Non-care household services are usually defined as object-centred activities that support daily living, and which are mainly carried out in the home of a customer, sometimes also referred to as indirect care.1 However, exact definitions vary across countries as they are typically tied to specific policies and instruments in this sector. Often lumped together with care‑related work under the umbrella Personal and Household Services (PHS), these activities aim to improve the well-being of households and/or support its maintenance. The main activities captured by the non-care household services label range from cleaning and ironing to maintenance and smaller repair work as well as gardening. Yet data sources and policy instruments do not always distinguish between care‑ and non-care types of service provision and providers may also deliver both types of services (Baga et al., 2020[3]).
There are different work arrangements in the non-care household service sector. Formal work arrangements concern either a “bipartite” relationship, i.e. direct employment by households, or “tripartite” relationships, where intermediaries, such as commercial or non-commercial service providers, employ the workers involved. In some cases the boundaries between the two are blurry, e.g. in case of platform work or micro‑entrepreneurship.
However, a substantial part of household services is estimated to be provided informally. In contrast to formal employees, informal workers do not have access to social benefits, health and safety protection and/or employment-related training. The nature of the work arrangements in the sector thereby co-determines working conditions and service quality (Martin Ramos and Ruiz, 2020[4]).
High labour cost of formal workers is seen as one of the main reasons why many consumers buy household services informally. By reducing the cost of household services through tax credits or social vouchers, some OECD countries have tried to encourage the formalisation of household service provision, thereby not only moving household service workers out of the shadow economy but also freeing up time for mostly women to participate in the labour market rather than undertaking unpaid housework. In turn, this would ensure a minimum standard of working conditions in the sector, and could potentially be fiscally neutral, as increased tax revenue from increased formal labour force participation.
The analysis focuses on experiences with non-care household service policies in five countries that have had reasonably comprehensive measures in this area since the early 2000s – Belgium, Finland, France, Germany and Sweden; in addition, the report also includes headline information on measures in other OECD countries. The report first considers the size of employment in the non-care household services sector and then provides estimates on the economic value of unpaid housework in OECD households. The second part of the analysis considers the different measures in place and discusses these in terms of operational aspects such as nature of provision, services covered, value of support, ease of access, and the groups who use support. The third section gauges the effect of the policies in terms of consumption effects and groups of users, employment effects and the overall cost of the programme in view of earn-back effects.
The main findings from this report include:
Employment in the formal non-care household services sector ranges from 0.1% to 2.9% for countries for which data are available, more than 90% of which are women. Estimates on the size of the informal workforce in this sector are not fully comparable but suggest that in some countries the informal sector covers up to 90% of all non-care household service work.
Women spend more than twice the time per day in unpaid non-care housework than men. Policy initiatives to reduce engaging in unpaid housework and free up (more) time for labour force participation will therefore benefit women in their labour market opportunities most.
The value of time spent on unpaid work on basis of the replacement cost approach is estimated to be around 15% of GDP, roughly equal to the average value added by the manufacturing sector in the OECD, but this increases to 27% of GDP when the opportunity costs of workers in unpaid work at home are accounted for. Women create the majority of this economic value.
Policy measures to stimulate the formalisation of non-care household services include tax credits and (social) vouchers, which often also extend to care‑related services in the household. Tax credits are considered as measures of favourable tax treatment. Social vouchers are transparent, easy to use, and can benefit all consumers across the income distribution; they also allow for simple targeting of specific groups if desired. Finland, Germany and Sweden have tax credits while the Belgian and French systems are a mix of the two, with the Belgian system being the only one with an emphasis on vouchers and covering exclusively non-care services.
In terms of timely access to support, the Swedish tax credit system and the Belgian social voucher grant financial support to users at the moment of service use, which is an important feature for low-income users. By contrast, in France, Finland and Germany users only receive financial support towards the use of household services at the time of settling the next annual tax return, meaning that the up-front cost for consumers is substantially higher.
To enhance the full use of service support it is important to keep administrative systems as simple as possible. Social vouchers, such as the Belgian one, which can be exchanged against service work, or the French declarative CESU system which simplifies the hiring of domestic workers, can greatly reduce the administrative burden related to household service work.
The conditions of employment are generally more favourable in predominantly tripartite systems (services providers, employees, and households), such as in Belgium, Finland and Sweden. In these cases, intermediaries allow for better working conditions, collective bargaining and greater health and safety provisions. Direct employment relationships between the employing household and the worker are more common in France and Germany, but expose household service workers to greater risks of precarious employment.
The policy instruments in the household service sector are used by close to 25% of households in Belgium and between 14 and 20% of households in Finland, France and Sweden. Perhaps surprisingly, the scope of services covered is not necessarily predictive of the extent to which support policies such as tax-credits or social vouchers are being used: the ability to set competitive market prices is a more important factor.
Households of moderate‑ to high incomes are the main beneficiaries of the policy instruments in the household service sector. The absence of sufficient taxable income and high gross service prices are major access barriers for lower-income households. However, it is questionable whether making tax credits available to the lowest income earners can lead to sizeable consumption effects among these groups. For example, after France generalised the “refundability” of their household service tax credits, the number of household service consumers did not markedly increase. Instead, the overall volume of fiscal reimbursement for low- to moderate‑income earners that already claimed tax credits increased.
Granting tax credits ”at source” makes the fee reductions more visible and reduces confusion, which can increase consumption particularly among low-income households who would find it harder to pay the full service price upfront. For example, since Sweden grants its household service tax credit at source, the number of consuming households has strongly increased.
Social vouchers and tax credits can be linked to clear reductions in informality, particularly in countries with generous fiscal support, such as France and Sweden. However, resulting from differences in price elasticities, even relatively comparable systems, like in Finland and Sweden, can show large differences in the effectiveness of reducing informality in the household service sector. Less generous systems, like in Germany, have not seen particularly noticeable shifts to declared household service employment.
Direct employment as prevalent in France and Germany involves households employing domestic service workers through declarative systems. However, by doing so, many households unwittingly take on employer responsibilities which could result in significant costs, especially if client households make mistakes in legal work contracts and procedures.
In some countries, social vouchers and tax credits have led to sizeable employment in and outside of the non-care household service sector. As such, the low-skilled and unemployed workers, predominantly women, face increased employment opportunities, while higher-skilled women are able to increase their labour force participation.
However, the long-established Belgian and Swedish systems are also very attractive to workers outside the national labour market. As such, they involve the risk that European labour migrants crowd out more vulnerable groups by entering the system. For example, foreign workers, predominantly of EU origin, make up more than two‑thirds of all service voucher workers in the Belgian capital Brussels, despite high unemployment and a large labour reserve in the region. As a result, the intended objectives of integrating refugees and other low-skilled and vulnerable workers into the regular labour market cannot be achieved.
Despite the high costs often associated with policy interventions in the non-care household service market, social vouchers and tax credits exhibit sizeable earn-back effects through reduced expenditure on unemployment benefits as well as increased public revenue. The net cost of the policy intervention is assessed to be moderate at maximum, for example in Sweden, or close to budget neutral, such as in Belgium and France, however, the underlying assumptions on net job creation may well be optimistic.