The Dutch welfare state has had relatively high benefit levels, similar to the Scandinavian countries, but until recently has been based a “male breadwinner” model, with low labour market participation by women – in marked contrast to the Scandinavian countries. Over the past two decades, however, the Dutch welfare state has moved strongly towards “activation”, promoting and/or enforcing employability, employment and participation (Knijn and van Berkel, 2003). Policies towards lone parents have changed in line with this more general policy shift. There has also been growth in
the incidence of lone parenthood. Between 1980 and 2002 the incidence of lone parenthood, as measured by lone parent families as a proportion of all families with dependent children, doubled from 8 per cent to 16 per cent.
Until the mid-1990s lone mothers with a child aged under 12 years had an exemption from the general work requirement attaching to social assistance. In 1996, a new General Social Assistance Act, which laid great stress on activation, resulted in the introduction of a work obligation for mothers whose youngest child was aged 5 years or over. (Knijn and van Berkel, 2003.) The Act gave considerable scope to local authorities to take account of individual variation in circumstances. An investigation by the Dutch General Audit Office shows that the number of exemptions from work obligations was high. In September 2002 less than 20 per cent of all lone parents had full work obligations imposed – about half had a full formal exemption (many because of having a child under 5 years) and the remainder had partial exemptions or de facto exemptions (in which case work obligations were not enforced). OECD (2002) stated that application of the work test varied “…depending on the attitude of staff and local politicians, some of whom believe that the mother should be able to look after her children at home”. Knijn and van Wel (2001) also find that local policymakers and caseworkers tended to resist a rigid interpretation of the reform and “…reject the full-time work obligation for lone mothers who have a strong care ethos”; and were hesitant about insisting that lone mothers take up jobs which might not improve their incomes.
Figure 5.5: Employment Rate and “At Risk of Poverty” Rate for Lone Parents in the Netherlands, 1995-2005
20 30 40 50 60 1995 1997 1999 2001 2003 Per cent At risk of poverty rate Employment rate
Sources: Employment rates from Eurostat (2004) Statistics in Focus, Population and Social Conditions, Theme 3-5/2004. “At risk of poverty” rates from Eurostat website (http://epp.eurostat.ec.europa.eu).
A further reform was introduced in 2003, which strengthened provisions requiring activation. There is now no general exemption for lone parents of a young child. If unable to find work, a lone parent must engage with a “Centre for Work and Income” or reintegration organisation charged with helping the applicant to find suitable work or training. The comprehensive approach is designed to promote labour market entry or
“social activation”13 of all social assistance recipients, including lone parents.
The evolution of the employment rate and the “at risk of poverty” rate for lone parents in the Netherlands over the period 1995 to 2005 is set out in Figure 5.5. The employment rate rose sharply between 1995 and 2003, which might have been expected to reduce the risk of poverty. But the “at risk of poverty” rate rose initially and then stayed close to 40 per cent.14
5.5.3
ENGLISH-
SPEAKING COUNTRIES:
EVIDENCE FROM THEUK
In the UK, lone parents have been entitled to income support until the youngest child reached the age of 16 years. Initially, active labour market policy focused mainly on those in receipt of unemployment payments, largely ignoring lone parents (Evans, 2003). The New Deal for Lone Parents (NDLP) (rolled out nationwide in 1998) was designed “…to encourage lone parents to improve their prospects and living standards by taking up and increasing paid work, and to improve their job readiness to increase their employment opportunities”. (Material from Department of Work and Pensions, quoted in Evans, 2003). One-to-one tailored advice and support from a specialist adviser is a central part of the NDLP. The advisers can help with job search, claiming of appropriate in-work benefits and finding suitable educational and training opportunities.
Unlike some of the reforms discussed in other countries, a key feature of the NDLP was that it was voluntary. However, attendance at a work- focused interview with a personal adviser was made mandatory for all those on Income Support from 2001. Evans (2003) estimates that between 15 and 20 per cent of lone parents on Income Support availed of the New Deal for Lone Parents. Those most likely to participate tended to have higher qualifications, recent work experience and a short claim history. Factors making participation less likely included having a child under 3 years, having more than one child, and having health problems or a disability. For lone parents with a child aged under 3, the take-up of the NDLP was at about 5 per cent.
How effective is the programme in terms of increasing the employment of lone parents? This question must be answered in two stages. Lessof et al. (2003) found that 50 per cent of NDLP participants moved into employment, as against 26 per cent of matched sample of non-participants. This suggests a very strong pro-employment impact on those who participate. The other key factor is the rate of participation, estimated at about 20 per cent in 2002. Evans (2003) comments that “…improving participation without changing the content of the programme is logical for as long as there is a large proportion of non-participants who look very similar in all respects to participants and would gain similarly from the programme”. However, he cautions that making participation in NDLP
13 Social activation includes voluntary work, for which a small allowance for expenses may be paid.
14 National sources (Central Bureau of Statistics, 2006) indicate that the risk remained close to 40 per cent in 2005.
itself compulsory is unlikely to achieve much more than the mandatory Personal Adviser meetings are already achieving.
Figure 5.6 shows how the employment rate and “at risk of poverty” rate have evolved in the UK over the past decade. Over the full period, the employment rate rose by about 12 percentage points. The “at risk of poverty” rate fell slightly over the full period. But between 1996 and 2004, the employment rate rose by about 10 percentage points, while the “at risk of poverty” rate fell by about 8 percentage points. The headline policy initiatives affecting lone parents over the 1998-2004 period was the New Deal for Lone Parents; but other policy changes,15 including greater income support for lone parents not in employment, and the introduction of a National Minimum Wage also played a role in generating these results.
Figure 5.6: Employment Rates and “At Risk of Poverty” Rates for Lone Parents, UK, 1995 to 2005
Sources: Employment rates from Eurostat (2004) Statistics in Focus, Population and Social Conditions, Theme 3-5/2004.“At risk of poverty” rates from Department of Work and Pensions, Households Below Average Income.
30 35 40 45 50 55 60 1994 1999 2004 Per cent Employment rate At risk of poverty rate (before housing costs)
5.5.4
WHAT CAN WE LEARN FROM INTERNATIONALEXPERIENCE
?
The cross-country evidence shows clearly that for lone parents, the lowest risks of poverty are in the Scandinavian countries. How is this achieved? Key features of the Swedish and Finnish systems, as summarised by OECD (2005), are:
• Strong emphasis is placed on participation in employment for all citizens.
• An extensive childcare system makes employment feasible for lone parents.
• A comprehensive system of employment supports, including training and skill upgrading as well as job matching, is made available.
• The work-test in the benefit system applies to all, including lone parents.
Norway, as we have seen, has had a rather different approach to lone parenthood, starting with a categorical benefit (payable until the youngest child reached 12 years of age), and reflecting a different attitude towards the role of lone parents as carer’s for their children. Recent reforms have moved Norway towards the mainstream Scandinavian approach, and the poverty risk is low, with a high employment rate.
What of the continental model? The poverty risk for the Netherlands and Austria is just over 25 per cent – somewhat higher than that in the Scandinavian countries (close to 20 per cent), but well below the rates in Ireland (45 per cent) and the UK (40 per cent). Again, the Dutch model has involved an increase in the employment rate, and some extension of childcare; but the timing of the fall in the poverty risk means that other factors must also be at work. Given the size of the poverty reduction which would be involved in a move to Dutch levels of poverty risk for lone parents, this merits closer investigation.
The UK poverty risk for lone parents has fallen sharply, and is now somewhat below the Irish rate. Gregg and Harkness (2007) stress that the design was radically different from US welfare reforms:
In the UK the generosity of in and out-of-work benefits were both increased substantially for families with children, there has been no use of time limits for welfare payments to lone parents and participation in job search and training or other support programmes has remained, to date, voluntary. The only element of compulsion has been for lone parents to attend interviews at the Job Centre to discuss work options. (Gregg and Harkness, 2007, p. 3.)
There are some common factors to be found in comparing countries which have achieved low risks of poverty for lone parents, and those which have had marked reductions in recent years; and there are also some divergences in the policies used which need to be considered. Common factors include:
• Promotion of employment as a route out of poverty: this involves more than simply promoting a transition for non-employment or unemployment into employment. It also requires structures which “make work possible” by assuring the availability of suitable and affordable childcare and which “make work pay” for those making the transition.
• “Making work pay” is often thought of as involving policies such as tax credits and in-work benefits. These do, indeed, have a role to play. But education and training are also vital in ensuring that employment can be found, and that progression to increased pay can be achieved.
• Irrespective of other conditions, the age at which children of lone parents cease to be regarded as dependent appears to be lower in other countries than in Ireland.
The major divergence between countries in terms of their policy approaches seems to be in the extent to which a work-test is required of lone parents of school-going children. In order of strictness, one might start with the Scandinavian countries (where the work test is applied strictly to all persons looking for social assistance, including lone parents); then the Netherlands (where the work test has become more strict, although possibly with local variation); and then the UK (where the New Deal for Lone Parents is voluntary, albeit with a mandatory work-focused interview). New Zealand has moved from a system where work search was mandatory for lone parents with school age children to a system of “enhanced case management”, where the focus is on getting the right outcome for the individual, regardless of children’s ages. (Hutten, 2003.)
In the next section we consider current Irish policy towards lone parents, and official proposals for its reform, in the light of this review of international experience.
A
detailed description of the One-parent Family Payment (OFP) and its evolution over time can be found in Ireland (2006). Here we summarise key features of the current system. To claim OFP, a person5.6
Policy
Towards
Lone Parents
in Ireland
• must be widowed, separated, divorced, or unmarried,16
• must be the main carer for, and have charge of, at least one child,
• must satisfy a means test,
• must not have gross earnings above €400 (the rate from May 2007),
• must make efforts to seek maintenance,
• must not be cohabiting,
• divorced or separated persons must have been separated for at least a year.
The means test includes income from earnings, maintenance and imputed income from capital and property (other than the family home). Only half of maintenance income is assessed as means, so that an incentive remains for OFP claimants to seek support. The treatment of earnings has also been changed in recent years so as to improve the incentive to take up employment. A significant tranche of earnings is disregarded (up to €146.50 per week). Earnings in excess of that amount lead to partial withdrawal of the benefit, at the rate of 50 cent per euro of earnings. Benefit is completely withdrawn if earnings exceed an upper limit, currently €400 per week. Beneficiaries of OFP are entitled also to apply for support
under the Family Income Supplement (FIS), if they satisfy the conditions of that scheme.
The rate of payment and child additions are in line with several other means-tested and contributory schemes, currently at €185.80 per week17 with a Qualified Child Increase of €22 per week.
As noted earlier, there has been continuing growth in the number of lone parents. Changes in the scheme, including higher rates of payment and a lower rate of benefit withdrawal for those with earnings, have also contributed to growth in the number of beneficiaries of the scheme. The net effect has included a substantial rise in expenditure on the scheme. There has also been a shift in composition, with a greater proportion of claims arising from separation and divorce, and a smaller proportion from the death of a spouse. Average length of claim is estimated at 5 to 6 years (Ireland, 2006, p.64). Exits from the scheme arose in roughly equal proportions from three main sources:
• Marriage or cohabitation.
• Earnings exceeding the upper earnings limit.
• Falling out of the scope of the scheme as the youngest child reaches the upper age limit.
5.6.1
ISSUES AND PROPOSALSIssues highlighted by Ireland (DSFA, 2006) included the fact that a scheme based around the contingency of lone parenthood created a financial incentive favouring that state. In particular, the loss of the contingency based payment could be an obstacle to the formation of new relationships involving cohabitation or marriage and joint parenting. In any event, rules regarding cohabitation are seen as difficult to enforce. The implicit rationale behind the structure of the scheme can also be seen as based around the “male breadwinner” model, while social developments have moved away from this approach over recent decades. The review also highlighted wider issues concerning educational disadvantage, childcare and financial stability.
The proposals in the review are built around a more direct response to needs, and a view that the longer-term welfare of lone parents is best served by encouraging and promoting their attachment to the labour market. Several options were considered, but the one advocated contains the following elements:
• A new means-tested parental allowance for all low income families, replacing not only the One-parent Family Payment but also the Qualified Adult Addition to other welfare benefits.
• The Parental Allowance would be payable until the youngest child reaches a certain age (e.g., 7 or 8 years).
• There would be no conditions up to age 5 years, but if the youngest child was aged over 5 years, there would be compulsory engagement with a Job Facilitator/Departmental Representative who would provide information and advice on education, training and employment options. It was envisaged that there would be three years of engagement, during which the parent might take up employment, but would not be required to do so.
• Over a higher age (8 years or over), Parental Allowance would not be payable and former recipients would be expected to seek work or training, with options including Back-to-work Allowance, Back-to-education Allowance and Unemployment Assistance. For lone parents, the condition of “genuinely seeking work” could be met by seeking a part-time job of 19 hours or more – which would meet the FIS qualification condition.
• It was envisaged that the activation process would be positive in nature, with mutual obligations.
• The critical issue of childcare was not dealt with directly as it forms part of a wider childcare policy; but it was possible that the activation package could include a direct child care allowance.
• The earnings disregard would be reduced from €146.50 to €120, but the taper would be at 40 per cent rather than 50 per cent, with a cut-off at €400.
• There would be transitional arrangements for existing recipients.
5.6.2
DESIGN AND IMPLEMENTATION OF POLICYKey advantages of the approach proposed include the fact that it provides support on an even-handed basis to all low income parents. It also does away with the need for a cohabitation test, and removes obstacles to cohabitation implicit in the current system. The reform is not a “piecemeal” one designed purely with lone parents in mind. It is set in a wider context, with a move away from the “male breadwinner” model of adult dependancy to a more nuanced support for low income parents. The activation proposals are in line with those in the “best practice” countries. Childcare is, however, a crucial piece of the jigsaw. A strong childcare system is central to the success of the proposed reform, and the phasing of its introduction must be linked with the development of childcare access.
A further theme that arises in implementing the proposal is that of flexibility versus discretion. As stated, the proposals on activation are conditioned purely on the age of the youngest child. But transitions into lone parenthood need to be taken into account as well. For example, in the case of a separation arising from domestic abuse, even if the youngest child is aged above the cut-off, one might regard it as reasonable that such a case be treated differently. More generally, circumstances such as the recency of separation might be of relevance to the nature and extent of activation that could be expected.
Finally, the lesson from best practice countries also includes higher levels of income support. We can examine the potential impact of this element using SWITCH. A 10 per cent rise in welfare rates would have the direct effect of reducing “at risk of poverty” rates among lone parents by
about 2 percentage points. A 20 per cent rise in welfare payments would see a further 1 percentage point reduction in the risk of poverty at 60 per cent of median income. Further analysis of packages involving increased welfare payments will be undertaken in Chapter 12, and the implications for lone parents will be considered.