The Government Saves Money on Nannies
By: Klaudia Wolniewicz-Slomka, CASE Economist
New regulations on childcare services for children under the age of 3 in Poland came into force on 1st January as a result of the Act of 7th July 2017, which amended acts related to the Polish family support system. Among the many changes introduced by the new law, parents who employ a nanny will be among the most affected. Indeed, according to the new law, the government’s subsidy to the social insurance of nannies will be reduced by half, shifting the burden to parents for the social insurance of the nannies that they hire.
Before 2018, the government fully subsidized the social insurance of nannies in Poland on the condition that they were hired on the basis of an activation agreement (umowa uaktywniająca), registered in the Polish Social Insurance Institution (Zakład Ubezpieczeń Społecznych), and that their remuneration did not exceed a pre-determined minimum salary (if it exceeded this minimum, parents would contribute insurance proportional to the excess salary). This regulation was part of the system reform introduced by the Act of 4th February 2011 on care for children under the age of 3, the rationale of which was to reduce the extent of shadow work of nannies. According to data CASE obtained from the Polish Social Insurance Institution, the number of registered nannies was around 8,376 at the end of 2016, and the estimated number of nannies was 400,000 (the total number of available nannies registered on the website niania.pl).
Discouraged by the these numbers and by the cost of the program (estimated at PLN 49.2 million in 2017), especially when seen in light of all the other expenditures that the current government has committed itself to, a decision was made to reduce financial support for parents. The Ministry of Family, Labour and Social Policy announced that the “savings” from these foregone expenditures would be spent on building new nurseries instead.
This decision can have important consequences. First of all, the growth in the number of nannies in shadow employment is expected, as parents will be tempted to cancel formal contracts with nannies (even if they have to share the resulting savings with them) due to the increased cost. Secondly and more importantly, by promoting mainly nurseries, as announced by the representative of the Ministry of Family, Labour and Social Policy, the development of other forms of childcare will be hindered. Diversifying childcare in Poland, including across nurseries, children clubs, daycare providers, and nannies, was one of the main goals of childcare system reform in 2011. It is believed that having a diversity of forms of childcare gives more flexibility to parents and helps to better to achieve a work‑life balance. Given that parents have different preferences related to the provision of childcare, the government has instead chosen one way as preferential. Thirdly, building new nurseries is bound to take time, and there may need to be a transition period for the phasing out of assistance. Instead of this approach, the Polish government has cut off subsidies but has not started building nurseries yet.
The decision made by the Polish government appears to be an easy one, but the government should consider different solutions which could help to encourage more nannies to register, modifying financial support to make it more effective. Instead, without a transition plan, it decreased the amount of money spent on social insurance of nannies, an action which could have unforeseen costs in the short-term. Rather than a coherent family policy, the government has gone for expedient measures.