Bringing Household Services Out of the Shadows

2. Non-care household services in the OECD

2.1. Formal employment

Formal sector workers are either directly employed by the households for whom they work, or they are employed by commercial or non-profit organisations who deliver household services as per contractual agreement. However, measuring employment levels in the non-care household service sector is not straightforward. Definitions of non-care household services often differ across countries and common statistical groupings for economic activities and occupations are either too broad or too narrow to adequately represent the true size of the labour force engaging in non-care household service employment.

This report follows the approach of the PHS Industry Monitor of the European Federation for Services to Individuals (EFSI), which is based on occupational classifications commonly used in Labour Force Surveys that, while imperfect, appears more accurate than an approach based on economic activities (EFSI, 2018[5]).1 The approach makes use of the detailed 4‑digit code International Standard Classification of Occupations (ISCO) referring to domestic cleaners and helpers (code 9111).2 In cases where sufficient data is not available, the broader group of domestic, hotel, and office cleaners and helpers (code 911) can be used, while subtracting the number of non-domestic cleaners, as provided by the European Cleaning and Facility Services Industry (EFCI, 2020[6]). For some non-EU countries, national sources can be used (see the notes to Figure 2.1).

Figure 2.1 shows the share of registered non-care household service employees among all registered employment. On average, 1.3% of all registered employees in OECD countries are formally employed as non-care household service workers. There are wide differences across countries, ranging from 2.5% in Spain, Portugal and France, to as little as 0.1% of registered employees in Poland and the Czech Republic. While a break-down by sex is not available on the country level, about 93% of all registered employees in the European Union are female (see also EFSI (2018[5])).

However, the personal household service sector is regarded as one of the economic sectors where services are provided by workers that do not register all or a part of their employment activities with the responsible fiscal authorities and does not appear in official statistics (EFSI, 2018[5]; European Commission, 2018[7]). For example, the Cologne Institute for Economic Research estimates that 8.1% of all German households employ a household service provider, yet almost nine out ten are employed informally and thus do not appear in Labour Force Statistics (Enste, 2019[8]). Given this, Figure 2.1 is likely to provide only a very partial picture of the size of employment in the sector.

One of the reasons for the prevalence of undeclared work in the sector concerns the relatively high tax burden on labour cost for the low-paid workers in the sector. Customer households may deem formal services as too expensive and demand informal services to avoid paying the tax burden as reflected in the price of the service. For example, 90% of representative German households reported they use services in the informal economy because they are relatively cheap, and 68% of responding households in Germany stated they would not consume household services through the formal economy due to the high labour costs (Feld and Schneider, 2010[9]).

Figure 2.1. Registered employment in the non-care household service sector (ISCO)

Share of registered “Domestic Cleaners and Helpers” among total registered employment, 2018 or latest available year

Note: Data refer to exclusively to registered workers. As unregistered employment is particularly common in PHS sector, the statistics may substantively underestimate the true extent of employment (see below). For EU countries – and where available – data refer to worker employed in category 9111 of the International Standard Classification of Occupations (ISCO) statistical nomenclature (Domestic Cleaners and Helpers). For non- EU countries, other related groups are presented and may slightly differ. * For these countries, no data on category 9111 was available. Instead, these numbers represent category 911 (Domestic, Hotel, and Office Cleaners and Helpers) subtracted by the number of cleaners in non-domestic environments, as provided by the European Cleaning and Facility Services Industry (EFCI). ** For Australia, data refer to cleaners and laundry workers (code 811) in the Australian and New Zealand Standard Classification of Occupations (ANZSCO) who are also employed by private households (code 9601) in the Australian and New Zealand Standard Industrial Classification (ANZSIC) in 2019. *** For Sweden, the data refer to registered employment in the RUT sector as reported by the Swedish Tax Authorities and thus covers care and non-care work. **** For the United States, data refer to house cleaners as per definition of the Economic Policy Institute (EPI). That is, workers who are simultaneously in the Census occupation group “maids and housekeeping cleaners” (code 4230) and the Census industry group “private household” (code 9290) in 2019.

Source: OECD calculations based on data from the European Union Labour Force Survey, the Australian Labour Force Survey, the European Cleaning and Facility Services Industry, the Economic Policy Institute, and Skatteverket.

The considerable difference between the effective net wage for low paid employees (less than 50% of countries’ average earnings) and the total labour costs to the employer curtails the demand for employment. Figure 2.2 shows that the tax wedge – a summary measure of the overall tax burden on workers, averages about 28% for low-income workers across the OECD (OECD, 2020[10]). In Chile, Israel, Mexico and New Zealand the tax wedge is relatively low, but it exceeds 40% in Germany and Hungary, which means that low paid workers typically take home only little over a half of the price employers or consumers pay on their labour (although specific national policies can substantively reduce the tax burden on some low paid workers, see below).3

The labour tax burden and the associated high price for service work is not the only driver of collaborative tax evasion by consumers and service providers. Doerr and Necker (forthcoming[11]), for example, suggest that informal services are easier to access as their use avoids the administrative efforts and costs associated with employing service workers.

Figure 2.2. Tax wedge on labour costs for low paid workers

Ratio between taxes paid by single and childless workers with 50% of avg. earnings and total labour costs for employer, 2019

Note: Tax wedge is defined as the ratio between the amount of taxes paid by an average single without children and the corresponding total labour cost for the employer. The average tax wedge measures the extent to which tax on labour income discourages employment. This indicator is measured in percentage of labour cost. Note that the tax wedge is commonly presented for single and childless workers.

Source: OECD Taxing Wages (2020).

2.2. Informal work

Informal, undeclared work involves workers (and their employers) who do not declare part of their earnings, or do not declare their earnings at all. In the absence of taxation of labour income, those engaged in informal and undeclared work will have higher take‑home pay than otherwise similar workers, but this comes at a price. Informal work is not covered by social protection arrangements in the area of health, unemployment and pensions.

Often, the undeclared work constitutes a de facto direct employment relationship between a household and an informal service provider. However, these arrangements usually operate in absence of formal employment contracts and outside of national regulatory frameworks (European Commission, 2015[12]). Furthermore, those who do not declare at all, such as illegal immigrants or status holders without work-permit, are exposed to substantial risks of exploitation and sub-standard working conditions. Then again, for many of the migrants, informal employment is frequently the only option of employment as official working permits are often out of reach. In the very short term, engaging in informal employment, or not declaring a limited part of earnings, may not hold involve much risk for workers. However, protracted work under informal and precarious employment conditions leads to an accumulation of disadvantage in the longer term (Ramos Martin and Ruiz, 2020[13]). On the other hand, employers of informal workers are also exposed to increased risk; particularly as such employment is considered illegal in many countries and may be subject to substantial penalties.

While obtaining detailed information on formal non-care household service provision is complicated, it is even more difficult to get a good overview of employment in the undeclared household service sector, as by its very nature these services are not recorded by national labour, tax or statistical agencies. One way of estimating the size of informal employment is to use ISCO data on occupations in conjunction with household expenditure data as in the Classification of Individual Consumption According to Purpose (COICOP). Among other things, these data measure expenses on non-care household services in category 05.6.2 (“Domestic services and household services”) and, importantly, regardless of whether these services are provided by declared or undeclared workers. Making assumptions on working hours and price levels, Lebrun (2021[14]) uses this data to estimate the share of undeclared work in non-care household services, by subtracting employment levels based ISCO data from the total employment levels based on COICOP data.

Based on this measurement approach, Figure 2.3 suggests that undeclared work is widespread across Europe: on average European countries, about 57% non-care housework appears to be provided informally. For some countries, such as Belgium with 13% and France with 35%, the extent of undeclared work in the non-care household service sector appears comparatively low, while in for example, Germany and Finland more 75% of work in the sector appears to be informal. Lebrun (2021[14]) notes that these estimates fall into the vicinity of his separate estimates based on Eurobarometer responses, with the exception of a few countries, such as Belgium.

These data have to be interpreted with caution, as they occasionally do not align with other estimates in the literature. For some countries, these estimates seem to be corroborated by other sources. For France, Crédoc (2017[15]) estimated that about 20% of all household service work was undeclared, while Enste (2019[8]) put the share of undeclared work among non-care household services in Germany at almost 90%.

Figure 2.3. Estimated undeclared employment in the non-care household service sector (COICOP)

Share of undeclared work in the non-care household sector based on ISCO data on employment in occupations and non-care household service expenses in the COICOP, 2015

Note: Based on assumptions on working hours and price levels, this approach subtracts ISCO employment levels (code 9 111) from COICOP household expenditure data for non-care household services (code 05.6.2).

Source: Lebrun (2021[14]).

For non-European countries, available estimates often rely on household surveys to assess the population engaging in informal work, rather than the share of informal work among all non-care household service provision. For Canada, for example, 9.2% of respondents to the nationally representative Canadian Survey of Consumer Expectations (CSCE) of the Bank of Canada reported they engaged in informal housecleaning activities between the second and third quarter of 2018 (Kostyshyna and Luu, 2019[16]). For the United States, the nationally representative Survey of Enterprising and Informal Work Activities (EIWA) of the Federal Reserve reported an incidence rate of informal work of about 36% in the general population over the six months prior to respondents completing the survey in 2015. Of these, a share of approximately 27% engaged in informal property maintenance services, such as cleaning, painting, house sitting, yard work and landscaping (Robles and McGee, 2016[17]).4 The vast majority of domestic workers do not have any sort of employment contract: Burnham and Theodore (2012[18]) suggested it concerned about 90% of domestic workers in metropolitan areas of the United States.

2.3. Platform work

Digital platforms have emerged in the intersection of households and service workers over recent years (Box 2.1). In order to facilitate matching by directly connecting demand and supply of services, these platforms have increasingly created online marketplaces in which workers offer and households buy services (Holts et al., 2019[19]). By providing standardised contracts and vetting potential employees, platforms typically ease the administrative burden for households. However, while digital platforms can improve the efficiency of the matching process, this often comes at the expense of reduced social protection for workers, resulting from common classification as self-employed workers. Also, with increased flexibility of work, owing to their employment status and the short time‑frame of most work arrangements (“gig jobs”), service providers often face income volatility, with remuneration frequently falling below minimum wages (Ad-PHS, 2020[20]).

Box 2.1. Regulating platform work

In recent years, the lack of adequate regulation of novel online platforms for service work has received increased attention from policy makers and the public alike. One issue is that even though platform workers share some characteristics with traditional employees, platforms often classify their service providers as self-employed or independent contractors.1 This can negatively affect the rights, benefits and labour protections available to platform workers. Platforms often insist that they are merely intermediaries that provide a matchmaking infrastructure. However, it is hard to argue that clients, who buy the services for very short durations, should be considered as legal employers.

In order to improve the conditions for platform workers, some countries have taken legislative action. Since 2017, Portugal grants platform workers with simplified and expedited court proceedings in order to challenge their employment status with the platform. In another case, California implemented the Assembly Bill 5 in January 2020, which put the burden of proof on whether or not a platform service provider is an independent contractor or not on the platform itself. However, with ballot initiative Proposition 22 – passed in November 2020, major ride‑sharing and delivery platforms won an exemption from this regulation, leading to a baseline classification as independent contractors for their drivers, although these platforms now have to grant minimum wages and better labour protections to workers.

Working conditions of platform workers can also come through collective bargaining. In Denmark, for example, a popular platform for household cleaning services entered a collective agreement with a major national trade union representing unskilled and vocationally trained workers in 2018. As a result, cleaners operating through this platform are entitled to sick pay, holiday allowances and pension contributions.

1. Platform workers sometimes can’t, for example, freely set their prices, they need to wear uniforms related to the platform and are unable to fully control their tasks. This bears strong resembles to traditional employer-employee relationships. See OECD (2019[21]) for a discussion on tests and criteria for determining employment status.

Source: Lane (2020[22]), Ad-PHS (2020[20])

Holts et al. (2019[19]) ran a number of surveys across Europe in recent years to measure the size of the platform economy. Digital platforms in the non-care household service sector connect households with local cleaners and include larger ones, such as Helpling and Freska, or smaller ones, like Batmaid and Moppi. Publicly run platforms also exist, such as the Haushaltsjob-Börse (household service job board) of the German Minijob-Zentrale, which connects households with marginal employees (mini-jobbers).

The estimates in Holts et al. (2019[19]) cover different years for different countries, and do not necessarily differentiate between non-care, care and other sectors. Despite not being fully comparable, the country estimates in Figure 2.4 show that a sizeable fraction of the working population provides household services at least once per week via digital platforms. For example, about 12% of the working population in the Czech Republic and Spain report to have offered their household service work on a digital platform, while this was less than 4% for Germany, the Netherlands and Sweden. However, much of the work on digital platforms is supplementary to regular earnings, while the share of full-time platform workers is nowhere above 12% of all platform workers (Holts et al., 2019[19]).

Regardless of the type of work arrangement, employment in the non-care household service sector was hit hard since the onset of the COVID‑19 pandemic in early 2020. Many provider organisations were shut-down during lockdowns and many of the jobs held before the pandemic were lost, while those that continued to operate often did so in unsafe and risky environments (Box 2.2).

Figure 2.4. Household service provision on digital platforms

Share of working population providing household service activities at least once per week via digital platforms

Note: The data was collected via surveys over different years, which may undermine comparability of the data across countries. Data was collected in 2019 for the Czech Republic, France, Slovenia and the United Kingdom; in 2018 for Estonia, Finland and Spain; in 2017 for Italy and Switzerland and in 2016 for Austria, Germany, the Netherlands and Sweden.

Source: Holts et al. (2019[19]).

Box 2.2. COVID‑19 and employment in the non-care household service sector

The COVID‑19 pandemic has severely affected the workforce worldwide, forcing many to work from home and others to lose their job. The service sector was hit hard as movement was restricted and non-essential businesses were closed. Of the household service organizations in Europe, about a half experienced at least a partial shutdown. At the same time, many household service workers were lacking the same employment protection that was granted to other groups of workers (Ad-PHS, 2020[23]).

Household service workers were often at the risk of job-loss during the pandemic lockdowns, though the impact of the pandemic seems to vary across countries and work arrangements. For example, in France, about a third of all household service provider organisations stopped operations between March and May 2020 (DARES, 2020[24]). In the United States, domestic workers lost more than 90% of their jobs at the onset of the pandemic, leaving up two‑thirds without any work by May 2020. The majority of these workers also did not receive any unemployment compensation, leaving many in financial hardship and housing insecurity (NDWA, 2020[25]). In Germany, there were about 12% less workers in marginal employment (Minijobs) in June 2020 compared to the same month of the previous year. Many of those that who lost their employment over this period were household service workers without access to furlough or reduced working hour schemes (Grabka, Braband and Göbler, 2020[26]).

COVID‑19 left many household service workers as one of the most exposed groups for workplace transmission of the coronavirus (Lan et al., 2020[27]); informal workers, in particular, faced heightened work- and earnings uncertainty and increased exposure to unsafe workplace conditions (Williams and Kayaoglu, 2020[28]).

Notes

← 1.  The structure and size of the formal non-care household service sector has been analysed in a range of reports and studies over recent years, predominately focussed on European countries (European Commission, 2018[7]; 2015[12]; Angermann and Eichhorst, 2013[157]; DGCIS, 2011[158]). These analyses rely on economic activity statistics, such as the Statistical Classification of Economic Activities in the European Community (NACE). However, non-care household service provision is not covered as a single activity within these classifications. A common approach is to map the size of the sector by using NACE category 97 (“Activities of households as employers of domestic personnel”). This category also includes care‑related services, and encompasses only individuals directly employed by households who hold this activity as their main job. This is problematic, especially as female household service workers are the most likely group to hold multiple types of jobs in the European Union and the United Kingdom (Eurofound, 2018[159]). This category also excludes all non-care household service activities carried out by service provider organisations or companies. Alternatively the use of specific categories referring to cleaning services could be considered, such as NACE category 81.21 (“General cleaning of buildings”), but then cleaning services outside private households are included too (European Commission, 2015[12]).

← 2.  Following the ISCO classification, domestic cleaners and helpers “sweep, vacuum, clean, wash and polish, take care of household linen, purchase household supplies, prepare food, serve meals and perform various other domestic duties” (ILO, 2012[160]). This explicitly excludes domestic housekeepers, which are covered in ISCO code 5152.

← 3.  In Germany, the Minijob-scheme (marginal employment) can exempt those with less than EUR 450 monthly income from income taxation. As a result, many domestic workers are marginal employees (Enste and Heldman, 2017[161]).

← 4.  The response rate to the EIWA was about 55% in 2015. Even though the survey population itself was designed to be representative, the results are therefore not necessarily so.