Collectively agreed childcare provision under pressure

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At the end of 2002, three-quarters of Dutch employees were covered by collective agreements containing childcare arrangements. However, in 2003, in anticipation of new childcare provision legislation due to come into force in 2005, employers are cutting back the proportion of childcare costs that they meet under such agreements. At the same time, the cost of childcare is increasing as market forces take hold in the childcare sector and labour costs rise because of the abolition of state-subsidised employment and wage increases for regular staff.

The social partners treat childcare provision for employees as a 'secondary' employment condition (or 'fringe benefit') in collective bargaining terms. Since 1990, there has been a marked increase in the number of collective agreements containing provisions on childcare. In 2002, 58% of collective agreements, covering three-quarters of employees, provided for childcare arrangements. Larger-scale collective agreements are more likely to contain provisions on childcare than smaller ones - 85% compared with 40%. Since 1990, when 21% of the larger collective agreements contained arrangements on childcare, the figure has increased fourfold, according to figures from the Labour Inspectorate (Arbeidsinspectie) (Kinderopvangafspraken in cao's[Childcare provisions in collective agreements], 2003). Company size is also a factor in the likelihood of employers offering childcare facilities to employees - under 20% of companies with fewer than 10 employees had any such arrangements in place in 2002, though 25% of them intended to include such provisions in a collective agreement in future.

Despite the increasing number of collectively agreed provisions on childcare, many employers are now reducing their financial contribution to employee childcare towards a sixth of the total costs, in anticipation of new legislation on the issue (see below). Such cuts are currently being negotiated in collective bargaining. For example, the 2003 collective agreement for the light engineering industry, covering 380,000 employees, reduces the employers’ contribution to childcare costs to this one-sixth level.

Single childcare scheme

There are currently three different types of childcare available to working parents - private, state-subsidised and 'business places' purchased by companies. Private childcare is paid for entirely by the parents themselves, who can then claim part of the money back in the form of a tax rebate. Subsidised childcare is mainly paid for by the municipalities. Under the third variant, whereby companies buy in business places, employees contribute part of the costs from their wages.

A recently passed new Basic Childcare Provision Act (Wet Basisvoorziening Kinderopvang, BWK) will group the different types of childcare under a single scheme (NL0006193N). Parents will always pay the childcare bill and, through the tax system, they will then receive income-linked monthly compensation worth roughly a third of the costs. The Act assumes that parents will receive further compensation of a third of the costs from their employers. However, employers will not be obliged to pay this share and, if they fail to do so, the state will provide a second income-linked contribution. The new Act was originally due to come into effect in 2004, but this was postponed for a year in spring 2003 because the costs for government would be far higher than originally estimated. In 2004, there would have been a funding shortfall of EUR 400 million, with the government's share of the financing EUR 260 million greater than estimated and the predicted employers’ contribution EUR 132 million below the figures previously forecast. While the funding must be sorted out for the Act to take force in 2005, the government has no intention of releasing further resources. The Minister of Social Affairs, Aart Jan de Geus, has requested that the social partners include childcare provisions in more collective agreements.

As mentioned above, the financing structure outlined in the new childcare provision Act assumes that employers will contribute one third of the childcare costs incurred by their employees. Employers assume that both a child’s parents will be earning a salary and – in anticipation of the new Act – many have therefore started compensating a sixth of the childcare costs. If one of the parents is not covered by a collective agreement at all or is covered by a collective agreement that does not include childcare provisions, the parents will be entitled to partial compensation from the state in future. However, this compensation is not yet available since implementation of the Act has been postponed. In mid-2003, childcare organisations announced that there had been a decrease in the number of registrations at childcare centres. While waiting lists for childcare places still existed in 2002, they have now practically disappeared in large cities (the number of childcare places has risen dramatically over the past five years to a figure of 166,000 in December 2002). According to the most important childcare organisation, diminishing interest stems from the economic recession and the fact that implementation of the new childcare provision Act has been postponed for a year, while employers are behaving as if it has already been introduced. At most, many employers now cover a sixth of the costs, forcing parents to approach the second employer, where applicable, and, failing any results from that quarter, they have to increase the level of their own contribution.

Childcare costs rising

While dwindling demand for childcare places is tied in with economic recession and the stance adopted by employers, it is also the case that childcare has become more expensive over the past few years, with price increases of between 10% and 15% not unusual. Such sharp increases have come about due to the fact that the childcare sector has been compelled to keep pace with the market over the past few years. Childcare providers have to compete for premises and municipalities assess them on the basis of their proposals. This forces them to calculate their costs accurately. In turn, this is reflected in the price of childcare as the sector is transformed from a subsidised one into a private or market sector. Older, subsidised childcare centres have yet to adjust to operating in line with the market. According to the results of a Price Waterhouse Coopers study published in summer 2003, it appears that 30% of the childcare organisations are loss-making, while half just break even.

The price of childcare is being pushed up even further because the sector is also having to convert state-subsidised jobs into 'regular' jobs, as the former are being phased out by the government (NL0212101N). The social partners reached agreement in this area in spring 2003, and 10,000 subsidised jobs are to be converted into normal jobs. This figure represents 20% of the total number of subsidised jobs in the childcare sector in large municipalities such as Utrecht, Amsterdam or The Hague. The large amount of subsidised employment in the childcare sector underlines that the price of childcare has at least in part been determined by the lower wage costs, which the government is now abolishing. A final source of pressure on childcare costs is the wage demands of regular staff. In spring 2003, regular employees in the sector took industrial action (as they had in 2001-2 - NL0201177N) to achieve a new collective agreement with advantageous pay terms. The deal provides for a 5% pay increase - double the figure recommended centrally by the social partners for 2003 (NL0212101N) - while group leaders who have reached the top of their pay scales may receive a total 8% increase from 1 January 2004.

Commentary

There seems little doubt that childcare is here to stay as a 'fringe benefit' in collective agreements. However, the details of how the cost will be shared between the government, employees and employers remain complex, even once the Basic Childcare Provision Act has been implemented. Given the Dutch system of industrial relations, a tripartite financing structure would be the most obvious, but the voluntary nature of the employers’ contribution under the new Act would seem to be the weak link in the chain, with working parents most at risk of losing out. The economic recession clarifies this: employers are already cutting back their contribution, while the new Act has not even begun to take effect. Trade union negotiators seem satisfied with this outcome of bargaining, and such equality-related items appear to have served as 'small change' in the negotiations, as has occurred before. The childcare provision sector itself is also vulnerable. It has not been in existence that long and has yet truly to take shape, while financing issues are changing: childcare institutions now have to operate as companies, and think in terms of 'unit product'. At the same time, the childcare sector functions in part on the basis of jobs subsidised by the government, which are soon to be scrapped and converted by the sector into regular positions. This will lead to repricing of childcare provision and employees with younger children – especially the least well paid in this group – will be the first to be confronted with the consequences. (Marianne Grünell, HSI)