Romania: Government re-introduces cap on child-rearing allowance
In order to encourage the birth rate to rise in Romania, the government had abolished the ceiling on the child-rearing allowance. However, recently, in order to combat unfairness and align with European models, the government has recently moved to re-introduce the cap.
Abolition of cap on child-rearing allowance
The birth rate in Romania reached an historic low in 2016, falling even below the rate recorded during the Second World War. In August 2016, the government, in order to encourage career women to take time off work to give birth and to raise their children, removed the ceiling for the child-raising allowance (PDF), which had been about RON 3,500 (€752 as at 23 November 2017).
Under the same law, the eligibility period (the time a parent has worked) for granting the allowance changed from being the previous 12 months, to a total of 12 months in the last two years before the child’s birth. A parent who satisfied this requirement was now entitled to get not less than 85% of their average monthly income to stay at home with the new baby for two years (or three years in the case of a disabled child or twins).
In addition, the level of the allowance increased by 85% of the minimum wage for each child born as a twin, triplet or other multiple pregnancy, starting with the second child from such a birth. The aim of these measures is to gradually lead to an increase in the birth rate. There was a reported increase in the number of beneficiaries, the amount of the allowance and of the budget expenditure. Another major change is that today, unlike the communist period when most children were born in rural areas, birth rates are highest in large cities where there is a higher proportion of career women with higher salaries.
At the same time, there was an increased error-level in the amount of income declared (upon which the allowance is calculated). The abolition of the cap led to cases in which some people received very high allowances leading to unfairness and possible illegalities.
In March 2017, there were almost 160,000 people nationally claiming the allowance:
- 108,438 (68.73%) were receiving less than RON 1,233 (€265);
- 45,208 (28.65%) were receiving between RON 1,233 and RON 5,000 (€1,073);
- 3,504 (2.22%) were receiving between RON 5,000 and RON 10,000 (€2,146);
- 623 (0.39%) were receiving more than RON 10,000.
The overall monthly cost of the allowances ranged from just under RON 10 million (€2.15 million) for those receiving more than RON 10,000 per month to almost RON 130 million (€28 million) for those receiving less than RON 1,233 – 54% of the monthly total cost of allowances.
Amendments to legislation
This led to the government having to consider amending its legislation on the amount of the child-raising allowance. There were several reasons for this.
- It needed to correct existing inequities and eliminate possible illegalities – as the highest yearly allowances mounted to RON 150,000 (€32,218).
- The funds allocated in 2017 – RON 3.4 billion (€730 million) – to pay for the measure were not enough.
- It wanted to get closer to the European models.
On 4 August 2017, the government passed Emergency Ordinance 55/2017, re-introducing a cap on the monthly child-raising allowance (PDF). The cap, set at 8,500 RON (€1,825) is the maximum granted in the EU, and came into effect at the beginning of September.
The new law is expected to affect about 1,100 of the total number of 160,807 claimants recorded in August 2017. It was not well received by the general public and by parents’ associations who criticised the lack of certainty in the legal framework, which has been changed 14 times over the last 20 years. They also warned that the change could have a negative impact on an already declining birth rate. In addition, they emphasised that – according to statistics – an increase in the child-raising allowance was the only kind of birth support that has had positive effects in Romania over the past 27 years.
At the time the allowance was capped, there had been a decrease in the birth rate. When the new cap was debated in Parliament, opposition parties questioned the degree to which it respects the contributory principle. Nevertheless, the Senate approved the ordinance on 26 September.