New government to amend childcare benefit scheme

In January 2007, the new coalition government agreed to amend the existing childcare benefit scheme, which – in its present form – does not entirely provide for equal opportunities for men and women in accessing the labour market. The government thus decided to render the scheme more flexible in terms of benefit payments and the period of benefit eligibility. Moreover, it plans to increase the current limit of €14,600 a year on additional earnings. However, the Chamber of Labour considers the government’s planned amendment of the childcare benefit scheme to be inadequate.

In 2001, the current childcare benefit scheme (Kinderbetreuungsgeld) was introduced by the previous conservative-populist coalition government in order to offer parents of young children aged up to three years greater freedom of choice in relation to childcare options. The scheme grants payments to all parents with childcare obligations, regardless of their employment situation, and this particularly favours young parents with no 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 is thus not related to an employment relationship. At present, the scheme provides payments of about €14.50 a day and for a period of up to 30 months, or up to 36 months if both parents alternately assume childcare obligations. Moreover, in order to promote the labour market participation of women with young children and thus to facilitate a better work–life balance, the scheme allows beneficiaries to earn an additional income of up to a maximum of €14,600 annually (AT0304201N).

Effectiveness of scheme

Since its introduction, a number of research studies have looked at the effects of Austria’s childcare benefit scheme. The findings of all these studies question the scheme’s effectiveness in terms of improved opportunities for women to participate in the labour market following a period of parental leave (AT0404203F). The most recent research in this field was drawn up by the Austrian social research institute L&R Sozialforschung on behalf of the Chamber of Labour (Arbeiterkammer, AK) in 2006. The study found that, following parental leave, women are confronted with significant income losses when they resume work. This is mainly due to the fact that the extended period of benefit eligibility under the current scheme acts as an incentive for many mothers on parental leave to stay at home for a longer period of time. However, such a delay in the return to employment often entails a major loss of up-to-date knowledge and skills, with the result that many women are subsequently under-classified in a company’s grading system and are thus offered only part-time jobs.

Draft amendment

In order to curb these negative employment effects for women, the new coalition government of the Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ) and the conservative People’s Party (Österreichische Volkspartei, ÖVP), which took office on 11 January 2007, presented a joint proposal to amend the childcare benefit scheme. This draft amendment provides for increased flexibility in terms of payment and the period of benefit eligibility. Accordingly, parents would be entitled to opt for a modified childcare benefit scheme, providing for higher payments of €800 a month (instead of about €436 a month at present) for a shorter period of 15 months, or up to 18 months if both parents want to engage in childcare tasks. This alternative to the current scheme is designed to encourage women to resume work earlier following a period of parental leave and thus to avert the negative employment effects of long-term labour market absence. In addition, the government plans to increase the maximum amount of additional earnings on top of the childcare benefit entitlement from €14,600 to €16,200 a year. This measure should encourage better-paid women to re-enter the labour market sooner after their child’s birth, even if only on a part-time basis.

While the ÖVP has praised the draft amendment as a cost-neutral, additional option for parents, the SPÖ has emphasised the forthcoming improvements in terms of labour market access for mothers of young children.

Chamber of Labour’s reaction

AK, however, considers the planned scheme’s modification to be inadequate and demands a more far-reaching flexibilisation of the benefit scheme. In their opinion, parents should also be given the opportunity to opt for a scheme which will support them until a child’s second birthday. The threshold of 24 months is of vital importance since it marks the end of formal parental leave and thus of the statutory protection against dismissal afforded to employees taking such leave. Moreover, according to AK, due to a dramatic shortfall in the availability of childcare places for children under the age of two years, especially in the country’s rural regions, a number of parents will have no possibility to opt for the modified 15-month or 18-month scheme. Furthermore, AK believes that the ceiling on additional earnings should be completely abolished in the case of part-time work. This could act as an incentive for better-paid men to assume childcare duties. At present, beneficiaries who do not observe the limit on additional earnings risk having to reimburse the current year’s total benefits. This is one of the main reasons why only about 3.5% of all fathers take parental leave at present.

So far, it seems unlikely that the new coalition government will adopt AK’s proposals.

Georg Adam, Institute of Industrial Sociology, University of Vienna

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

Eurofound welcomes feedback and updates on this regulation

Add new comment