Family Supporting Services in Germany

Prof. Dr. Dominik Enste, 11.11.2010, MadridCologne Institute for Economic Research

University of Applied Science CologneUniversity of Cologne

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Overview

The importance of FSS

The Supply of FSS in Germany

The Demand of FSS in Germany

The Market Volume

Policy Options

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3

Why are Family Supporting Services important?

Quality time for families in the "Rush hour of life"

Jobs for less qualified people (in households)

Legalisation of Illicit (undeclared) work

Why not "Do it yourself" (DIY)? More wealth as the result of the division of labour

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The market for FSS in Germany -Employees and WagesNumber of Employees in FSS (broad definition)Main Profession 666.193As a sideline 344.315Overall 1.010.508

Other professions 31.048.408

Source: SOEP, Own Caculations

Supply

Wage and Income

Other professions

FSS

Main Profession As a sidelineGross Income 2.200 1.250 100Gross hourly wage

13,03 8,65 7,50

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A Typical Supplier

Socio-economic attributes

Gender: more female

Age: relatively old employed persons (due to elderly men)

Nationality: no difference in relation to other professions

Main Profession: mainly women without specific characteristics in age and nationality; two-thirds of them live in a two-person household

As a sideline: mainly young, single women

Persons in marginal (precarious) employment occur three times more in FSS than in other professions

Lower qualification than in other professions

Supply

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Typical Demand

Single households as well as elderly people living in two-person households

Two-person household with children, both working; very high income, mainly academic background, long working-hours

Two-person households without children with relatively high income

FSS strongly depends on (high) income

Demand

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The market for FSSFewer demand in households with children Share according to types of household

6,7

3,64,5

2,4

11,2

6

0

2

4

6

8

10

12

Households with children underthe age of 16 years

Households without childrenunder the age of 16 years

Domestic help (on regular basis) Domestic help (occasionally) Total

Source: SOEP, Own calculations

Demand

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The market for FSSMedian equivalent income on the demand side(in brackets: Share of all households in per cent)

Domestic help employed on... AllOccasional

basisRegular basis households

Singles aged < 60 2,000 (0.5) 2,600 (0.7) 1,300 (20.5)Single aged 60 and > 1,400 (1.6) 1,600 (2.6) 1,224 (17.9)Couples without children 2,080 (1.2) 2,800 (1.9) 1,533 (29.3)Single parent 1,333 (0.1) 2,000 (0.2) 1,092 (5.3)

Couples with children1 child 2,222 (0.3) 3,000 (0.5) 1,430 (11.9)

2 children 1,619 (0.4) 2,850 (0.5) 1,377 (10.0)3 and more children 2,235 (0.1) 1,860 (0.2) 1,310 (3.3)

Total 1,680 (4.2) 2,090 (6.7) 1,350 (100)Source: SOEP, own calculations

Demand

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Different forms of employment

4%1%

95%

Undeclared employmentin 4 million households

Marginal employment in158,000 households

Employed personssubject to social secritycontributions in 39,000households

Source: own calculations according to TNS Emnid, 2007

Illicit workSelf-employedMinijobService AgencyHouse-keeping

Market Volume of FSS in Germany

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Full-time equivalence Gross Income

Legalisation of illicit work: 30 per cent 60 per cent

177,000355,000

2.8 Bn. Euro5.5 Bn. Euro

Demand according to preferences of Consumers: with an hourly wage of 8 € with an hourly wage between 10 to 12 €

594,000417,000

9.2 Bn. Euro8.1 Mrd. Euro

International comparison: EU 15 average EU leaders

304,000*) 727,000*)

4.7 Bn. Euro11.3 Mrd. Euro

MaximumLegalisation of 60 per cent the services currently provided through illict work plus realisation of existing consumer preferences with an hourly wage between 10 to 12 €

772,000 13.6 Bn. Euro

* employees

own calculations

Policy Options

Reduction of tax burden on labour costs

Immigration according to needs (through point system)

Supporting the development of a legal market for FSS

Less bureaucracy e.g. to support self-employment

Vouchers for Families (because of positive external effects of children)

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Outlook: increasing demand e.g. in Germany

Major job potential in private households

Demographic development: - 17 per cent among those:

aged between 70 and 80 years + 20 per cent

aged between 80 and 90 years + 154 per cent

aged 90 years and > + 301 per cent

2005: 25 Percent of the population aged 60 years and >

2050: 42 Percent of the population aged 60 years and >