WHEN MOM MUST WORK:
FAMILY DAY CARE AS A WELFARE-TO-WORK OPTION
2.0 International Trends and Perspectives
Systems of social assistance do not operate in isolation within welfare states. Western industrialised countries have developed an array of social welfare programs, a central purpose of which are to reduce poverty, address concerns around social exclusion,6 and advance the well-being of the population.7 Common risks and contingencies are addressed, such as raising children, temporary bouts of unemployment, disability, and the eventuality of ageing and retirement. The levels and mixes of cash benefits and related non-cash or in-kind social programs (e.g. child care, health, and education) provided differ widely.
Cash benefits tend to be less equally distributed and are more likely to benefit poor, sick, disabled, and unemployed persons. Cash benefits combine a number of programs. These include: social insurance to protect against unemployment, disability and retirement; social assistance, or welfare, to establish a minimal subsistence according to a test of basic needs and resources (a means test); and universal benefits such as child allowances and tax credits.
Non-cash benefits tend to be more equally distributed among the population. While the mix of cash and non-cash benefits varies, nations that tend to transfer relatively small shares of their gross domestic product (GDP)8 in cash benefits also tend to transfer smaller shares in non-cash benefits. Countries that make higher provisions for cash benefits also tend to make higher provision for in-kind benefits.9
Founded in the 1940s, welfare states were based on the assumptions of full employment, and of two-parent families headed by a single (male) earner. Both the labour market and the structure of families, the foundations of the welfare state, have changed considerably since the mid-twentieth century, creating new risks and challenges for welfare states.10
Social assistance programs are the minimum income programs of last resort for people with little or no other income. As residual programs, they are susceptible to use as a final recourse when the labour market and other social security schemes and public services do not provide an alternative. As minimum income schemes and in conjunction with other policies such as minimum wages they define a social minimum below which no one should be allowed to fall.
The prevalence of means-tested welfare programs and approaches to welfare-to-work varies among countries. There are large differences in the extent that countries rely on welfare, in the availability of other policy/program alternatives and options, and in labour market conditions. Some countries rely mainly on primary (non-means tested) income programs and have developed family policies that respond to changing family needs and risks, other countries rely more heavily on welfare. One approach to welfare-to-work is to maintain the social minimum established through welfare while investing in human and labour market development. The other approach is to reduce the social minimum, make life uncomfortable for recipients so they will not stay on welfare, and seek the shortest and most rapid route for recipients into the labour market.
The effectiveness of these approaches to welfare-to-work in getting people into the labour market is assessed largely in terms of the poverty-reducing impact, the main goal of social welfare policy. In addition, poverty is among the central concerns of social exclusion and social cohesion. The poverty-reduction impact of welfare-to-work programs is a useful indicator of the impact on social exclusion and cohesion.
2.1 The Impact of Social Security and Welfare Spending on Poverty
2.11 Do Social Programs Help or Hinder?
Table 1 illustrates available data for nine countries on the proportion of GDP spent on total social spending and income security program spending, and the proportion of social security spending on social assistance. The Table then shows the incidence of poverty for adults, children, and the elderly before government taxes and transfers (i.e., just market income)11, and then after taxes and income transfers, indicating the poverty reduction impact of social security programs.
Market income poverty rates within these countries are uniformly high. Between almost a fifth and a quarter of working age adults are poor, and between a fifth and a third (29%) of children are poor. Germany was an exception. Its high wage economy means lower market poverty rates of 13% for adults, and 12% for children, which points to the importance of earnings and the wage floor. However, in all instances, poverty rates are lower after taxes and transfers.
Critics, (particularly in the United States) contend that social welfare programs do temporarily reduce poverty, but they fail over the long run and actually hurt the poor because they divert spending away from other productive activity and weaken the economy over time. If generous transfers dampen economic growth people are worse off than in countries where shares of the income pie transferred are smaller in relative terms, but become larger in absolute terms because of economic growth. To test this contention a study devised an absolute poverty line that applied to fifteen Organisation for Economic Co-operation and Development (OECD) countries. Countries with more extensive social welfare systems since 1960 tended to have lower absolute poverty rates in the 1990s, supporting the view that social welfare programs in fact do reduce poverty.12
Similarly, the OECD points out that equating social welfare reform with reductions in social expenditure does not free up resources devoted to social ends, it merely redistributes them, increasing the pressure on individual households to provide for themselves. For example, the OECD notes that in Sweden taxes constitute 37% of household expenditure, versus 10% in the United States. However, expenditures on private health, education, child care, and pensions are about 30% of consumer expenditure in the United States, compared with 4% in Sweden.13
2.12 Generosity in Income Security and Poverty
On average, the level of spending on income security among 20 OECD countries was 17% of GDP. Canada and the United States spend considerably less than the OECD average on income security, at 12% and 9% of GDP respectively (Table 1). Nevertheless, even these lower levels of social spending have a considerable impact on poverty. After taxes and transfers in the United States poverty is reduced by 67% for the elderly; by 16% for adults; and by 13% for children.
Canada spends just 3% more of its GDP on income security than the United States does, but gets considerable results. Among Canada's elderly, poverty is reduced dramatically to levels as low as those in Europe. The poverty reducing impact of taxes and transfers for adults and children are less dramatic but substantially higher than in the United States
Income security expenditures as a proportion of GDP in Europe are considerably higher than Canadian levels of spending. The results, except in the United Kingdom, are considerably lower poverty rates among adults and children. For example, child poverty rates after taxes and transfers in France and Sweden were respectively one-half and one-fifth of Canada's child poverty rate.
Higher levels of income security spending tend to result in lower poverty rates. Canada lies between the United States and Europe in its levels of income security spending and subsequent poverty rates among children and working age adults. Poverty levels among the elderly are as low as Europe's. Overall, Canada's spending on income security is 5% of GDP below the OECD average. Canada could afford to be more generous.
2.13 Means Tested Welfare, Other Income Transfers and Poverty
How much is spent on income security matters, but how it is spent also matters. Higher poverty rates are evident in countries with greater reliance on means tested welfare. In Anglo-American countries means tested social assistance is much more prominent in the mix of income security programs, and larger fractions of the population live in poverty (Table 1).
Table 1: Income Security Spending, Social Assistance Spending and, the Effect of Transfers on Poverty
Country
Total Social Spending: % GDP
Income Security Spending: % of GDP
Social Assistance Spending: % of Social Security
Adult Poverty (18-64)
Child Poverty (Under 18)
Aged Poverty (65+)
Market Income
Post Tax Transfer
Market Income
Post Tax Transfer
Market Income
Post Tax Transfer
Canada
19%
12%
19%
18%
11%
23%
15%
58%
6%
United States
15%
9%
40%
20%
16%
29%
25%
59%
20%
Australia
13%
7%
90%
17%
10%
21%
15%
70%
22%
United Kingdom
22%
17%
33%
20%
11%
29%
19%
69%
24%
Belgium
25%
18%
3%
20%
5%
17%
4%
89%
12%
Germany
23%
18%
12%
13%
7%
12%
9%
66%
8%
France
26%
20%
6%
24%
8%
27%
7%
80%
5%
Netherlands
29%
23%
11%
17%
7%
15%
8%
66%
4%
Sweden
33%
26%
7%
23%
8%
18%
3%
92%
6%
Notes: Average Total Social and Income Security Spending for 20 OECD countries 23% and 17% respectively. Poverty defined as 50% of median adjusted disposable income. Social assistance spending for 1992, 1990 for Germany; poverty rates, social & income security spending circa 1990.
Sources: OECD June 1998, Economic Outlook, Table 1; OECD, 1998 Occasional Paper No. 33, Table 3.2; Smeeding, T., 1997, Working Paper No. 155, Luxembourg Income Study, Table 7; CCSD, 1994, "Countdown 94: Campaign 2000 Child Poverty Indicator Report" p. 33.
Expenditures on welfare range from 19% of social security spending in Canada to 33% in the United Kingdom, 40% in the United States, 90% in Australia and 100% in New Zealand (not shown). In contrast, among the European countries, social assistance constitutes only between 3% and 12% of social security expenditures.
It is notable that while Canada does rely heavily on welfare, the proportion of social security spending on welfare (19%) lies between Europe and its Anglo-American counterparts. Welfare constitutes a much smaller share of social security spending in Canada than in the United States, where 40% is spent on welfare. It is also notable that the United Kingdom spends considerably more than Canada on income security (17% versus 12% of GDP), and a larger portion of it (33%) is on welfare, yet poverty levels are higher - four times higher for the elderly.
Few of Canada's elderly rely on welfare. Only 1% of the national welfare caseload is over age 65. Canada addresses income security for the elderly through primary (i.e., non-means tested) transfers: the Canada and Quebec Pension Plans, Old Age Security, and the Guaranteed Income Supplement. These income transfers have provided an alternative to welfare, and have had a considerably impact, reducing poverty among the elderly by 90% from market income levels.
Income transfers that do not include means-tested benefits (so-called primary transfers) reduce poverty most effectively in Nordic countries, such as Sweden and Finland.14 Experience in these countries, and among the elderly in Canada, underlines the importance of income transfers other than welfare to effectively reduce poverty among working age adults, families, and children.
Conclusion - Social programs do reduce poverty. More generous spending on income security and greater reliance on income programs other than welfare reduces poverty more effectively. The level of wages and earnings is also an important factor. Canada is more generous than the U.S. in its spending on income security, but is below the average spent among 20 OECD countries. Canada lies between the US and Europe in the proportion of its social security spending that is on social assistance. Canada could afford to be more generous in its spending, and its experience in effectively addressing poverty among the elderly points to the importance of income transfers other than welfare to more effectively reduce poverty among working age adults, children and families.
2.2 Welfare and Low-Income Dynamics
2.21 Transitions In and Out of Poverty/Welfare
The view of the poor as immobile and unchanging in number is a misconception. There is a considerable amount of turnover in and out of poverty and social assistance. For families with children, similar events are associated with transitions in and out of poverty and social assistance in Canada, the United States, and Europe.15 These are employment-related events, family related events, and the termination of social insurance benefits. These events are not necessarily mutually exclusive. Also, just as a job loss, separation from a spouse, or inability to qualify for social insurance can lead to poverty or welfare, the resolution of these events (e.g., job gain, remarriage, eligibility for social insurance) are pathways out.
2.22 Employment Related Events
The most common events leading people in and out of poverty and welfare are employment related, underlining a point made repeatedly in the literature: for recipients to leave welfare there must be sufficient and sustaining jobs for them. A longitudinal study of poverty and welfare dynamics in the United States, Canada, and Europe16 found that a reduction in work (i.e., hours, days, weeks) was associated with 48% of family transitions into poverty in Canada and the United States, and with at least one-fifth for other countries. Job loss, together with a reduction in work, was tied to about three-quarters of the transitions into poverty in Canada, two-thirds in the United States, and at least one-quarter in the other countries.
Labour market conditions are crucial concerns. Yet, these are often poorly grasped. The probability of viewing people in need as lazy is significantly higher in the United States than in Canada (one-third of Canadians hold this view), and higher in Canada than in the United Kingdom. The differences among these countries are small compared with the difference between Canada and the Netherlands and Norway where far fewer people (one-tenth of Norwegians) subscribe to the view of the poor as indolent. In Canada, this attitude translates into heightened concern about over-generous benefits and work incentives.17 This heightened, if not exaggerated, concern appears to obscure the importance of labour market and other events.
As shown in Table 3, unemployment is a pressing social and economic problem in Europe. Among the 15 European Union (EU) countries, between 1987 and 1997 unemployment rates were at double-digit levels (over 10%), and had quadrupled in Sweden (to 8% from 2%). Unemployment remained high but flat in Canada (9.2%), and dropped to 4.9% in the US. The OECD notes that for the foreseeable future there is likely to be an excess supply of labour.18
In many countries, the portion of total employment that is part-time is growing. The proportion of work that is part-time for women is significantly higher than for men (Table 2). Youth are also at risk, facing unemployment rates that are often double or more of the rate for the total work force.
The major difference between unemployment in the European Union and in North America is the level of long-term unemployment. One half (51.3%) of unemployment is long term (a year or more) in the EU. While long-term unemployment grew in Canada and the United States, it remains relatively lower (12.5% and 8.7% respectively).
Although unemployment is quite low in the United States, as has been seen, its poverty rates among the working age population are very high. Low unemployment does not necessarily result in effective protection against poverty and the risk of social exclusion. High unemployment does not necessarily result in poverty if social policy and employment models prevent it.19
Table 3 shows the incidence of full-time employment with low earnings among OECD countries. In countries with more generous social programs, work also pays better. Only a small fraction of full-time work for men (3 to 4%) was low paid in Belgium, Sweden, and Finland. About one in ten jobs for men was low paid in Germany, France, and the United Kingdom. One in six male jobs in Canada and one in five jobs in the United States were low paid.
Table 2: Labour Market Profile, Selected OECD Countries, 1997 and 1987.
Canada
USA
U.K.
France
Germany
Sweden
1997
1987
1997
1987
1997
1987
1997
1987
1997
1987
1997
1987
Unemployment Rate as % of female and male labour force.
Women
9.1
9.3
5
6.2
5.8
7.6
14.3
13.6
10.9
8.8
7.6
1.9
Men
9.2
8.5
4.8
6
8.1
12.4
10.9
8.3
8.9
6.8
8.4
1.9
Both
9.2
8.8
4.9
6.1
7.1
10.4
12.4
10.5
9.8
7.6
8
1.9
% Unemployed Long Term 1 year+
Both
12.5
9.4
8.7
8.1
38.6
47.9
41.2
45.5
50.1
48.2
33.4
18.3
Youth Unemployment as % of youth labour force under age 25.
Women
15.7
12.3
10.7
11.7
11
14.7
32.8
28.5
9.6
9
21.9
5.4
Men
17.6
14.6
11.8
12.6
15.6
16.7
24.6
18.3
10.3
8
23
5.3
Female Labour Market Participation Rate
67.8
65.5
71.3
66.2
66.8
62.4
59.8
55.5
61.8
54.5
74.5
79.4
Part-Time Employment as % of total employment 30 hours per week or less.
Women
27.5
25.7
19.5
21
40.1
41.5
25.6
21.9
29.8
25
24.5
31.5
Men
9.6
7.9
8.3
8.6
7.6
4.9
6.3
5.1
3.3
1.1
6.7
5.5
Both
17.8
15.7
13.6
14.4
23.1
21.4
15.5
12.5
15
10.5
15.7
18.5
Note: Figures for 1987 are for West Germany only. Source: Adapted from tables on Employment, Unemployment, Part-time Employment in: OECD, 1999 "OECD in Figures, 1999."
Table 3: Incidence of Low Paid Full-Time Employment, Selected OECD Countries, (circa 1995)
Canada
USA
UK
Australia
France
Germany
Belgium
Finland
Sweden
Japan
Men
16%
20%
13%
12%
11%
8%
4%
3%
3%
6%
Women
34%
33%
31%
18%
17%
25%
14%
9%
8%
37%
Note: Low paid employment defined as two-thirds of median earnings for all full-time workers. Source: Yalnizyan, 1998 p. 23, citing OECD Employment Outlooks, 1996.
The situation for women is very much different. About one in ten full-time jobs were low paid in Finland and Sweden for women, rising to about one-fifth or quarter of jobs in other European countries, and rising further to a startling one-third of all full-time jobs in Canada, the United States and the United Kingdom The risk of low levels of earnings and in-work poverty for women is great.
2.23 Access to Other Income Transfers and Family Related Events
A longitudinal study of welfare dynamics in the United States, Canada, and Europe found that both family related events such as separation/divorce, and the termination of social insurance were also linked to a sizeable portion of transitions in and out of poverty and welfare for families with children. They were associated with between about one-tenth and one-fifth of transitions each.20
Social insurance schemes are contributions based, and designed for short bouts of unemployment so they are time limited. Prolonged unemployment can result in social insurance coverage ending. Unstable work or not being established in the work force can mean not qualifying under eligibility rules for social insurance. In addition, in many countries social programs have been a target of expenditure reductions, which may make qualifying more difficult. Among most OECD countries, increasing numbers of people have had to rely on social assistance to meet immediate income needs.21
Complementary and alternative income and social program arrangements to welfare are particularly relevant to families. Two-parent single-earner families are no longer the norm. Women's participation in the work force has risen. There are a number of reasons, which include: the maintenance of family income, the demand for greater economic equality; rising levels of education; and growing employment opportunities in health, education, and public service, and in services that had previously occurred in the home such as housekeeping, and the care of children and the elderly.22
Rates of separation and divorce have also increased. In Canada the proportion of families with children that were lone parent families jumped from 11% in the 1960s to 20% in the 1990s, and the proportion of lone parents who were widows fell from 60% to 23%. However, the stereotype of single parents as having never been married and/or being teens is misconceived. For example, 80% of single mothers in Canada are separated, divorced or widowed.23
Changes in women's roles and in family structures are relatively new challenges for social welfare systems. Many countries have responded by playing a facilitative role around women's work force participation and by supporting parents at home. Policy directions include generous paid maternity leaves and job protected parental leaves, family allowances that cover substantial portions of the cost of raising a child, advance maintenance payments (state assured child support) to single parents, and extensive child care systems. However, governments in Canada, the United States and the United Kingdom have done little. As O'Hara notes, "with the exception of Quebec, Canadian governments have left families to fend for themselves in adapting to this change."24
Table 4 provides data from a study of fourteen countries on policies that tend to support the employment of mothers. Note that support of mothers' employment is not necessarily an indicator of a country's overall support of families. Some countries place greater emphasis on supporting parents to stay at home. However, Canada and the United States do neither on an adequate scale.25 The fifth column of the table provides information on which countries provide government payments in child support.
The availability of publicly funded child care is one indicator of support for the employment of mothers. In eight of 14 countries, 5% or less of infants are enrolled in public child care. Public child care is more widely available for pre-schoolers. Canada ranks at the lower end of countries that make public child care available. The United States is exceptionally low, and relies heavily on private care.
Other policies support the employment of mothers. The cross-country study constructed an index weighting the following policy indicators: job protection at childbirth, coverage and generosity of maternity leaves, paternity benefits, tax relief for child care, guaranteed child care coverage, and the percent of children in publicly funded child care. According to this index, Canada ranks ninth among the 14 countries in policies that support mothers' employment, and the United States held the lowest ranking.
Table 4: Publicly Funded Child Care, Index of Policies Supporting Employment for Mothers, and Government Payment in Child Support Arrangements.
% Children in Publicly Funded Child care
Policies for Mothers With Children Under Age 6
Government payment in child Support
Age 0 to 2
Age 3 to School
index Value
Rank
Australia
2%
26%
19
13
No
Belgium
20%
95%
56
5
-
Canada
5%
35%
32
9
No
Denmark
48%
85%
64
2
Yes
Finland
32%
59%
61
4
Yes
France
20%
95%
65
1
Yes
Germany
2%
78%
34
8
Yes
Italy
5%
88%
51
6
No
Luxembourg
2%
58%
35
7
-
Netherlands
2%
53%
32
10
-
Norway
12%
40%
31
11
Yes
Sweden
32%
79%
62
3
Yes
United Kingdom
2%
38%
22
12
-
United States
1%
14%
17
14
No
Notes: Index of policies supporting the employment of mothers with children under age six is calculated by Gornick et al. The index weights the following policy indicators: job protection at childbirth, coverage and generosity of maternity leave, paternity benefits, tax relief for child care, guaranteed child care coverage, and percent of children in publicly funded child care (p. 15-16). Child support information from OECD. Sources: Adapted from Gornick, J., Meyers, M., Ross, K. October 1996, Tables 3 and 5, Luxembourg Income Study; Kalisch, D, Tetsuya, A., Libbie, B., 1998, Table 4.3, OECD.
Research shows that the stability of child support is an important factor in determining whether a woman will remain in the workforce after leaving welfare.26 In six of these countries, all European, there is government provision to make payments if a parent defaults in child support, or is unable to pay (Table 4). Coverage may include a top-up to a minimum pre-set amount. As will be noted later, few single parents on welfare receive child support in Canada.
2.24 Low Income Mobility
The study of welfare and poverty dynamics in Europe, the US and Canada found that though events leading to transitions into poverty were similar, escape rates from poverty were very different in Europe than in North America. 27
Among the European countries, between a quarter and almost half of poor families with children had escaped poverty within a year. The portion of families who were poor over the entire three year period was tiny: between 0.4% and 1.6%. In contrast, in Canada and the United States, only 12% and 14% of poor families respectively escaped poverty after one year; and 12% and 14% were poor over the entire three year period studied.
The reason fewer escape poverty in Canada and the United States is that large fractions of the population are poor with incomes further below the poverty line. In the European countries, the poor are a much smaller fraction of the population, and their incomes are much closer to the poverty line. The poor in Europe do not fall down or have to climb up as many rungs on the income ladder to escape poverty.28
An escape from poverty is not a one-way ticket. A study of low-income dynamics between 1991 and 1994 in the United Kingdom found that while half of the individuals in poverty escaped it in any one year, there was a 30% chance of them re-entering poverty within a year. A Canadian study of working age adults conducted between 1982 to 1986 revealed similar dynamics: among those who exited poverty 21% returned to it the following year. The United Kingdom study also found that income movement was only a short distance. From one year to the next, 70% were in the same tenth or neighbouring tenth of the income distribution, and 90% were in the same fifth or neighbouring fifth of the income distribution.29
Work alone is not necessarily a ticket to upward income mobility. The OECD examined earnings mobility in six countries and found that at best, only one in three low paid workers moved up after the first year of low pay. After five years, only about one in six moved up. The longer one worked for low pay, the lower the chance of escaping it. In Canada, between 1993 and 1995 only a fifth of workers in low-paid jobs escaped those jobs. Only one in 12 lone mothers working for low pay escaped.30
In short, there is income mobility for persons with low incomes, but they often do not travel far within the income distribution. How far into poverty they fall and how far they have to climb to escape poverty depends on the wage and social floor established by countries. In European countries a higher floor translates into lower levels of poverty, so relatively fewer low-income persons find themselves in deep poverty or on and off welfare. This is depicted in Figure 1.
The dynamic nature of welfare-to-work transitions, the problem of poverty, and the necessity of raising the total social floor of earnings, income and in-kind transfers, particularly for lone parents, are evident in the following United Kingdom, United States, and Canadian studies.
A study of lone parents on welfare in the United Kingdom found a high turnover rate on and off welfare. Only one in five were in receipt throughout a four year period from 1993 to 1997; one half of those no longer in receipt had been in receipt of benefits for two years or less; and most had worked and were looking for work.
Over one-third of the lone mothers had moved on and off welfare more than once mainly because of marginal work, changes in their family, and lack of child care. Mothers under age 25 had the highest exit rates; women who had become single mothers as teenagers were no more likely to experience long spells on assistance than others; and, older mothers and those caring for three or more children had the greatest difficulty leaving welfare.31
In the United States, a study of mothers who exited welfare for work found that more than half of them returned for a subsequent spell on welfare. The most vulnerable were those with little work experience and education. Welfare benefits are quite low in the United States. However, because of the preponderance of low-wage work, earnings for those who leave welfare are also quite low. Families have extreme difficulty living on either. Survival strategies differ between welfare and working poor mothers.
Welfare recipients can generate cash on the side and make use of charities. ( Babysitting is one such strategy). Working mothers can not adopt these same strategies. Mothers who managed to continue working at low wages either had unusually low expenses and/or received substantial and regular cash help from people in their own personal networks. The study urged access to training for recipients and low-wage earners, child care, and broader unemployment insurance coverage, including coverage for part-time work.32
In Canada, a study of welfare cases in British Columbia from 1980 to 1992 found that half of the spells for all people on assistance were six months or less. As is the case in the US and Europe, single parents tend to have spells on welfare of a longer duration. Most revealing was that in only a third of all the cases was it the recipients' first spell. The incidences of multiple spells on welfare were high. Indeed, between 6% and 9% of all family types had had seven or more spells on welfare over the period studied.33
Conclusion - The poor are not a static group. Few people are immune to the events associated with transitions in and out of poverty and welfare, and these are similar in Canada, the US and Europe, (reduction in hours of work, job loss, family events and access to social insurance).
However, the proportion of full time work that is low paid is higher in the US and Canada than in Europe, especially for women. In Canada and the US one-third of women's jobs are low-paid. Also unlike Europe, Canada and the US have not developed family policies (e.g. child care, family allowances, assured child support etc.) to respond to changes in mother's workforce participation and changes in family structures. As such, the basic social and wage floor in Canada is low, and in the US it is lower still, resulting in more people falling into poverty and cycling between welfare and low paying jobs. This indicates that for family day care to be an effective welfare-to-work option, it must provide sustaining employment and be part of a more comprehensive family policy strategy.
2.3 Themes and Approaches in the OECD and Europe
2.31 The OECD and "Active" Employment Oriented Policies
The OECD notes that a priority for many countries is to shift emphasis from income support to programs seeking reintegration for the unemployed. This trend has been dubbed a move from passive to active social policy, emphasising skill, human, and labour market development. Examples of active social policies are placement, training, and job creation measures.34
Making work pay is a particular problem, especially for families with children because they have greater budgetary needs. The OECD suggests three ways to make work pay: skill development so wages earned will go up; increase the incomes of persons taking low-wage work; or reduce the incomes of those who are out of work to make low-wage work more attractive. 35
While some countries have trimmed benefits due to budgetary pressures, according to the OECD few countries have pursued the latter option of drastic cuts to benefits to make low-wage work more attractive. The OECD favours the first two options, particularly the upgrading of skills. 36
Other perspectives strongly suggest that cutting benefits, particularly in countries where benefits are already quite low, runs counter to skill and human development.
Poverty, inequality, and unemployment feed upon one another. The term "hysterisis" describes how high unemployment is self-perpetuating: those out of work for long periods eventually become unemployable. Long term unemployment makes skills obsolete, and, increases the incidences of illness, drug abuse, crime, victims of domestic and child abuse, separation and divorce, and so on. These burden welfare programs by increasing the likelihood of larger numbers of people landing on assistance, and by making it less likely and more difficult for them to leave.37
Extended periods of unemployment leads to exclusion from the world of work, but not necessarily to social exclusion if income is adequate and social networks are maintained. Add poverty to the mix, and social exclusion is likely.38 Inequality and poverty depreciates human capital and this contributes to long term unemployment. Having a healthy, skilled, and motivated workforce is vital to economic growth. Economic growth literature emphasizes the links between inequality and the depreciation of human capital and harm to economic growth caused through unemployment.39
In terms of active social policies, the most promising direction urged by the OECD is the upgrading of skills and human development. Upgrading is a longer-term strategy. It requires investment, and access to education and training programs for low-income individuals. The OECD notes that training seems to work better for adults such as women returning to the workforce after child rearing. Programs need to be well matched to participant characteristics and the requirements of the labour market.
Job search assistance is effective at accelerating the chances that the unemployed will find work. Subsidized employment schemes in the private and public sectors are ineffective and lead to few net employment gains according to the OECD. However, these may help the unemployed stay linked to the world of work. Others note that carefully designed programs of job search assistance, remedial education, vocational training, and job placement have positive effects, but only if the number of local jobs available is expanding rapidly. 40
The OECD believes two routes merit attention to making work pay. One, increase minimum wages and, two, develop employment conditional benefits. The role of minimum wages should be of interest in Canada, where, as will be discussed later, minimum wages have eroded substantially over time. A standard criticism around improving minimum wages is that it will increase unemployment by pricing people out of work. However, several studies have suggested that this is not necessarily the case.
An OECD study of nine countries found minimum wage hikes had some adverse effect on teen employment, however, they only explained a small fraction of declining teen employment. There was no significant effect on adult employment overall. The redistributive effect may be weaker than expected for families, since some minimum wage workers are secondary earners in families with median incomes, and many poor households have no workers at all. Nevertheless raising the minimum wage reduces in-work poverty, particularly for women and others trapped in poorly paid work. It also provides greater incentives to work, and reduces earnings inequality by establishing a more effective wage floor.41
Recent experience and studies in the United States have also shown little negative employment impact arising from increases to the minimum wage. 42 In addition, hikes to minimum wage pose no additional costs to the state. In fact, they can reduce costs to government. A U.K study estimated that increasing the minimum wage to £3.75 an hour would reduce the number of low-paid workers living in poor households by 300,000 and would net £1.2 billion a year in savings for government and tax payers.43
Employment conditional benefits (income supplements, special benefits) are better targeted than minimum wages at addressing in-work poverty for families. However, these can be expensive, and where the rate at which benefits are reduced and earnings increase are steep, they can create work disincentives. Many are also concerned that it is business that is being subsidized, not workers. The OECD suggests a balanced approach using minimum wage and employment conditional benefits in making work pay. 44
The OECD echoes much of the literature on the need for child care. Overcoming the absence of adequate, affordable child care, in addition to other employment-oriented policies, makes these policies expensive. The prospect of reduced costs in restructuring welfare systems in the short run is limited. However, the longer-term payoff is substantial.45
Table 5: Rank of Countries by Portion of GDP Spent on Active Measures
1. Denmark
6. Belgium
11. Portugal
16. Switzerland
21. Greece
2. Sweden
7. Netherlands
12. Australia
17. United Kingdom
22. Luxembourg
3. Ireland
8. France
13. New Zealand
18. Austria
23. United States
4. Finland
9. Norway
14. Spain
19. Hungary
24. Czech Republic
5. Germany
10. Italy
15. Canada
20. Poland
25. Japan
Note: Active measures comprise placement, training, and job creation measures. Spending is for 1996
Source: OECD, 1998, Ranking estimated from Chart B, p. 14.
The OECD compared public spending on active measures of placement, training, and job creation measures. OECD figures (ranked in Table 5) indicate that Canada is among the lower spenders of 25 OECD nations, and the United States is among the lowest. By way of contrast Denmark spends almost four times the portion of its GDP on active measures than Canada does. The OECD's figures also indicate that Canada spends below the average spending of the G7, EU, and OECD countries.46
2.32 Welfare-to-Work in Europe
Like North America, the EU is a trade bloc, the single largest in the world. Unlike North America, social rights and the development of common policies, particularly social policy, are pursued in treaties and agreements and involve procedures of consultation with social partners, business, and labour.
Areas of common interest include social protection and exclusion. In 1998, the European Council set out a blueprint for social policy over three years based on the results of previous agreements and treaties. The plan focuses on three areas: jobs, skills and mobility; work challenges; and an inclusive society. Directions include:
the use of Structural Funds to develop new forms of employment locally;
developing a culture of entrepreneurship;
increasing investment in human resource development, education, training, and life long learning;
increasing equality of opportunity; and
making greater provision for child care in order to reconcile work and family life effectively.47
The European Parliament recently evaluated the role of social assistance in terms of both the fight against poverty and enabling social and economic reintegration. Although social assistance schemes are small compared with overall social protection spending in most of Europe (see Table 1), for most recipients it is their main source of income.48
Several common policy approaches are evident. EU states have not reduced benefits as an incentive measure because these are viewed as minimum subsistence levels. Benefits are indexed to consumer prices or to other social programs. Able-bodied recipients are expected to seek and accept work. Exemptions to these requirements are similar within the EU, and include those who are disabled and those who are caring for young children.
Obstacles to leaving assistance include the design of schemes. One development is to reduce the administrative complexity of programs because these present a barrier to transitions off assistance. Recipients are likely to be reluctant to leave welfare if jobs are insecure and the way back to minimum income schemes daunting. In other words, making welfare more difficult to get is viewed as a disincentive because recipients will rely on assistance rather than take risks in the labour market.
Access to employment measures associated with social insurance can be a barrier, and recipients do not always get support with job searches and training. EU states are looking at better integrating social and employment services, since the two have worked in isolation. Social services have not been oriented to employment programs. Conversely, social workers point to the problem of longer term planning in an environment of constantly changing training and employment programs. Longer-term approaches tailor made to recipients is another avenue of social integration that address complicated personal and institutional barriers. These can include language courses, driving lessons, drug treatment, improving family situations, improving housing, and so on. Employment is the long-term and final objective.
Competition and entry requirements for training programs are another barrier, because some recipients lack basic skills. A number of countries are developing remedial education schemes for recipients. Training also tends to be short term, which results in a low take-up rate. In part this is due to budget constraints, but is also based on uncertainty about addressing shortcomings in national education systems.
Incentives are provided (bonuses, expenses) for voluntary activity in the community sector. These help with social exclusion and prevent total inactivity, but do not tend to reflect work expectations and so are limited. Some countries are phasing these programs out in favour of subsidized work in the non-profit sector. Where this approach exists, it is the most favoured, as the work is better structured, though it is usually low paying work of minimal quality, and is part-time and short-term. Success is mixed. Incentives are also offered to employers to take on the unemployed, though these are not usually targeted to minimum income recipients. Employers are not well disposed to keeping people after the subsidy, but because of pre-selection beforehand by the employer, the results are better than other options.
Some states are examining the role of social assistance schemes in supplementing earnings. This development is related in part to the growth of part-time and atypical work, and hence an increase in the number of recipients who are already active in work. In Sweden for example, half of recipients are working, 20% of them full-time. States are looking at how social assistance can supplement wages. Six states have transitional periods where social assistance can be used to top-up wages wholly or partly. Another option being explored is to provide assistance for people to become self-employed.
Local employment initiatives are seen as a way of generating jobs, and child care has been pinpointed as one of the fields with potential. Considerations include financing, improving skills, and combining paid work and unemployment benefits.49 In addition, part of the European program to combat poverty involves creating horizontal links by building partnerships and participation (a community development approach). This approach draws on the social responsibility of employers and unions by bringing them together to develop new opportunities at the local level.
For example, work in the Netherlands has focused on the development of urban networks focused on jobs. In an employers' network, proposed by employers, 100 vacancies were reserved for long-term unemployed ethnic minorities provided they completed training. In a women's network, opportunities were made available for paid work to single parents primarily in the caring sector, provided training and child facilities were available (which also generated employment).50
Overall, the EU recognizes that labour market circumstances are not likely to change in the immediate future. As such income support programs for the unemployed are expanding beyond job searches to include long-term skills development and training and financial incentives to work. These reforms differ from North America where the emphasis is to get people off welfare and into any job as quickly as possible.51
Conclusion - The OECD urges a shift toward more "active" employment oriented policies that emphasize skill, human and labour market development. These strategies include developing training and job placement, child care, employment related benefits (e.g. earnings supplements), improved minimum wages, and job creation. While one strategy to "make work pay" is to cut benefits to make low-wage work more attractive, few countries have done so. Other perspectives suggest that cutting benefits, particularly where benefits are already quite low, runs counter to skill and human development. OECD figures indicate that Canada spends below the G7, EU, and OECD averages on "active" measures.
The EU emphasis is on actively improving the labour market and social circumstances of the disadvantaged. The EU has not reduced social assistance benefits because these are already viewed as minimum subsistence levels. Benefits are indexed to changes in consumer prices and other social programs. Developments include: simplifying the administrative complexity of welfare because this is viewed as a barrier to recipients taking risks in the labour market; access to training and remedial education; local employment initiatives including child care; and longer-term approaches tailored to the recipients' personal and institutional barriers.
Child care as a welfare-to-work employment option would be most compatible with "active" approaches that emphasize human skill and labour market development. However, this approach differs from the North American approach where the emphasis is on getting people off welfare and into any job as quickly as possible.
2.4 Family Day Care as an Employment Option in Europe
Family day care is a large sector of female employment in Europe. An estimated 500,000 women are registered as caregivers of children for payment, in their own homes.52 The large presence of family day care exists alongside broad access to publicly-funded group programs for pre-schoolers and the comparatively low levels of maternal labour force participation outside the Scandinavian countries.
Europe will not provide models of family day care used as work opportunities for welfare recipients. It is nevertheless useful to examine the employment status of family day care in countries where the sector is integral to public systems of child care provision.
Most European countries require some form of registration process for family day care providers. Still a number of self-employed providers operate without public recognition and therefore illegally. The proportion of illegal providers varies depending on the country. While family day care is a large sector of child care provision it is not evenly distributed. While an established part of northern Europe's child care sector, it is very rare in Italy, Greece, and Spain.
There is a close historical connection between family day care and child welfare authorities. Providers often serve as 'day' foster parents offering respite for stressed parents and monitoring children at risk. In France, Germany, and Austria family day care and child welfare laws, regulations, and agencies are closely related. This leaves family day care with an identity crisis as it straddles the expectations between child welfare and child care systems.
2.41 Filling the Service Gap
Family day care is the most common form of program for pre-school children. Ages served vary according to each country's maternity leave provisions and the availability of group pre-school education. In those countries where pre-school programs are universal from three years onward, it provides infant and toddler care and serves outside school hours for older children. It is not as common in cities where there is less suitable housing, more employment opportunities, and a wider variety of services.
Providers are overwhelmingly women in married or in common-law relationships. They are less likely to have post-secondary education as compared to other working women. Almost all have dependent children of their own and have become providers in order to combine child rearing with earnings. They average one or two children, as is the trend in Europe.
Regulations vary from country to country and even within countries. Often regional government authorities are responsible for the development, supervision, and enforcement of children's services and, therefore, standards vary. Ratios range from three to five children excluding the providers' own. No training is required before beginning work in the sector, although in-service training is usually required. Only France has legislation requiring 60 hours of training for all providers that must be completed during their first year of employment.
Agencies or municipal authorities provide supervision. Enforcement and support may be combined under the single authority, or in some cases local authorities take responsibility for enforcement while the agency provides support. In Norway and Sweden it is common for providers to be attached to a day care centre where they have access to the centre's toys, equipment, and other resources. The centre director provides supervision and support.
2.42 Employment Models for Providers
Europe has three models of family day care: the provider may be independently self-employed; self-employed under contract to an agency; or employed usually by a municipality. Individual countries may have more than one model.
Independent self-employed providers are common in Germany, Ireland, and the United Kingdom. Regulations are most common when state funding to subsidize child care payments of parents is involved. Providers attached to agencies may be paid directly by the agency, or the agency may act as a support and referral body as in the Netherlands, Belgium, and Portugal. Providers are most often employees in France, Norway, Austria, Finland, Denmark, and Sweden. They are hired either by local authorities or by non-profit agencies.
Employed providers are often unionized. Those employed by local authorities are part of the large municipal employee unions. Those working for agencies join the private sector unions. Providers may have their own advocacy organizations, often working in conjunction with parents and agencies, to improve the quality of family day care.
Remuneration also varies. Earnings are below those of other workers in services for young children, who are themselves often low paid. Employed providers in the Nordic countries are the highest paid. France is the only country to insist on a minimum wage for all self-employed providers.
Europe's family tax system is often held responsible for holding down earnings. The higher earning partner faces a tax increase if the spouse's income rises above a certain amount. Low pay doubly penalizes the provider leaving her under the income threshold for public pension eligibility. Attitudes also determine pay. In Belgium and the Netherlands family day care is considered volunteer activity and providers are often only reimbursed for expenses.
Employed providers receive holidays, sick leave, and pensions where the self-employed must make their own provisions. All providers are also likely to work longer hours than their counterparts in group settings.
A closer look at Sweden illustrates one of the most advanced European models.
2.43 Sweden: Family Day Care as a Public Service
Sweden's model provides a unique perspective on family day care as a professional public service.53 Sweden, along with Finland and Denmark, boasts universal child care, with no shortage of services.54
Family day care was a late arrival to Sweden's child care system. It was not until 1967 that state funding extended to the sector. Local authorities received payment under condition that providers were employed under state workers' contracts.55
The National Board of Health and Welfare establishes guidelines for family care but, unlike group care, these are not legislated. Local authorities employ providers and are responsible for establishing their own regulations and qualifications. To quell opposition to unionization, public funding was made available to independent providers to establish their own business. Most now prefer to work for the municipalities and receive employment-related benefits. A small number of caregivers operate outside national and local regulations and without public funding. The demand is low because parents pay full costs when they purchase care outside the public system.
In the mid-1980s, a national agreement established standard wages, benefits and hours of work. It did remove provider flexibility over some working conditions and was met with opposition. Standardization has since become accepted and welcomed in the sector.56 Providers work a 55-hour week and wages are based on an enrolment of 3.5 children. The payment is equal to an assistant in a group program (who works fewer hours). They have the same access to social benefits as other workers including five weeks paid holiday, paid sick leave, and pension. They also receive a tax-free allowance for food and other program-related expenses. The newest struggle is to establish the 40-hour work week as a standard in the sector. This will require children to participate in group care for at least part of the week to accommodate the providers' hours. This development has raised concerns that family day care will lose its unique character.57
The state recommends providers receive the same basic training as centre assistants - 40 weeks. Local authorities usually provide 100 hours initial training and about two-thirds of providers have this training or higher. Thirty hours of in-service training annually is also recommended. The provider is usually paid for the training.
Supervision is the responsibility of a home visitor, but it has recently become more common for providers to be attached to local centres where the director provides monitoring and support. Most providers also belong to caregiver networks that meet regularly and provide group activities for the children.
Family day care is playing an increasingly smaller role in Swedish child care as group programs expand and schools take over responsibility for before and after school care. It is responsible for 24% of the publicly funded care for children under seven. However, that number is down from 43% in 1980 and the decline is expected to continue.
Conclusion - It is useful to note that as the status of family day care providers improved (i.e., family day care yielded sustainable employment) reliance on the service declined. Parity in wages and working conditions has meant family day care is no longer a low cost option. Indeed well resourced family care, with its lower ratios, is more expensive to operate than group care, particularly for older children. The Swedish example suggests that as family day care ceases to be a cheap care alternative, its attraction for policy makers declines.
Endnotes:
6 The term social exclusion is more often used in an European context. However, a recent international survey found that nearly all countries have policy concerns about social exclusion and are similar in what they understand it to mean. Social exclusion means exclusion from the labour market and social activities and events which lead to the necessities of life; restrictions on access to education, training, employment, health, housing, income; and lack of civic integration, family, and community integration. One may be poor but not excluded, or vice versa, but often the disadvantaged are both. Kalisch, D, Tetsuya, A., Libbie, B., (1998) Social and Health Policies in OECD Countries: A Survey of Current Programmes and Recent Developments, Labour and Social Policy Occasional Papers No. 33, Paris: Organization for Economic Cooperation and Development, p.21-2.
7 Duncan, J. et al (1996) 'Poverty and Social Assistance Dynamics in the United States, Canada and Europe' in Poverty, Inequality and the Future of Social Policy, Russell Sage Foundation. Kenworthy, L. (September, 1998) Do Social-Welfare Policies Reduce Poverty? A Cross-National Assessment, Working Paper No. 188, Luxembourg: Luxembourg Income Study.
8 GDP is the value of all final goods and services produced by a country in a year.
9 Smeeding, T. (1997) Financial Poverty in Developed Countries: The Evidence from the LIS, Working Paper No. 155, Luxembourg: Luxembourg Income Study, p. 10. Duncan, J. et al (1996) Op. Cit., p. 67.
10 Pearson, M., Scherer, P. (May, 1997) 'Balancing Security and Sustainability in Social Policy' OECD Observer, No. 205, Paris: Organisation for Economic Co-operation and Development.
11 Market income refers to earnings from work and investments.
12 Kenworthy, L. (September, 1998) Op. Cit.
13 Pearson, M., Scherer, P. Op.Cit. How money is spent also matters. The United States spends more on health care than any other country, but has the worse health outcomes (e.g., infant mortality and low birth weight rates). Phipps, S. (1999) International Comparison of Policies and Outcomes for Young Children, Ottawa: Canadian Policy Research Network Inc.
14 Haataja, A. (March, 1999) Unemployment, Employment and Social Exclusion, Working Paper No. 195, Luxembourg: Luxembourg Income Study, p.11.
15 Duncan, J. et al (1996) Op.Cit.
16 Duncan, J. et al (1996) Op.Cit.
17 Phipps, S. (1999) International Comparison of Policies and Outcomes for Young Children, Ottawa: Canadian Policy Research Network Inc., p.14, Table 2.9a, p. 37.
18 Pearson, M., Scherer, P. Op.Cit.
19 Haataja, A. (March, 1999) Op. Cit.
20 Duncan, J. et al (1996) Op.Cit.
21 Kalisch, D, Tetsuya, A., Libbie, B., (1998) Op. Cit.
22 Yalnizyan, A. (1998) The Growing Gap: A Report on Growing Inequality Between the Rich and Poor in Canada, Toronto: Centre for Social Justice, p. 36.
23 Pearson, M., Scherer, P. Op.Cit. Mayson-Richmond, M. (September, 1997) Neo-Liberal Restructuring of the Welfare State. Workfare and Sole Support Mothers on Assistance: "Ontario Works"-- Or Does It?, unpublished research review paper, Toronto: York University.
24 O'Hara, K. (1998) Comparative Family Policy: Eight Countries Stories, Ottawa: Canadian Policy Research Networks Inc, p. 8.
25 O'Hara, K. (1998) Op. Cit.
26 Child Poverty Action Group (December 1994) A Federal Agenda for the Economic Security of Families, Submission to the Standing Committee on Human Resources Development, Toronto.
27 Duncan, J. et al (1996) Op.Cit.
28 Duncan, J. et al (1996) Op.Cit.
29 Jarvis, S., Jenkins, S. (October, 1996) news release Changing Places: Income Mobility and Poverty Dynamics, Internet: Joseph Rowntree Foundation, www.jrf.org.uk/. Economic Council of Canada (1992) The New Face of Poverty: Income Security Needs of Canadian Families, Ottawa.
30 Yalnizyan, A. (1998) Op Cit p.22-3.
31 Noble, M., Smith, J., Cheung, S. (April 1998) news release Lone Mothers Moving In and Out of Benefits, Internet: Joseph Rowntree Foundation, www.jrf.org.uk/
32 Edin, K., Lein. L. (1997) 'Work, Welfare and Single Mothers' Economic Survival Strategies', in American Sociological Review, Vol. 62, No. 2: 253-266.
33 Barrett, G. (1994) The Duration of Income Assistance Spells in British Columbia, Vancouver: Department of Economics, University of British Columbia.
34 Organisation for Economic Co-operation and Development (1998) Key Employment Policy Challenges Faced by OECD Countries Labour Market and Social Policy - Occasional Papers No. 31, Paris.
35 OECD (1998) Op. Cit., p. 11.
36 OECD (1998) Op. Cit.
37 Osberg, L. (1996) Unnecessary Debts, Chapter 7, Toronto: James Lorimer and Company Publishers, p. 137.
38 Haataja, A. (March, 1999) Op. Cit.
39 Osberg, L. (March, 1995) The Equity/Efficiency Trade-Off in Retrospect, address to conference, Laurention University, Halifax: Dalhousie University.
40 OECD (1998) Op. Cit. Osberg, L. (1996) Op. Cit., p. 132.
41 Organisation for Economic Co-operation and Development (August 1998) 'Employment Outlook: Towards and Employment Centred Social Policy.' The OECD Observer, No. 213, Paris.
42 University of Vermont (1999) The Effects of Increases in the Minimum Wage, Internet: www.uvm.edu/~vlrs/doc/ min_wage.htm. Kuttner, R. (July 21, 1997) 'So Much for the Minimum-Wage