stroke copie

Bringing Household Services Out of the Shadows: Formalising Non-Care Work in and Around the House

household services

3 Questions to Jonas Fluchtmann, Economist in the Social Policy Division at the OECD Directorate for Employment, Labour and Social Affairs (ELS), co-writer of the report

What is the main topic the report tries to address?

In our report, we examine the development of policies in the non-care household service sector, which provides a wide range of services, such as cleaning, cooking and gardening. This sector has become very important in helping families in combining their careers with their housework burden and therefore increasing their work-life balance.

However, these services are often provided “in the shadows” on an informal basis, so households buy services from unregistered workers to evade taxes and contributions. This makes the work substantially cheaper, while workers also take more of their pay home – though at the cost of much worse working conditions and social protection. Households also face a lower quality of service, as there is no service in case of sickness and no training of the workers – besides the very real risk of facing fines.

We therefore aim to identify what “formalisation”-policies work best in reducing shadow work, improving working conditions and service quality, and increasing overall family well-being.

The report presents non-care household services policies in Belgium, Finland, France, Germany and Sweden. In that perspective, which measures have you identified as most commonly used?

Across these countries, tax credits are the most common approach, used in Finland, France, Germany and Sweden. They reduce prices by offering different degrees of favourable tax treatment to the consumer of such services, which can be very substantial and reduce the service price by up to 50%.

Another approach is the use of social vouchers that can be exchanged for service work. They can be bought at a reduced price by households, as in Belgium, or are emitted by employers to increase the work-life balance of employees, as in France.

Does the report highlight some key takeaways for the success of such measures?

The most important aspect for the success of such measures is to make them easy to use and affordable. For example, social vouchers are, by design, very simple to use. In Belgium, they subsidise up to 70% of the regular service price. For tax credits it is important to not just make them available through the yearly filing of taxes but to apply them right when services are bought, so household are not out of pocket. This is done in Sweden and since this year also in France.

A second important factor is to incentivise work arrangements that offer the best working conditions. For example, the French tax credit is available for households that directly employ service workers, but this arrangement often entails inadequate health and safety conditions and no access to collective bargaining. Sweden and Belgium, on the other hand, make their approaches conditional on buying services from service provider organisations. This has led to better working conditions for the service workers.

Overall, these measures can be quite expensive for the state, but they can be effective in reducing informality and improving the work-life balance of household, all while increasing tax revenue and reducing spending on unemployment benefits.

Read the report here

To find out more, join the ESSC Workshop Session C-13. Promotion of Personal and Household Services in Germany and France on 9 June. More information can be found here.