Calls for reform of childcare benefit scheme

In 2001, the Austrian government introduced a general childcare benefit scheme, providing for uniform payments for up to 36 months for all parents with childcare obligations, regardless of their employment situation. A study commissioned from the WIFO research institute by the Chamber of Labour (AK) and published in March 2004 finds that this scheme tends to consolidate gender-related inequality in labour market access, by encouraging mothers of small children to stay at home longer. AK and the trade unions are thus demanding a reform of the scheme and other measures to improve women’s employability, though the government questions the WIFO study’s findings.

In March 2003, the Chamber of Labour (Arbeiterkammer, AK) presented a study of the effects of Austria’s childcare benefit scheme (Kinderbetreuungsgeld), conducted by Hedwig Lutz of the Austrian Institute of Economic Research (Österreichisches Institut für Wirtschaftsforschung, WIFO). The study’s findings question the scheme’s effectiveness in terms of women’s chances to participate in the labour market after taking parental leave (AT0304201N). One year later, at the end of March 2004, AK presented a more differentiated, updated follow-up study on the same issue, drawn up by the same author on behalf of AK ('Wiedereinstieg und Beschäftigung von Frauen mit Kleinkindern'). In general, this updated research, which is based on more reliable empirical data than the 'pioneer' study, corroborates the results of the latter, with slight modifications in detail.

Childcare benefit scheme

The present childcare benefit scheme was introduced by the coalition government of the conservative People’s Party (Österreichische Volkspartei, ÖVP) and the populist Freedom Party (Freiheitliche Partei Österreichs, FPÖ) in 2001. According to the government, it is designed to offer parents greater freedom of choice in childcare matters, since it is entirely left to them to decide how to use the benefit: either to buy external childcare facilities (eg day-care provision) or to use the money for other (family-related) purposes. Thus, the government argues, (potential) parents, and in particular women, are encouraged to fulfil their labour market aspirations if they want to. It is important to note that the childcare benefit scheme applies to all parents with childcare commitments, regardless of their employment status, which, in particular, favours young parents without a long record of income. This is because the childcare benefit scheme - in contrast to the previous system of parental leave allowance (Karenzgeld) - is not a social insurance benefit and thus not related to an employment relationship.

The payments provided by the childcare benefit scheme are slightly higher than under the previous scheme, at present amounting to about EUR 15 per day. Furthermore, they are paid out for a longer period - up to 30 or (if both parents assume childcare obligations alternately) 36 months after the child’s birth. Moreover, the scheme allows beneficiaries to earn up to an additional EUR 14,600 per year, with the aim of promoting employment among parents (in particular of mothers of small children). The new scheme fully covers all families with children born since 1 January 2002. Moreover, it provides higher payments as well as longer benefit periods for those parents covered by the 'old' system of parental leave allowance, with children born between 1 July 2000 and 31 December 2001 (ie a transition period).

Recent WIFO study’s findings

The 2004 WIFO study (by and large, in line with the 2003 study) questions the positive effects of the childcare benefit scheme on women’s opportunities for reconciling work and family commitments.

A first major finding which emerges from the study is that the average date of women’s return to employment after parental leave has been significantly delayed under the current scheme. Within the period from a child’s birth to the 33rd month of their life, the average duration of employment among women resuming work after parental leave has dropped from seven months (under the 'old' scheme) to 4.9 months (under the 'new' scheme). This, it is stated, is because the extended period of benefit eligibility acts as an incentive for many mothers to stay at home for a longer time.

Another finding is that the proportion of women returning to the labour market before their children reach the age of 24 months has fallen by 40% during the transition from the 'old' to the 'new' scheme. This threshold of 24 months is of major importance since it marks the end of formal parental leave, and thus of the statutory protection against dismissal afforded to employees taking such leave. This implies that for many women the longer period of payment seems to be more important than the risk of losing any protection in terms of labour law. However, other studies have suggested that about half of the women concerned do not even know that their protection against dismissal ends before the whole period of receipt of childcare benefit has expired. As a result of this, the author of the WIFO report states, the employment rate of mothers when their children reach the age of 33 months has dropped by 7%, whereas the unemployment rate has increased by 39%.

With respect to income levels, the new scheme has, perhaps surprisingly, had most effect on better-earning women. The proportion of mothers earning more than EUR 2,000 per month before parental leave who failed to return to the labour market after 33 months of motherhood has increased by 35%. Apparently, higher-skilled women with higher pay tend to be more vulnerable in terms of labour market access after parental leave, owing to supposed major de-skilling effects resulting from longer periods of labour market absence, the report states. These findings indicate that unequal treatment of women in working life will be perpetuated unless the childcare benefit scheme's eligibility periods and conditions on the one hand, and labour law regulations on the other, are matched, the author concludes.

Demands of organised labour

At a joint press conference held on 30 March 2004, the president of AK, Herbert Tumpel, and the chair of the women’s organisation of the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB), Renate Csörgit, put forward - referring to the WIFO research findings - a set of demands, in particular for substantial amendments to the current childcare benefit scheme, as follows:

  • parents who want to exercise their right to return to their job under the terms of the parental leave regulations (ie within 24 months after the child’s birth) should be entitled to opt for a modified childcare benefit scheme, providing for higher payments of EUR 555 per month for a shorter period of 24 months, adding up to the same amount over the whole period of receipt as the 'normal' scheme;
  • employers should be obliged to inform employees taking parental leave - in a timely fashion and in writing - about when the latter have to re-enter employment in order not to lose their protection against dismissal. If the employer fails to inform the employee, any dismissal on grounds of the latter's failure to resume work in time should be null and void. The new regulations on this point should be based on the example of the relevant provisions of the current collective agreement for the metalworking and mining industry; and
  • in order to encourage better-paid women to re-enter the labour market sooner after their child’s birth, the ceiling of EUR 14,600 a year on additional earnings on top of childcare benefit entitlement should be abolished, at least for employees switching to part-time work.


Austria has always had high levels of statutory family-related cash benefits. This has helped families reduce the risk of serious hardship. However, high levels of direct benefits for families are an appropriate means of consolidating the traditional, unequal roles of the sexes rather than advancing structural changes. Similarly, the introduction of the childcare benefit scheme has promoted women staying at home with the children for a longer period rather than helping them resume their work. A 2003 Organisation for Economic Cooperation and Development (OECD) study (in the 'Bosses and Babies' series) found that Austria’s expenditure on financing the childcare benefit scheme is six times higher than that on running public kindergartens. Childcare places for children aged under three are particularly scarce in Austria: according to the OECD study, there is a shortfall of some 90,000 of such places. This means that - in particular, in the rural regions of the country - for many women, having children and pursuing a career are mutually exclusive activities. However, the ÖVP-FPÖ government has denied that there is an imperative necessity to provide for more childcare facilities; furthermore, it has questioned any negative employment effects of the childcare benefit scheme as claimed by the WIFO studies. (Georg Adam, University of Vienna)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment