Service voucher

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see also Dienstleistungsscheck

A service voucher is a financial instrument which allows a public authority to target social services at those it deems in need, and at the same time to promote employment and labour market integration. It effectively boosts demand for certain services which meet social policy objectives.

A voucher scheme will typically start by defining services which are needed in society, but which are being supplied neither by the market nor by the public sector. These might include for example home care, household repairs, ironing, or bicycle hire and repair. The activities within the scheme will typically be agreed with trade unions and employers' organisations, to avoid concern about the disturbance of unfair competition.

Potential providers of these services are identified, often from among the long-term unemployed.

Vouchers are sold to people who want to use the service. The price is subsidised, so that on the one hand the service is affordable - and for instance can compete with informal (illegal) work - and on the other provides decent condition for the employees (including social insurance cover, holiday pay etc.) an example subsidy regime is the one in Belgium, where a hour's work is bought at EUR 7 and sold at EUR 20.

Service vouchers play a key role in creating viable neighbourhood services, as the example of the EQUAL Werk.Waardig project in Kuurne in West Flanders shows.

Contents

Analysis of benefits

Vouchers can be defined as subsidies granting limited purchasing power to an individual to choose among a restricted set of services. In the field of personal and household services, their use has been growing in recent years, following successful experiences in some European countries. Vouchers can be seen as tools that would lie between in kind provision of services and cash distribution of income to be used (or not) for these services. Very basically, vouchers are simple means of payment. The payment can be integrally made by the user, or by a public financer, and mixed forms of payment with other actors can be imagined (e.g. companies paying for part of the cost or insurance companies providing some services through this means).

In the field of care policies, the increasing use of vouchers has sometimes been analysed as an element of a current commodification trend that corresponds to an increase in what can be labelled a “social market” logic. Social markets mainly rely on demand-side measures, the aim being to ensure that users or consumers of services are offered more choice and are, financially speaking, able to purchase personal services. The market logic involves developing the demand side with the aim of transforming “latent” demand into effective demand. These social markets thus involve competition between different modes of provision, with the user receiving direct or indirect assistance from public authorities to make their choice.

In the field of “non-care” services, vouchers are being used mostly for the same reasons as those in the care sector, that is for a series of supposed advantages in particular regarding efficiency of public spending, expected impact on undeclared labour but also quality issues (quality of services and quality of jobs).

  1. A first advantage is freedom of choice. Under the logic of social markets, vouchers are supposed to allow for user choice between different types of providers (sometimes including public providers) or simply between providers of one single type (e.g. domestic workers).
  2. A second advantage is efficiency. Vouchers offer less freedom of choice than pure money but their efficiency is linked to the fact that the demand is “channelled”, i.e. that it is oriented towards certain types of services or activities; moreover there is an efficiency for public finances as if not used, the voucher does not represent a cost for authorities. As well it is possible to imagine public policies targeting people with special needs.
  3. A third advantage is reduction of undeclared labour. Vouchers are meant to simplify the administrative procedures when employing someone to outsource housework tasks or care activities. In some cases, the purchase of a voucher does not entail the duty to sign a labour contract between the parties (as in France under specific conditions), which might have a negative impact on working conditions.
  4. Further, social security contributions are calculated automatically and directly paid. Because they considerably reduce administrative burden, vouchers are supposed to be a significant incentive for the use of declared labour rather than undeclared labour.
  5. Fifth, and finally, vouchers might foster quality of services. The partisans of the market-oriented and purchaser-provider model consider that it encourages innovation, flexibility and quality, as the market should eliminate the bad quality suppliers and encourage a user-oriented approach. As a Eurofound report notes: “The more actively involved service users are in determining the content of care, the more likely it is that care services will be greater suited to the individual’s values, culture, attitudes and circumstances. Empowerment of care recipients enables them to purchase their own care and have the security assurance of contractual rights. This can potentially influence the quality of care, as low standard care services would simply not be ‘bought’. At the same time, care recipients could tailor a care programme to their specific needs, again raising quality and improving delivery”. Voucher schemes could be steered in this direction, according to this report and to certain authors.(1)

Macroeconomic effects

Belgian Service Vouchers: a precious source of quantitative data2

Service vouchers in Belgium can be used for activities done at home (cleaning, laundry and ironing, cooking and sewing) and outside the house (shopping, ironing in an ironing atelier, and providing assistance with the transportation of persons under specific conditions). For the time being, these vouchers cannot be used for home repair or gardening. The user pays per hour €7.5 for the service, the real cost is €20.80 and the difference (€13.30) is financed by the RVA/ONEM36. In addition to the supplement, governments allow households to deduct their spending on vouchers from their taxable earnings (price after fiscal deductibility = €5.25).

Based on a study realised for the Belgian government [1], the net cost of intervention of the system is:

  • Gross cost € 1,430,432,704
  • Earn back effects € 629,734,509
  • Indirect earn back effect between € 418,275,083 and 534,575,08338
  • Net cost between € 382,423,112 and 266,123,112

According to this report, the user seems ready to pay €8.59 on the black market. In this case, the fiscal deductibility could be suppressed and the price for a service-voucher increased up to €8.59. The net cost for the public authorities becomes equal to €82,478,861 or becomes negative (then a benefit) €-33,821,139. In average, the net cost is €24,328,861 or an intervention of €304 per job (80,000 full time jobs created by the implementation of the service-voucher system). Assuming that cost for users is equal to the price on the black market seems realistic and logical.

The report also shows an interesting impact of the vouchers: 10.4% of the users declared that they could increase their working time/employability as they delegate some tasks with the use of the service vouchers and 0.6% of the users declared that they could enter again the labour market as they can make a paid work instead to spend time for housework. 10.8% of the users declared that without service vouchers they would be obliged to reduce their working time.

References

1. Developing personal and household services in the EU - A focus on housework activities, European Commission, 2013

2. Commission SWD on exploiting the employment potential of the personal and household services. SWD(2012) 95 final of 18 Apr 2012, page 12

External links

EU report Developing personal and household services in the EU - A focus on housework activities including analysis of service vouchers, 19 Sep 2013

Belgium's service voucher site: http://www.dienstencheques-rva.be/

The Service Voucher in Belgium, paper to EU mutual learning seminar, 26-27 October 2006

Service vouchers - a family of instruments for employment, Jean-François Lebrun, European Commission, 17 October 1996