1. Policy context, economic circumstances and institutional background in France relevant to the programme under discussion

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1 The Service Voucher in Belgium Statements and Comments Jean-Claude Barbier UMR CES-Matisse, Université Paris 1 Panthéon-Sorbonne 1. Policy context, economic circumstances and institutional background in France relevant to the programme under discussion 1.1 General background: employment potential in the service sector A debate about the comparative underperformance of the French economy in terms of the number of jobs in the service sector has been going on for quite a long time. It is however not consensual among economists. In 1998, Debonneuil and Lahidji quoted a 1996 survey commissioned by an association for personal services founded by CNPF (the main French business association, now MEDEF); in this survey, the business sector estimated that 25% of French households were potential customers for new commercial personal services. Ten years later, their expectations have however not been met, despite multiple government intervention. Debonneuil and Lahidji advocated an upgrading of the policy in favour of personal services because, they said, it was certainly more effective to focus employment creation measures on the low-skilled, in a sector where households were prevented to buy services because of their market price. A supply policy was also wanted. One of the standard methods used by French economists is to compare the French case with other countries; if this is made, a deficit in the service sector in general appears. In 2004, Debonneuil estimated this deficit to about 1 to 3 million jobs (as against Germany, Denmark and the USA). The potential for job creation in the service sector was 2 million. The deficit was, to her and her colleague P. Cahuc, attributable to a high labour cost for low skilled workers, and they advocated additional reduction of employers social contributions. Accordingly, labour law was to be reformed to allow for more flexibility. After the publication of a White Paper in February 2005 and the passing of an Act in July of the same year, the French government launched a comprehensive programme in February 2006 (see section 2); the announced ambition was the creation of 500,000 personal and household service jobs over three years Historical background in France: from emplois de proximité (household and care jobs) to introducing vouchers (titre service emploi) Policy measures have a long history in France, but two significant shifts were made in 1996 and Even before the introduction of the Chèque Emploi Service (or Chèque Service) (hereafter CES) [Service Jobs Cheque], in 1993, successive French governments initiated 1 This is obviously a political statement. In the French case, statistics are often difficult to reconcile between various sources, because statistics are influenced by the diverse construction of contracts October, 2006 Peer Review The Service Voucher in Belgium 1

2 measures in order to foster the creation of jobs in this sector via the simplification of administrative tasks for hiring employees, but also to combat undeclared work 2. Policy in this area was also articulated with the introduction of new family benefits especially targeted at people employing aides for caring for their children at home. Following 1993 and 1994 Acts, the CES was introduced and its use expanded rapidly. Over the recent years, CES principles were essentially the following and they have remained the same after the reform: CES (now CESU type a see table 2): 1) are available free of charge by banks; banks deliver chequebooks to individual employers (households) who use them according to their needs to pay employees/workers; 2) While paying their employees via CES, individual employers also fill a simplified form they have to send to the Social Security Contributions Agency (URSSAF Centre national de traitement du chèque service); this declaration is the only one they have to fill; their obligations as employers are thus simplified; the net amount paid the employee also comprise legal payment for annual holiday; the CES is an equivalent of employment contract; 3) URSSAF debits employers bank accounts both of the amount of the cheque and of the corresponding employer social contributions; 4) Employers receive notification of the amount paid that is deductible from their tax on a yearly basis. Under a mainstream 3 ceiling of 90,000 FF (1995) and 45,000F (1998), 6,000 (2006), and because of a 50% tax break, the net cost to the employer is roughly the amount of the cheque, i.e. the net payment to the household employee/worker. 5) CES may be used for paying for household and family services, menial housework 4 ; it was originally limited to 8 hours per week (alternatively four working weeks in a row for one year) 5 but the hour limit was dropped from 1996; 6) CES employees are parties to the household employee collective agreement (convention collective des employés de maison) and they enjoy the same rights as their colleagues hired on the basis of standard contracts. 350,000 chequebooks had been delivered by the end of 1995, corresponding to about 320,000 users (IGAS 1995). At the same date, this amounted over the year 1995 to 18.2 millions hours of work, i.e. a yearly equivalent of 10 to 15,000 full time equivalent jobs (FTE). At the time, DARES (ministère du travail) estimated that 15 to 20% of hirings were substituting for undeclared work; one third of employers swapped CES with mainstream contracts that were already eligible to tax breaks. All in all, DARES estimated, net job creation was akin to 50% of the total in this initial stage. DARES has constantly monitored the development of CES jobs. Table 1 indicates how employment and take-up of the CES grew over the recent years. 2 CES and TES were listed as good practice along the Belgian Voucher in the EU report on undeclared work (May 2004). 3 Additional reductions are available for people/households with special needs for caring. 4 The type of work eligible was first defined by the December 1991 Act for emplois familiaux ; it was redefined in the French Labour Code (article L 129/1), from the 1996 introduction of the TES (see later). A detailed list of activities was defined by Décret n ( ); it extended the activities eligible to the CESU and tax breaks (20 types are listed in article D of the French labour code: do-it-yourself work; menial gardening; internet and computer support at home, etc. see section 3). 5 A formal employment contract is nevertheless required above 8 hours (or 4 weeks in a row) October, 2006 Peer Review The Service Voucher in Belgium 2

3 The total FTE number of jobs for the emplois familiaux sub-sector was estimated at 241,000 jobs (40h week basis) or 275,000 (35h week) (DARES 2006). This total include employees whose employers do not use CES: about two thirds of the sub-sector employers use them. Table 1 CES employers and employees (source DARES, 2003, 2006) CES Emplois familiaux (thousands) Employers ,05 Employees Titre Emploi Service (TES) [Service Voucher] introduced a new logic in TES were available for works councils (or employers where no work council existed). Six years after their introduction, the ministry considered their success very limited (DARES 2003). Jobs linked to TES amounted to about 1,000 FTE, in 2003, although 1.3 million vouchers were used. The main characteristics of TES and CES are compared with the Belgian voucher in table The potential transferability to France/ other member states The Belgian voucher analysed in the Peer Review meeting displays many similar characteristics with the current CESU (chèque emploi service universel universal service job cheque). The CESU Reform introduced by the July 2005 Act and launched in 2006 actually merged the rationales of CES and TES while extending considerably their scope, as is shown in table 2. The CESU reform amounted to a complete overhaul of government policy in the area of household and personal services; the 2005 White Paper displayed four objectives: foster the supply of services; ease access to new services; simplify administrative tasks; enhance the quality of jobs in the sub-sector. The 2005 Act also aimed at reorganising fragmented programmes into a coherent framework. Its basic rationale was to merge CES and TES into CESU, while (a) extending the scope of the service activities eligible see note 2); (b) involving the finance industry on a larger scale; (3) boosting the development of market services; (4) making the use of CESU a mainstream Human Resource Management (HRM) tool in the private and the public sector 6. One clear objective is to facilitate the creation of firms providing such services. Contrary to 1996 expectations, as was already said, the participation of the private for profit sector has remained limited in France (DARES 2006): over the period , the number of firms has nevertheless increased and the number of employees has more than doubled (5,400 employees in 2004 for a total of 2.8 million hours); this latter figure has to be compared, however, to a yearly amount of 250 million hours paid via CES (now CESU) and a total of 500 million hours when other employment types of emplois familiaux are included. 6 Buying CESU vouchers was made possible for civil servants and public sector employees from September, 1, October, 2006 Peer Review The Service Voucher in Belgium 3

4 Table 2 Comparing the Belgian voucher and the French CESU French CES 1993 French Service voucher TES 1996 French CESU 2006 Belgian Service voucher 2004 earlier version 1994 Eligibility households Works councils and employers Basic form Cheques => chequebook Variable amount according to working time Funding Basic process Tax and social contribution s reductions Budget funds tax breaks + administrative and operating costs Household pays household employee (employé de maison, or à domicile) with chequebook 45 to 90,000FF deductible from income tax (mainstream: higher sums for persons with special needs) 2006: 6,000 CESU Voucher is issued by licensed operator Fixed amount Employer + employee + tax breaks (employer+employee) Works council gives employee voucher; Employee pays (registered) service provider (organisme agréé market or nonprofit structure) Maximum support for beneficiary: 12,000FF (1996) a) households = ex-ces b) employees, insured persons, members of mutuelles, etc.. Cheques=>chequebook (variable amount minimum wage applies SMIC hourly 8.27 before social contributions) + Vouchers (mean amount, 14 ) Combination of both previous systems + new partners for funding (insurance companies, mutuelles 7, social security pension funds, local authorities..)+ Tax and social contributions breaks for employers a) cheque: unchanged b) voucher allows either to pay provider (invoice) (organisme agréé) or to hire directly; or to pay a mandataire organisations 8 ; or to pay for childcare (childminders+ crèches) b) employers social contributions reduced up to a maximum of 1830 per employee; corporate tax reduction = 25% of expenditure (max: 500,000 ). For 100, net cost for firm is 42. Voucher income non taxable for employees; 50% deductible from income tax. Households mainstream consumers Voucher (fixed amount : 6.70 per hour Federal budget + customer + Tax reduction Voucher should be spent by registered companies, private + non profit associations + local authorities Tax reduction 30% for consumer Subsidy for the company, per voucher (hour) Employers social contributions reductions (?) 7 8 Mutuelles are emloyment-related non-profit health insurance (or general insurance) organisations that employees join voluntarily. Most French employees are members of such organisations. The recent CMU (couverture maladie universelle) has gradually extended membership to non employees. Mandataire (proxy organisation) is opposed to direct employment; it is especially developed in the care for the elderly sector for non-profit organisations; the proxy mechanism allows elderly couples or individuals to at the same time be individual employers and so-to-say sub-contract administrative and legal tasks to non-profit organisations. (see Barbier, 2002) October, 2006 Peer Review The Service Voucher in Belgium 4

5 Hence, the Belgian and the French voucher schemes have at the same time similarities and differences. Both are compatible with Bismarckian social insurance systems, where employment protection and social contributions play a prominent role. However, the Belgium voucher emerges as focussed on a narrower range of services (housework, cleaning), privileging one type of provider (organisations including a majority of associations and temporary work agencies), and a type of low-skilled, even sometimes close to long-term unemployed or excluded people (category A workers/employees 80% of the unemployed hired were long-term unemployed) as the ALE persons. Yet, when only the present French situation is considered and not the government s expected outcomes after its new 2006 policy the range of household and personal services in France is on the majority not so dissimilar to the one targeted by the Belgian voucher (however, childcare and non medical domiciliary care for the elderly play a prominent role in the French case); the type of employees is also roughly similar. The main difference lies perhaps in the targeting of provider organisations (versus the combination of providers and direct employment by households in France) and the focussing of services (versus the inclusion of IT services and menial DIY work as well as childcare). Another important aspect lies in the fixed price of the voucher and the 21 hourly euros for employers. In the French case, the price is either variable (cheques) or not calculated on an hourly basis. Despite their differences, they raise similar interrogations that generally apply to household and personal services: these pertain to the quality of services and to the quality of jobs. 3. Important issues relevant to the policy area The cost to public finances (social insurance funds and the budget) is obviously an important element of the debate, as the IDEA discussion paper stresses. The cost in Belgium signals apparent efficiency. The cost should however be analysed against both aspects of quality. In both Belgium and France, but also in the wider European context, jobs in the household and personal services sector are mostly part time and often very precarious; moreover they are gender biased. Although the French government has argued their CESU vouchers would foster equal opportunities within households, this remains to be documented. The experience of instability of jobs and income is notably observed in the care for the elderly sector (employing an overwhelming majority of women, though to a lesser percentage than the Belgian voucher system) where, despite better collective agreements (Barbier, 2002), and recent reform (the introduction of the universal APA benefit) the access to training has remained very limited for CES paid employees; because of the high fragmentation of their work (combining many employers in the French case) and the small number of hours worked with any of them, access to social protection is too often limited, especially with regard to unemployment insurance and pension rights. In the Belgian case, the IDEA discussion paper shows that the majority of voucher employees are part-timers; it also shows that 9 out 10 have been employed in the scheme since its inception. Is it possible to envisage that, as often in the domiciliary care for the elderly in France, they would be in a way trapped in low-skilled jobs that they would like to leave (for instance from temporary jobs to more stable ones)? Accordingly, the multiplication of contracts leads to the segmentation of the labour market, a characteristic shared by Belgium and France and criticised by the 2003 Wim Kok report. In the Belgian case, category A workers apparently do not enjoy the status of wage-earner (salarié), having a top-up on their assistance benefit. This raises the question of the social entitlements of the workers/employees employed in the voucher scheme as against others October, 2006 Peer Review The Service Voucher in Belgium 5

6 One other important issue is the quality of services. During parliamentary debates French MPs deplored that insufficient attention was paid to the characteristics of social services as against mainstream ones. Since schemes have been introduced in some member states (Finger, 1997) the question of the precise nature of service activities has been discussed. Here, the licensing procedure is supposed to act as a safeguard for quality services, especially for services with a social dimension. In the French case, it is obviously much too early for any assessment of this matter. Yet previous experience has taught that one of the reasons why personal services did not develop from the part of private for-profit providers was linked to the question of trust, especially for elderly households. There was also fear that the extension of the scope for subsidized services would jeopardize the quality of the licensing ( agrément ) procedure, which the government said was a key guarantee for quality. There is little about this aspect in the IDEA discussion paper ( special licensing commission p.6): however, this dimension is more important for personal services (forms of support linked to the caring for elderly people for instance, transport or helping for errands - or children) than for mainstream household chores. And in their longer report, IDEA report that 82.5% of service provision are either cleaning or ironing at the consumer s home (IDEA 2006). These are two main points. However, the IDEA discussion paper also points to other important problems: displacement and substitution effects especially mentioned by unions; the lack of labour supply experienced by many firms in a context of significant unemployment (only 43% of the workers in the survey were unemployed before joining the firms with voucher contracts); the economic equation for firms that claim in their majority that the 21 sum is not sufficient. Here we lack more detailed data comparing the working conditions, wages, social contributions between mainstream open-ended and voucher system contracts, especially in the temporary agency business, which employs more than 40% of voucher employees/workers October, 2006 Peer Review The Service Voucher in Belgium 6

7 References Barbier J.-C., dir., with Brygoo A., Tarquis F. and Cabotte L., 2002, «The French domiciliary care for the elderly sector, a specific flexibility/security/quality regime?, National report for France, ESOPE Fifth framework research project, 72p. DARES, 2003, «Dynamisme du secteur des emplois familiaux en 2002»,Premières infopremières synthèses, ministère du travail, Décembre, n DARES, 2006, Les emplois familiaux en 2004, un secteur en forte croissance, Premières infopremières synthèses, ministère du travail, Mai, n Debonneuil M., 2004, «Les services : une opportunité pour créer des emplois productifs», in Conseil d analyse économique, Productivité et emploi dans le secteur tertiaire, rapports, Paris: Documentation française, p Debonneuil M. and Lahidji R., 1998, Services de proximité, Etat et marché, in Conseil d analyse économique, Emplois de proximité, rapports, Paris: Documentation française, p Finger D., 1997, «Dienstleistungsschecks in Europa ein Modell für Deutschland? WZB Discussion Paper, FS IDEA, 2006, Evaluation du régime des titres services pour les services et emplois de proximité 2005, rapport final : Bruxelles. IGAS (Ministère du travail), 1995, Le cheque emploi-service: premiers éléments d évaluation». Paris : La Documentation française October, 2006 Peer Review The Service Voucher in Belgium 7