeks leave. Here, as everywhere, mothers rather than fathers take leave or reduce hours, not least because paternal earnings are generally higher than maternal earnings (Chapter 2). This traditional distribution of household earnings is visible in all countries, but is less pronounced in Portugal. Indeed, on average male working weeks are still above 40 hours in all three countries, but in contrast to the other two countries (and many other OECD countries), there is a high proportion of Portuguese women who work full-time too (Chart 6.2). Because low-income families cannot afford a reduction of hours (and have no access to informal care and/ or cannot afford to buy formal care – Chapter 4), Portuguese women engage in almost as many hours of paid work as their male counterparts. By contrast, New Zealand and particularly Swiss women in employment are far more likely to work part time

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Chart 6.2.

Women in Portugal engage in paid work for almost as many hours as men

Incidence of actual weekly hours among prime-age (20-54) workers, 2001 (percentage) Men

Women

70 New Zealand (2002) 60 50 40

34.8 29.5

30 21.5 20 12.5 10

3.4

10.3 5.9

6.2

13.4 9.5

5.9

5.0

14.5

12.5 4.8

0 1-14

15-29

30-34

35-39

40-44

45-49

50-54

4.2

4.3

1.6

55-59

60 and more

70 Portugal

61.0

60

52.6 50 40 30 21.7 20 11.9

0

10.1

7.7

10 0.5 2.1 1-14

1.9

1.5 3.5

15-29

30-34

5.1 35-39

70

40-44

45-49

6.5

3.4

50-54

5.8 0.8 0.5 55-59

3.5

60 and more

68.1

Switzerland 60 50 40

35.7

30 20

25.4 17.7 10.5

8.1

10 1.9

2.8

1.7

3.9

6.1

3.8

3.1

6.1 1.0

1.9 0.3

1.8

50-54

55-59

60 and more

0 1-14

15-29

30-34

35-39

40-44

45-49

Source: Statistics New Zealand; INE, Employment Survey; Swiss Labour Force Survey, 2002.


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(almost 55% of Swiss women work less than 34 hours). To a large extent this is related to the intricacies of the childcare (Chapter 4) and tax/benefit systems (Chapter 5), but may also be related to relatively high family incomes in Switzerland compared to New Zealand and especially Portugal (Chapter 2).11 Moreover, in New Zealand, mothers return to work/increase their hours rather more often than in Switzerland (Chapter 3), where working part-time is a far more permanent feature. This is likely to contribute to Swiss mothers having greater difficulty breaking through the glass ceiling than their Portuguese and New Zealand counterparts: in Switzerland women only constitute 21% of managers, while this is 28% in Portugal and 38% in New Zealand (Chapter 3). There is some discussion in Switzerland on the desirability of the “one-and-a-half family earnings model” which involves both partners working reduced hours and sharing the care burden (Baillod et al., 2002). Men in particular, seem lukewarm about reducing working hours. Whether or not part-time work establishes a satisfactory work and family reconciliation solution for individual workers and their families crucially depends on individual valuation of work, career progression and the family income situation. Although there is a continuous scale of preferences, in broad terms a distinction can be made between those who highly value their work and career in terms of personal esteem (“career track workers”), and those who mainly work to sustain family income (“parent track worker”).12 “Career track workers” are careful not to send signals to their employers that may negatively affect their career prospects. Hence, they are very reluctant to work part-time, even on a temporary basis, as long as take-up of part-time employment is regarded a signal of less then complete career commitment, and thus detrimental to future earnings and career prospects. In such circumstances there is a risk that parents have to choose between work and family-life. This issue seems particularly relevant to Switzerland, where 40% of women with high levels of education in Switzerland remain childless. Alternatively, these women may choose to have children, partially reduce working hours, forfeit their career, and may get so disillusioned that they withdraw from the labour market altogether. These outcomes are sub-optimal from a societal and labour market perspective.

6.3.5. Facing the future Chart 6.3 illustrates how demographic trends underlie (future) labour supply concerns, even though such concerns may be reduced by migration and cross-border employment.13 If female and male labour force participation rates were to remain constant in future, the Portuguese and especially Swiss labour forces would decline, and economic growth would decline with it. However, even if labour force participation rates remained constant, were female working hours to gradually rise to male levels, gains in effective labour

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Chart 6.3. More family-friendly workplace support can help avoiding shrinking labour forces in Portugal and Switzerland Total weekly hours from 2000 projected to 2050 (Index 2000 = 100) 1.

2.

4.

3.

140 New Zealand 130 120 110 100 90 80 2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2010

2015

2020

2025

2030

2035

2040

2045

2050

140 Portugal 130 120 110 100 90 80 2000 140 Switzerland 130 120 110 100 90 80 2000

2005

1. Constant labour force participation and weekly hours : assumes constant labour force participation rates and constant weekly hours for men and women from 2000 to 2050. 2. Growth of female labour force participation and constant weekly hours : assumes that female participation rates reach current male participation rates in each country in 2050, and constant weekly hours. 3. Constant labour force participation and growth of female weekly hours : assumes constant participation rates and female weekly hours to reach male weekly hours in each country in 2050. 4. Growth of female labour force participation and weekly hours, gender equity : assumes that female participation rates reach current male participation rates and female weekly hours to reach male weekly hours in each country in 2050. Source: OECD Database on population and labour force projections, and OECD Database on weekly hours of work.


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supply in both New Zealand and Switzerland would be considerable (this effect would be much smaller in Portugal where the incidence of female parttime employment is much lower). Compared to the baseline scenario of current male and female labour force participation rates, if female employment rates and working hours were to gradually increase (over the next 50 years) to match male employment rates and working hours, this alone would on average increase GDP by 0.4 percentage points per year in New Zealand and 0.3 percentage points in Switzerland and 0.15 percentage points in Portugal.14 Thus, over the next 50 years New Zealand and Swiss GDP could increase by as much as 15 to 20% (and half that in Portugal) just because of an increase in female labour force participation. In all, the potential labour market and economic returns from more investment in family-friendly workplaces are considerable.

6.4. Conclusions Parents have to allocate their time across paid work and securing family income and providing personal parental care for their children. Workplace practices that make this easier are thus very important to them. Governments and employers wish to help parents by making labour force participation attractive to parents, although there are differences in emphasis in the balance of policy objectives as equity, health, and child development, and concerns on employer costs and the state of public budgets. But if current patterns of work and family outcomes were to be perpetuated, labour forces will shrink in the foreseeable future in Portugal, and especially Switzerland. To change this, policy has to achieve a better mix of support for families throughout the years of childhood and adolescence. The current system of paid sick leave around childbirth in Switzerland is in need of reform: it does not contribute to making work attractive to mothers. Indeed, only one in two mothers seem to have access to such income support, while the financing structure gives financial disincentives to employers to hire young women. Reform of this system into one that pools resources comprehensively among employers and employees would be welcome. Without additional spending, governments can increase parental choice options within child-related leave systems, by allowing them to spread income payments over a longer period. For example, an initiative in Portugal to allow current payments to be taken over a five month period is worth considering for policy implementation in the two other countries. In fact, on the basis of their experience with maternal labour market withdrawal, a few Swiss employers are actually considering extending the period of employerprovided leave to five months. Apart from Portugal, where many families simply cannot afford to reduce hours or take unpaid leave as family incomes then fall to very low levels

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(Chapter 3), part-time employment is arguably the most intensively used form of time-related workplace support by mothers in New Zealand and Switzerland. However, in both countries, but especially in Switzerland taking up part-time work negatively affects career progression (Chapter 3) and this may lead some women to choose not to have children. This effect would be less pronounced if part-time work in the aftermath of the period of medical repose after childbirth, were of short duration, and was embedded in careers and life time employment patterns. It would be conducive to gender equity if workplace cultures changed so that taking time off work for family reasons was to become a real possibility for fathers. Portuguese policy with its emphasis on gender equity in policy design encourages fathers financially to take up leave to care for children. This policy signal will take time to have an effect, but without this policy signal changes towards more gender equitable workplaces will be even more difficult to accomplish. There are considerable differences across countries in the methods public authorities use to promote family-friendly workplaces. The Portuguese government goes furthest in time-related leave legislation, and in the context of its recent initiative to promote “social co-responsibility” has started to entice enterprises with financial support to do more. In New Zealand the policy approach is to encourage firms to make their workplaces familyfriendly, while non-interventionism in Switzerland means that umbrella organisations of employers and unions (alongside government sponsored advocacy groups) take the lead in promoting such practices. Despite this family-friendly workplaces are not all that widespread. Other measures will be needed to spread such policies. In the first instance, it seems useful to support financially initiatives that provide tailored advice to companies as those undertaken in Switzerland on a long-term basis, and there seems some demand for this type of service in New Zealand. To overcome the absence of widespread “leadership” among management, governments could consider introducing framework legislation that requires or encourages employers to provide a minimum number of policies out of a prescribed list, for example, by reducing working hours by two hours per day for parents with very young children; providing financial support towards the cost of childcare or out-of-school care; making flexitime options available; and providing extra days to care for sick children. In this manner, a standard of access to family-friendly workplace support would be guaranteed, while (small) workplaces have the opportunity to tailor such practices to their needs.


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Notes 1. In general anti-discrimination policy (regarding any contingency, including pregnancy) in New Zealand is embedded in human rights or employment relations systems, and relevant complaints are dealt with by the Human Rights Commission or the Employment Court. People can use either system and the number of complaints (that are frequently settled by mediation) taken through either system is small. For example, over the July 2000-May 2001 period, the Human Rights Commission dealt with 20 complaints related to pregnancy and the workplace: 1.8% of all formal employment-related complaints. Workplace-related discrimination complaints are dealt with by the Commission for Equality in Labour and Employment in Portugal (both in terms of conciliation attempts and legal procedures), with the assistance of the labour inspectorate. In Switzerland, discrimination complaints under the Federal Equality Act (enforced since 1996) on, for example, the equality between men and women are usually made to the appropriate Cantonal Tribunal. For example, as recent as 2003, there was a case ruled by the Lausanne City Court ruled against an employer who intended to promote a female worker but came back on it’s decision when she informed her employer on her pregnancy (and hired a male employee). All cantons have established conciliation services and prior to engaging in legal procedures parties may be required to participate in a conciliation procedure (the nature of which varies across cantons). Upon the cantonal judicial process, appeals to the Federal Tribunal are possible. 2. The New Zealand “Drijfhout v Guardian Trust” case in 1997 is an example of indirect discrimination, i.e. when a condition or practice prima facie does not treat one group less favourably than another in theory, but does in practice. This case concerned a female manager who on return from maternity leave wished to change daily hours of work from 8.30 a.m. – 5.00 p.m. to 8.45 a.m. to 4.35 p.m., by curtailing her lunch break to 20 minutes. With reference to the family status law, the New Zealand Employment Court ruled against the employer insisting on the pre-childbirth work-schedule: the requirement to work fixed hours is not discriminatory in itself, but may become so in certain circumstances. There is no case yet in Switzerland which similarly relates flexible working hours and family status. The Swiss federal labour law for “l'industrie, le commerce et l'artisanat”, includes an explicit link between working hours and family responsibilities of workers with children up to 15 years of age: they cannot work overtime without their consent and on their demand such workers are entitled to a lunch-break of at least 90 minutes (which may facilitate picking up children from school, in view of the prevailing school hours). 3. For example, a Swiss study illustrates the positive effects of formal childcare on the development of children in migrant families (Lanfranchi et al., 2003). 4. The evidence for the US – where employment protected child-related leave is relatively new, suggests that the provision of such leave (even when unpaid), increases the chance that women return to the same employer and take leave for shorter periods (in the absence of employment-protected leave they would take off for longer and are more likely to work for another employer – Hofferth and Curtin, 2003). On the other hand, where leave periods are prolonged (in excess of 12 months) and not paid at or close to previous earnings levels, then there is a high risk that many mothers will not return to work upon expiry of leave, and if they do, often not to the original employer (Babies and Bosses, Vol. 2; and Gustafsson et al., 2002).

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5. To increase working hours among female workers, the Banque Cantonale Vaudoise gives priority access in childcare support to children whose mothers work full-time. 6. The Union Syndicale Suisse advocates its members to bargain for a comprehensive family-friendly policy strategy in negotiations including: the right to reduce working hours by at least 40% for parents with children not yet 12 years of age; Equal treatment for persons working full or part-time at all levels of the hierarchy; paid care days up to ten days a year (plus two days per extra child); paid maternity leave of at least 16 weeks; and, paternity leave of one week. 7. UMR Research (2003) identifies stress management courses and job-sharing as the measures that both employers and employees in New Zealand perceive to be most useful and the most likely to be introduced. 8. Family-friendly policy legislation often explicitly excludes smaller-enterprises. For example, Netherlands legislation that grants employees the right to change their working hours does not cover enterprises with fewer than ten employees. 9. Auckland City Council is a regular winner of these awards. One interesting initiative of this company is its own internal annual award system aimed to encourage family-friendly support and work/life balance solutions at all management levels. This is important because this company does not grant family-friendly support as of right, but on the basis of individual agreements between direct managers and employees. 10. The work and family reconciliation challenges that face parents with children who are disabled, or long-term sick are daunting, and often lead to one parent in couple families withdrawing from the labour force for a long period. Many programmes in the Portuguese tax/benefit system have special (more generous) clauses toward support to families with disabled children. 11. Maternal part-time employment is often motivated by family reasons but also depends on household stability, difficulties in finding and holding a full-time job, and reduced access to training. According to Strub (2003), 53% of Swiss women (and less than 8% of men) say that they work part time for family reasons, while 18% say that they are not interested in full time work; 10% say that they work part time because they have not found a full time job. For men, the reasons for working part-time are often not related to family matters. Bielenski et al. (2002) report that for Portuguese women, the average of preferred working hours per week is 15 hours below the average of current working hours. This sugg ests a clear preference among Portuguese women to work part-time. 12. The “Parent track” is the original label given by Schwartz (1989), although the more commonly used phrase is the “mummy track”. Similar analysis by Hakim (2000) distinguishes career-focused, home-focused and adaptive women. 13. Although for years a net immigration country some employers in New Zealand now see family-friendly workplace policies as one tool for luring back skilled New Zealanders who went to work abroad, or at least try to keep skilled workers in the country. 14. For reasons of simplicity, this calculation assumes: 1) the capital stock in an economy increases proportional to the increase in labour force participation; 2) each additional female worker has the same level of productivity as the current average level; 3) the increase in labour force participation does not change the average hours worked per person, and 4) the increase in labour supply matches labour demand (there is no shift in the unemployment rate). Under these strong


195


assumptions, the gains in GDP are equal to the gains in labour force participation. However, in order to err on the side of caution (and account for a trend decline in labour hours) projected annual gains in GDP have been adjusted downwards. Even when applying this cautious approach the potential gains of increasing female employment are significant.

196


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BACKGROUND ANNEX TO THE REVIEW

Background Annex to the Review This annex gives a more detailed description of the main family cash benefit programmes, of child-related leave schemes, and of unemployment and social assistance programmes.

A1. APW earnings, exchange rates and purchasing power parities Throughout, “average earnings” refer to the annual earnings of an average production worker (APW). This concept refers to the average gross wage earnings of adult, full-time workers in the manufacturing sector in each country. In 2003, these were NZD 41 452 (USD 23 850) in New Zealand, EUR 8 677 (USD 8 022) in Portugal and CHF 65 260 (USD 41 122) in Switzerland (Table A.1). The exchange rate used is the average of the daily rates in 2003, with USD 1 equivalent to NZD 1.738, EUR 1.0816 and CHF 1.587. Purchasing power parities (PPP) eliminate the difference in price levels between countries. This report uses OECD estimates, with PPP per USD equal to NZD 1.46, EUR 0.702 in Portugal and CHF 1.9. Table A.1. APW earnings versus GDP per capita, 2002 New Zealand

Portugal

Switzerland

APW earnings in national currency

41 452

8 677

65 260

Exchange rate (towards one USD)

1.738

1.0816

1.587

Purchasing power parities (USD = 1.00)

1.460

0.702

1.900

23 850

8 022

41 122

APW earnings in USD APW earnings in USD adjusted for PPP

28 392

12 360

34 347

GDP per capita (in USD PPP)

21 783

18 394

29 940

130%

67%

115%

Earnings over GDP/capita

Source: OECD (2003f), Main Economic Indicators; OECD (2003k), Taxing Wages.


205


A2. Characteristics of family cash benefits New Zealand Public family assistance in New Zealand is largely offered in the form of refundable tax credits. These tax credits differ in the extent to which they require families to work and in the variance of payment rates with the age and number of children (Tables A.2 and A.3). The main child-related tax credit, Family Support, is a payment to all low-income families irrespective of their work status, with per child payments increasing with the child’s age but generally being highest for the first child. Child Tax Credit is a flat-rate per child payment only paid to low-income working families that are independent from state assistance. Family Tax Credit guarantees a minimum after-tax family income to sole parents working at least 20 hours and two-parent families working at least a combined 30 hours a week (only for families who are not on a benefit). All family tax credits and benefit programmes use special earnings abatement regimes and most have an abatement-free zone.

Portugal Portugal’s main family cash benefit programme, Child Allowance, has been reformed to ensure better targeting to poorer families. High-income families with a reference income over five times the national minimum wage (which for a couple with two children corresponds to around 750% of APW earnings) lose eligibility. Reference income is calculated as total family earnings divided by the number of children eligible for child allowance plus one, e.g. divided by a factor of three for a family with two children. In addition, the reference income grid that determines the benefit level has been refined at the bottom end. The highest level of benefit is now paid to families below half the national minimum wage (corresponding to 76% of APW earnings for a couple with two children), with the payment declining with the households’ income. Child Allowance is a per child payment unrelated to the parents’ work status. For children aged 12 months or less, payment rates are four times the normal payment rate. Thus, Child Allowance can pay up to 17% of APW earnings for a child under 12 months.

Switzerland Cantonal child allowance in Switzerland is only paid to working families, and payment rates are reduced for families working shorter hours. In most cantons payment is pro-rata, although in some cantons (including Zürich) the full rate is paid when working at least 50% of standard hours. For sole parent families working shorter hours, more than half of the cantons (including Vaud) have special regulations. In a dual-earner couple family, only one parent

206



All households with a dependant.

Low income households under age 30.

Rent subsidy for young people/families

Low income households with high accommodation costs (for a couple Non-taxable income- and cash assest tested subsidy, related to the actual cost of with children, costs must exceed NZD 4,992 for a rented home or NZD 5,980 accommodation which must exceed 25% of after-tax income for renters and 30% of for owned housing. income for home owners. Maximum rates depend on family size and differ by region.


Tax deductions for dependents

Sole parents who are the primary carers for a qualifying child or children (there is no age limit for the child); similar benefit (Widows Benefit) payable to widows; Domestic Purposes Benefit can also be paid to carers of sick and infirm.

Domestic Purposes Benefit

All low and middle income families with dependent children under age 16, or up to age 24 if in full-time education and not working.

Families with dependent children whose main source of income is salary or wages. Self-employed and benefit recipients are not eligible.

Family Tax Credit

Child allowance

Paid for the first eight weeks after the birth or adoption of a child to low and middle income working families (benefit recipients are not eligible).

Parental Tax Credit

Income-tested rent subsidy granted for a period of five years (no pissibility of extension). Entitlement depends on family income and cannot exceed 75% of the total rent.

Per child deductions from the tax assessment basis for each household member (i.e. granted for each spouse in a couple).

Non-taxable per child payment. Entitlement depends on the child’s age (higher rate in first year after childbirth) and declines with the households reference income.

Portugal

Taxable income-tested benefit. No work test, but compulsory planning for employment requirements along individual needs and circumstances. Sole parents are required to identify the other parent, so Child Support can be collected towards the cost of the benefit (otherwise the payment will be reduced).

Guarantees a minimum after-tax family income. A sole parent must work for at least 20 hours a week, a two-parent family must work a combined 30 hours per week. Entitlement abates dollar for dollar against increases in net income above the guaranteed minimum family income. Family, housing and childcare benefits are excluded from the income test.

Flat-rate payment. Same income test as Family Support. Same abatement rules as Child Tax Credit.

Flat-rate per child payment, paid together with Family Support. Same income test but families with higher incomes can qualify depending on number and age of their children. Same abatement regime, but only abates after FS has been abated to zero.

Low and middle income working families with dependent children under age 18 (benefit recipients are not eligible).

Child Tax Credit

Non-taxable payment per child. Entitlement depends on number and ages of children (increases with age, decreases for second and higher order children). The entitlement abates against gross specified family income.

New Zealand

Features

All low and middle income families with dependent children under age 18.

Recipient group

Family Support (Tax Credit)

Name of the programme

Table A.2. Main family benefit programmes, 2003


207

208 Recipient group

Features

Source: National authorities.

Switzerland (Federation) Family allowance Agricultural workers and small self-employed farmers with a child Per child payment, varying with the type of farm. under age 16, or up to age 25 if in full-time education. Child tax deduction All households with a dependent child. Per child deduction from the family’s tax base. Canton Ticino Family allowance All working families with a child under age 15, or up to age 20 if child Per child payment. For part-time work, the allowance is reduced pro-rata-temporis. is still in full-time education or disabled. Self-employed and unemployed are not entitled. Supplementary allowance Low income families with dependent children under age 15, residents Allowance covers the costs of children and is determined as the difference between of Ticino for at least 3 years. reckoned income and reckoned expenditure for children. Infants’ allowance Low income families with dependent children under age 3, residents of Allowance ensures subsistence income of the entire family and is determined as the Ticino for at least three years. difference between disposable income and the subsistence income as determined by the law on pension and invalidity insurance, up to a maximum payment. Canton Vaud Family allowance All working households with a child under age 16, or up to age 25 Per child payment, varying with the child’s age and the number of children (higher if if in full-time education. To be extended to all households with children over age 16, and if parity three and over). For part-time work, the allowance is reduced under this age in the coming years. pro-rata-temporis. Self-employed and those not working are not entitled. Birth allowance All residents giving birth to a child. Non-taxable one-off payment. Maternity allowance Low income families with a dependent child under six months, residents Paid to mothers. Payment duration can be increased to twelve months in case of bad of Vaud for at least six months. Supplementary allowance depending health condition of either the mother or the child, with another 12 months where a on the number of children if mother’s income has lowered. handicap of a child requires the presence of one of the two parents. Taxation on the basis All working familes. Tax quotient varies with the number of children and the family status (single, couple, of a family quotient system lone parent).. Tax deduction for the costs Households with a child under age 12 in formal childcare, lone parent Deduction from the family’s tax base. of formal childcare or both parents in a couple family are in work. Canton Zürich Family allowance All working households with a child under age 16, or up to age 25 Per child payment, varying with the child’s age (higher if over age 12). For people if in full-time education. working less than 80 hours per month, the allowance is reduced pro-rata-temporis. Self-employed and unemployed are not entitled. Infants’ allowance Low income families with a dependent child under age 2, for lone parents Allowance covers the difference between subsistence income of the respective type of working at most 50% and for couples working between 100 and 150% family and covered earnings, up to a maximum payment. of a full-time job, residents of Zürich for at least one year. Child tax deduction All households with a dependent child. Per child deduction from the family’s tax base. Tax deduction for the costs Households with a child in formal childcare, lone parent or both parents Deduction from the family’s tax base. of formal childcare in a couple family are in work (or permanently disabled).

Name of the programme

Table A.2. Main family benefit programmes, 2003 (cont.)




NZD 8 756 NZD 12 040 NZD 13 135

No child

One child

Two or more children

Domestic Purposes Benefit


Minimum income for working families NZD 15 080 with children

Family Tax Credit

NZD 7 800

NZD 2 769

Theoretical maximum (depends on region)

Average supplement paid

NZD 1 200

Child under 8 weeks

NZD 3 120

additional child, age 16+

Parental Tax Credit

NZD 2 080

additional child, age 13-15

NZD 780

NZD 1 664

additional child, age 0-12

Child under age 18

NZD 2 444

Eldest child (if over age 16, the higher rate for this age applies)

In national currency

Child Tax Credit

Family Support (Tax Credit)

Specifications

1 609

4 488

7 558

6 928

5 038

8 677

690

449

1 795

1 197

957

1 406

As a percentage of APW earningsa

6.7%

18.8%

31.7%

29.0%

21.1%

36.4%

2.9%

1.9%

7.5%

5.0%

4.0%

5.9%

New Zealand

In US dollars

Annual rates

25% abatement rate for earnings above NZD 21,655 for a couple with children (NZD 18972 for a lone parent with children); maximum benefit rate and maximum income threshold depends on the region

30% abatement rate for earnings between NZD 4 160 and NZD 9 360 , and 70% abatement rate for earnings above that level; gross cut out point with one child at NZD 24 331

Abates dollar-for-dollar against increases in families' net income; gross cut out point at NZD 18 369

Abates together with Family Support; gross cut out point with one child effectively at NZD 59 617

Abates together with Family Support; gross cut out point with one child at NZD 33 546

18% abatement rate for earnings between NZD 20 000 and NZD 27,000 (joint income in the case of couples), and 30% abatement rate for earnings above that level; the gross cut out point with one child under age 13 is thus NSD 30 946

Income tests (annual income levels)

Table A.3. Comparison of family benefit rates, 2003

Around 100%

62%

44%

144%

101%

88%

Gross cut out point with two children under age 10 in per cent of APW earnings


209

210 1 109 888 555 333

€1 200 €960 €600 €360

3rd income tier

4th income tier

5th income tier

255 222 111 132

2 774

€276 €240 €120 €143 €3 000

CHF 1 920

3rd income tier

4th income tier

5th income tier

Rent subsidy for Related to the actual rent paid, with young people/families maximum of 250/month

Child under age 16/25

Dependent child

Family allowance

Child tax deduction

34.9%

CHF 5 600

3 529

1 210

-

1.4%

2.8%

3.2%

3.5%

4.2%

4.2%

7.0%

11.2%

14.0%

16.7%

-

2,9%

Switzerland (Federation)

277

€300

Dependent child

333

€360

2nd income tier

child aged over 12 months

1 331

€1 440

2nd income tier


Portugalb

in US dollars

1st income tier

Child aged 12 months or less


1st income tier

Tax deductions for dependents

Child allowance

Specifications

Annual rates

No income test

No income test

Income must be below 4 times the NMW

No income test

As above

Reference income between 2.5 and 5 times NMW

Reference income between 1.5 and 2.5 times NMW

Reference income between 1 and 1.5 times NMW

Reference income between 0.5 and 1 times NMW

Reference income lower than 0.5 times NMW


Table A.3. Comparison of family benefit rates, 2003 (cont.)

-

-

199%

-

as above

746%

373%

224%

149%

75%





Flat-rate payment

1.0 for a single person, 1.3 for a lone parent, 1.8 for a couple living together, plus 0.5 for each child in the household -

Maternity allowance

Family quotient for tax purposes

Childcare tax deduction Child up to age 12

Paid at childbirth

Birth allowance

CHF 1 200

CHF 1 200

CHF 1 500

CHF 1 800 CHF 2 340 CHF 3 840 CHF 4 380

756

945

1 134 1 474 2 420 2 760

-

1.8%

2.3%

2.8% 3.6% 5.9% 6.7%

38.3%

Resource tested on an individual basis

No income test

Total family income below the level of subsistence income for this type of family

Total family income insufficient to cover the costs of children

1st/2nd child up to age 16 1/st/2nd child age 16 and older from the 3rd child onwards 3rd+ child age 16 and older

15 740

CHF 24 980

7.6%

75.8%

12.3% 8.2% 4.1%

Family allowance

3 138

CHF 4 980

Canton Vaud

31 153

CHF 49 440

5 072 3 382 1 691

Theoretical maximum lone mother with two children, income of CHF 20,000 a year lone mother with two children, no income

CHF 8 050 CHF 5 368 CHF 2 684


No income test

Infants' allowance

3.4%

Maximum for 1st/2nd child Maximum for 3rd/4th child Maximum for 5th+ children

1 384

Supplementary allowance

CHF 2 196


Canton Ticinoc

In US dollars

Child under age 20


Family allowance

Specifications

Annual rates


-

n.a.

-

-

70%

80%

-



211

212 CHF 3 000

3 403

6 647

15 123

1 474

1 285

-

-

16.2%

36.6%

3.6%

3.1%


Canton Zürich

In US dollars

No income test

No income test

Total family income below the level of subsistence income for this type of family

No income test


-

65%

-

Gross cut out point with two children under age 10in per cent of APW earnings

Source: National authorities and estimates by the OECD Secretariat.

a) Individual benefits or elements of them, are expressed as a proportion of gross APE. Compared to net wages, benefit rates would be significantly higher (New Zealand's DPB payment for a sole mother with two or more children, for instance, is equal to 44. b) Reference income for the purpose of calculating child allowance entitlement in Portugal is total income earned by all household members divided by the number of beneficiaries of the child allowance, plus one. c) Total family income for the purpose of calculating supplementary and infants' allowance in Ticino is total income earned by a family plus hypothetical earnings for a non-working spouse in a couple, interests from capital, family allowance and maintenance.

Dependent child

Childcare tax deduction

CHF 5 400

CHF 10 548

average allowance paid

Dependent child

CHF 24 000

CHF 2 340

Theoretical maximum

CHF 2 040

Child age 12 and older


Child up to age 12

Child tax deduction

Infants' allowance

Family allowance

Specifications

Annual rates





can receive this in-work family allowance. Typically, the recipient will be the parent working the larger number of hours. Payment rates differ across cantons, with a nationwide minimum, generally fluctuating at a level of 3% of APW earnings per child. In Ticino the payment rate does not depend on the age and number of children; Zürich has a somewhat higher rate for children over age 12; and in Vaud payment rates increase with age as well as with the number of children, with a significantly higher rate from the third child onwards. Income-tested infants’ allowance is paid for the first two years after childbirth in Zürich and for the first three years (and at a significantly higher rate) in Ticino. This benefit ensures the family’s subsistence income in a period when mothers often want to provide full-time care and formal childcare is largely unavailable. Vaud also has a means-tested, flat-rate benefit (CHF 200 monthly) for parents with a very young child, called maternity allowance, which is paid during the first six months after childbirth. (an income-tested supplement can be paid for each additional child in the family). Supplementary allowance in Ticino is designed to cover the basic costs of children. It is calculated as the difference between family income (earnings plus benefits plus maintenance payments) and deductible expenditure (which includes subsistence expenditure for the parents and for each child, actual housing costs up to a maximum, health care premiums and a certain part of the social security contributions). The actual payment of supplementary family benefit cannot exceed the subsistence level for the child or the children.

A3. Characteristics of child-related leave programmes (as per late 2003) New Zealand There are four types of leave in New Zealand that all have to be taken in the first year after the birth or adoption (Parental Leave and Employment Protection Act 1987): ●

Special leave of up to ten days for a pregnant mother, before maternity leave begins for reasons connected with pregnancy such as ante-natal classes or appointments with a doctor or midwife;

●

Maternity leave of up to 14 continuous weeks for the mother, with up to 6 weeks available before, and at least 8 weeks available after the birth of the child;

●

Partner’s/Paternity leave of up to 2 weeks for the mother’s partner on the birth of a child; and


213


●

Extended leave of up to 52 weeks, less any maternity leave taken, that can be shared between the parents if they are both eligible.

To be eligible, an employee must have worked at least an average of ten hours each week or 40 hours per month for the same employer during the last 12 months before the expected date of birth or adoption. A second or subsequent period of parental leave can not be taken unless the employee has returned to work for at least 12 months at their expected date of delivery from a previous period of parental leave. Both parents must be eligible for leave before leave can be shared. Each partner must take any period of extended leave in a continuous period. Publicly financed paid parental leave was introduced in mid-2002 (Paid Parental Leave Act 2001). Employees eligible for parental leave are entitled to up to 12 weeks of tax-payer funded paid parental leave. The payment rate is 100% of previous earnings up to a maximum of NZD 334.75 per week (the payment is taxable). Primary eligibility for paid parental leave lies with the mother, and without maternal eligibility, partners have no access either.

Portugal There are many different leave entitlements in Portugal that, together with other stipulations on working hours and health and safety protection, are summarized in the recently reformed labour code. The description below is a concise summary of provisions with respect to different leave entitlements, without going into detail on the provisions regarding adoption, assistance for parents with sick or disabled children or other specific regulations on employment-protection or working hours.

214

●

Pregnant workers are entitled to be absent from work for pre-natal medical consultations.

●

Maternity leave of 120 consecutive days, of which 90 days have to be taken after birth. In case of multiple births the period of leave is extended by 30 days for each twin. Maternity leave in Portugal is paid for four months at 100% of basic pay while the payment rate may not be below 50% of the national minimum wage. Basic pay is defined as total earnings, including holiday payments, Christmas bonuses, etc. during the six calendar months ending on the second month prior to taking leave, divided by 180. Eligibility requires six continuous or interspersed calendar months with registered earnings, prior to taking leave.

●

Paternity leaves. Mothers only have to use the first 6 weeks of the maternity leave entitlement. Thereafter the entitlements (including pay) can be transferred to the father. The father is also entitled to maternity leave in case of the mother’s death or in case of maternal physical or psychological incapacity.



In addition, Portuguese fathers are entitled to i) five days of paid leave that have to be taken in the first month upon childbirth, and ii) 15 days of paid leave, to be taken upon use of the five-day leave period or the shared “maternity leave” period (payment/eligibility rules as for maternity leave). ●

Unpaid special leave for two years, or three years when it concerns a third or higher-order birth.

●

A part-time work entitlement for a two-year period. This can be taken until the child is 12 years of age.

●

Grandparent living with their grandchildren may have access to paid financial support for 30 days, if the child is born to a parent not yet 16 years of age or when the spouse of the applying grandparents is at work or mentally and/ or physically incapacitated. Leave is paid at 100% of earnings (see maternity pay rules).

Switzerland Switzerland does not know maternity payments as regulated in a maternity insurance system, but female workers could be entitled to payments as regulated under the Code of Obligations, depending on length of service (see Table A.4). Jurisprudence (the system should be regarded as private contract law) reveals that the courts often apply the so called Bern Scale for salary payments. Table A.4. Continued payment of salary for those on leave for incapacityrelated reasons (including maternity) in Switzerlanda Duration of payment as under the Bern Scaleb

Average duration of payment (in weekly earnings) as under collective agreements

4 weeks

9.6 weeks

3 and 4

8 weeks

10.7 weeks

5 to 9

12 weeks

14.6 weeks

10 to 14

16 weeks

21.5 weeks

Length of service (in years)

1 2c

7.1 weeks

a) Those who have already used their entitlement to (partial) continued payment of salary because of sickness-related reasons face an equivalent reduction when maternity occurs in the same year. If the full entitlement to continued wage payment for that year has already been used, then no “maternity” payment will be made. b) There are other payment rules such as for example, the Basler and Zürcher Scales. These payment rates are not widely different, except that they are more generous than the Bern scale to those who with two years of service, where the scheduled payment is eight to nine weeks (Baillod et al., 2002). c) The obligation to continue paying the salary during the eight weeks upon childbirth during which work is prohibited only imposed after the 3rd year of service (provided that the employee has not been on sick leave in the same year). Source: Federal Swiss authorities.


215


A4. Characteristics of unemployment and social assistance benefits All three countries have benefit programmes that aim to protect families from the risks of joblessness and poverty. In New Zealand, people losing their job and ready for work can stay on means-tested Unemployment Benefit for unlimited duration. In Portugal, a person losing the job would first be entitled to an unemployment insurance benefit for a period of 12-30 months, depending on age, followed by payment of a means-tested social unemployment benefit for half of this duration. People not entitled to a contributory benefit can receive the means-tested benefit for 12-30 months. Once that benefit ceases, entitlement to Social Insertion Income, a social assistance benefit, may exist. In Switzerland, unemployment insurance benefit lasts for 150-400 days, also depending on age, and is typically followed by receipt of unemployment assistance and afterwards of social assistance. The latter two are regulated on a cantonal basis, and several cantons (including Zürich) in fact do not, or no longer, have a special unemployment assistance programme (Table A.5). Social Insertion Income, the Portuguese social assistance programme, has higher payment rates for larger families. Each first or second child increases benefit income by 71%, relative to the benefit income for a single person, and by 81% from the third child onwards (Table A.6). This is significantly higher than the respective equivalence elasticities of around 30% for second and higher order children both in Switzerland (using the SKOS guidelines on social assistance as a benchmark) and in New Zealand (using unemployment assistance and DPB as a reference). Similarly, equivalence elasticities for the second adult in a couple family are higher in Portugal than in the other two countries. Together this raises Social Insertion Income for a couple family with three children to the level of 86% of APW earnings.

216



Table A.5. Unemployment and social assistance benefits for those of working age with children Type of system

Account taken of children in rates of payment

Net replacement ratesa Couple

Lone parent

With two children aged 6 and 4 New Zealand No unemployment insurance, but means-tested Unemployment assistance for unlimited duration

Higher payment rates for families with children

66%

61%

Unemployment insurance benefit for 12 to 30 months, depending on age

Family benefits

76%

76%

Means-tested social unemployment benefit for half the insurance duration. People not entitled to a contributory benefit can receive the meanstested benefit for 12-30 months

Family benefits

61%

61%

Social Insertion Income, 12 months (possible renewal provided that entitlement conditions are satisfied)

Family benefits

70%

46%

Portugal

Switzerland Unemployment insurance benefit for 150 to 400 days, depending on age

Increases paid for dependent children

82%

82%

Social assistance, regulated on a cantonal basis (Zürich)

Increases paid for dependent children

73%

67%

a)

NRRs express the net income out of work as a proportion of the net income in work (accounting for tax payments and benefits). These calculations are for families with children aged 4 and 6, assuming they earn the APW when in work.

Source: OECD (2004d), Benefits and Wages, and national authorities.


217


Table A.6. Social assistance benefit income as a share of average wages and equivalence elasticities for additional children Family typea

New Zealandb % APW

Portugalc

Elasticities

% APW

Switzerlandd

Elasticities

% APW

Elasticities

Single person

20

–

20

–

21

–

Lone parent, 1 child

37

0.82

35

0.71

32

0.53

Lone parent, 2 children

45

0.42

49

0.71

39

0.33

Lone parent, 3 children

51

0.29

66

0.81

45

0.28

Couple

34

0.67

41

1.00

32

0.53

Couple, 1 child

44

0.49

55

0.71

39

0.33

Couple, 2 children

50

0.29

69

0.71

45

0.28

Couple, 3 children

55

0.29

86

0.81

50

0.28

Note : Base rate for elasticity equivalence calculations is the single person rate for social assistance. The social assistance rates are those payable where there is no other income, and do not include housing benefit. The calculations include other family assistance benefits. a) The benefit rates for children are fo those aged 4 (families with one child), aged 4 and 6 (families with two children) aged 4, 6 and 8 (families with three children). b) Refers to DPB for sole parents and UB for all others, includes family support and child tax credit. c) Refers to Social Insertion Income, includes child allowance. d) Refers to SKOS guidelines for 2003 (basic need Cat.1 and country-wide average for basic need Cat. 2). Source: OECD Secretariat calculations.

218


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Babies and Bosses - Reconciling Work and Family Life, Volume 3: New Zealand, Portugal and Switzerland (Babies and Bosses: Reconciling Work and Family Life)

Babies and Bosses: Reconciling Work and Family Life: Austria, Ireland and Japan (Babies and Bosses: Reconciling Work and Family Life)

Reconciling Work and Family Life in EU Law and Policy

Reconciling work and family life in EU law and policy

Integrating work and family life: the home-working family

My Life and Work

Life and Work Express

My Life and Work

Balancing Your Life: Executive Lessons for Work, Family and Self

Harmonizing Work, Family, and Personal Life: From Policy to Practice

Employment and the Family: The Reconfiguration of Work and Family Life in Contemporary Societies

Wendell Berry: Life and Work

John Muir: Life and Work

Semmelweis: his life and work

And Babies Make Five

And Babies Make Five

Balancing Work and Family (The Worksmart Series)

Women, Work and the Family in Europe

Work and family stress (Extension bulletin)

Work, Family, Health, and Well-being

Women, Men, Work and Family in Europe

Work-Family Balance, Gender and Policy

Work and Family in the Ework Era

Women, Men, Work and Family in Europe

The New Liberalism: Reconciling Liberty and Community

Social Work and Family Violence: Theories, Assessment, and Intervention

Big Babies, Little Babies

Cowboys, Babies and Shotgun Vows

Unequal Childhoods: Class, Race, and Family Life

Family and Community Life of Older People

Evangelical Identity and Gendered Family Life

Babies and Bosses - Reconciling Work and Family Life, Volume 3: New Zealand, Portugal and Switzerland (Babies and Bosses: Reconciling Work and Family Life)

Babies and Bosses: Reconciling Work and Family Life: Austria, Ireland and Japan (Babies and Bosses: Reconciling Work and Family Life)

Reconciling Work and Family Life in EU Law and Policy

Reconciling work and family life in EU law and policy

Integrating work and family life: the home-working family

My Life and Work

Life and Work Express

My Life and Work

Balancing Your Life: Executive Lessons for Work, Family and Self

Harmonizing Work, Family, and Personal Life: From Policy to Practice

Employment and the Family: The Reconfiguration of Work and Family Life in Contemporary Societies

Wendell Berry: Life and Work

John Muir: Life and Work

Semmelweis: his life and work

And Babies Make Five

And Babies Make Five

Balancing Work and Family (The Worksmart Series)

Women, Work and the Family in Europe

Work and family stress (Extension bulletin)

Work, Family, Health, and Well-being

Women, Men, Work and Family in Europe

Work-Family Balance, Gender and Policy

Work and Family in the Ework Era

Women, Men, Work and Family in Europe

The New Liberalism: Reconciling Liberty and Community

Social Work and Family Violence: Theories, Assessment, and Intervention

Big Babies, Little Babies

Cowboys, Babies and Shotgun Vows

Unequal Childhoods: Class, Race, and Family Life

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