Government creates a programme hoping for low participation

According to the government, two new social programmes, namely the extension of the paid parental leave from 20 weeks to one year and the extension of social insurance coverage to freelancers, self-employed and the unemployed who decide to go on the new child care leave, are to cost taxpayers PLN 3.4 billion. According to the Ministry of Finance, the cost of longer parental leaves (to be introduced in 2014 and amount to 80% of the salary) is PLN 2 billion annually and subsidies to contributions amount to PLN 1.4 billion.

The measures are to result in an increased number of children being born. Yet by 2060, there will be merely 165 000 more of us. Demographers argue that it is such a poor result that it cannot in any way change the situation on the labour market.

Let us start from the hottest topic, i.e. child care leaves. Where does the amount of PLN 2 billion come from and how was it calculated? It is not fully clear. The Ministry of Finance failed to provide any information on the subject.

I used the data of the Central Statistical Office (GUS) and the Social Insurance Institution (ZUS) to calculate the amount that should be transferred to mothers and fathers on a longer paid child care leave. The result proved to be totally different than assumed by the Minister of Finance. My calculations show that annual expenditure on the programme will amount to PLN 5.2 billion, instead of PLN 2 billion.

Why the difference

In 2011, 388 000 children were born (according to the forecast by the Central Statistical Office, the figure will not have changed significantly by 2014). According to the Social Insurance Institution, last year a daily amount of maternity benefit was PLN 72.58. Assuming that the amount corresponds to 100% of the benefit, I calculated 80% of the average daily benefit amount (i.e. PLN 58.06) and then multiplied it by the number of days in a year and the number of children born. The result after adding up was PLN 8.222 billion. It is interesting to note that last year (when the 20-week basic maternity leave was in place) the Social Insurance Institution paid out maternity benefits amounting to PLN 3.018 billion.

Why then does the government assume that after extending the paid leaves by as many as 32 weeks it will only pay extra PLN 2 billion? The experts argue that the answer to this question is relatively simple. The government assumes from the beginning that the programme will be available only for some, and not all parents will be eligible for benefits. Some will not be able and others will not want to, and the government took this already into account while drafting the next budget.

Many young people work based on the so-called flexible forms of employment (civil law contracts) and are not entitled to social benefits. There is one more explanation.

– Young people of reproductive age who work based on employment contracts will not, for fear of losing their jobs, want to use the full-length leave to which they are entitled. The differences in calculations show that the government decided that it would be able to save quite a lot on this programme, says Krzysztof Tymicki, assistant professor at the Institute of Statistics and Demography of the Warsaw School of Economics.

Entrepreneur on a child care leave

A similar “saving” mechanism was used when calculating the cost of introducing social insurance for the self-employed and freelancers who decide to stop working to take care of a child. It is the new child care leaves that will be available already in 2013.

So far persons conducting economic activity have not had the right to child care leave, since the right was granted only to the employees covered by employment contracts.

The draft Act of 7 November 2012 amending the Act on social insurance system and certain other acts, drawn up by the Ministry of Labour and Social Policy and approved last week by the Council of Ministers, stipulates that both entrepreneurs and persons working based on contracts of mandate, agency contracts or other contracts for provision of services will have the right to similar child care leaves as the employees covered by employment contracts.

The draft assumes, among others, that retirement and disability pension insurance in relation to child care would cover the persons with at least 6-month contributory period who, while taking care of the child, would suspend their economic activity or cease to perform the contracts of mandate or another form of services provision. In practice, it would mean that the state budget would finance social insurance (retirement and disability pension) contributions and health insurance contributions for those persons within that period.

Next year, the amount would total PLN 1.404 billion. But, again, this is only virtual expenditure. The rationale for the draft Act states that “Persons that are not covered by insurance are young and the effects of increased expenditure on the benefits should not occur before 2033″.

– The social insurance scheme will be used by few young people, since the majority of them have no contributory periods on record, whereas the requirement is for the contributory period to be at least 6 months. Therefore, the government will save quite a lot on them, says Henryk Nakonieczny from the Tripartite Commission for Social and Economic Affairs at the Independent and Self-Governing Trade Union Solidarność (NSZZ “Solidarność”).

Are 165 000 citizens worth it?

Of course, there would be nothing wrong in the resourcefulness and foresight of the government, if not for the fact that such a programme for “supporting demography” will be utterly useless. The effect that the government wants to achieve is to increase the fertility rate of Polish women.

According to the estimates of the Ministry of Labour, the first favourable demographic changes resulting from new benefits will be visible around 2028, when 13 000 children more will be born (compared to 2010). By 2060 (the last year in the government forecast), the number of children born is to increase by 165 000. According to experts, the result is unimpressive, does not change anything and does not make even the slightest contribution to solving the problem of the replacement of generations.

We would have to increase the fertility rate of Polish women from 1.3 children to 1.6 children, which means that three or more children should be born into each family. It is hard to imagine in the current economic conditions and with the current unemployment rate, says Lucyna Nowak, the head of the Department of Demographic Studies at the Central Statistical Office.

She points out to yet another important aspect of government assumptions: they may prove right but they do not have to, in particular in such a long perspective as the year 2060.

Literally anything may happen by that time, especially in demography. The results of such a programme as this one should be visible already around 2030, and if they are not included in the plans, this means that not enough has been done, emphasizes Lucyna Nowak.

Her opinion is shared by Paweł Woliński, the president of Fundacja Mamy i Taty (Mom and Dad Foundation). He quotes the example of Estonia, a very small country (with the population of 1.3 million), which managed to recover from a demographic collapse by spending much more money on this objective than Poland plans to spend.

The fertility rate increased from 1.3 to 1.63, among others as a result of the introduction of the common child care benefit (covering both the insured and the unemployed parent) several years ago. The benefit is paid to the parent for 435 days until the child completes 3 years of age and its amount depends on the earlier insurance record of the parent. The unemployed receive the minimum salary and the employed up to three average national salaries.

Changing the attitudes

The government of Estonia also took action to change social attitudes towards families with many children and to promote having children.

The reform would have failed without this element of propaganda. In Germany, the government spends approximately 3% of GDP on pro-family policy and gets practically no results. The reason is the lack of social acceptance for having many children and stigmatisation of large families. The situation is similar in Poland. Even some opinion-forming circles believe that a large family means a dysfunctional family. A radical change is needed. Otherwise, Polish women will not have children in Poland but abroad, as it is now in the British Isles, argues Piotr Woliński.

He believes that without significant changes to the tax system (i.e. introduction of tax-free amounts for each child in the custody of the parent, as it is in France, and a significant reduction of VAT rates for products for children) as well as the introduction of child care vouchers giving the parents the opportunity to choose the method of taking care of the child (instead of building more crèches and kindergartens), all activities of the state aimed at increasing the fertility rate of Poles will end in fiasco.

This view is shared also by Krzysztof Tymicki from the Warsaw School of Economics.

Poland does not have any long-term strategies or systemic plans preventing its depopulation. The Polish labour market is still governed by 19th century management styles and attitudes to employees. Women either decide to rear their children at home, thus being excluded from the labour market, or they work full time and the children are brought up by their families, nannies or public child care institutions. There is nothing in between, no flexibility, no possibility of part-time employment, etc., states Krzysztof Tymicki.

Henryk Nakonieczny from NSZZ Solidarność believes that systemic changes are necessary, but they must be really effective solutions and not just changes on paper meant to silence the EU commissioners (in May 2012 Poland received the recommendations of the European Commission on the National Reform Programme for 2012, where in point 12 the Commission recommends, among others,raising the participation of women in the labour market, improving the childcare system and increasing the enrolment rate in pre-school education. The lack of improvement in this regard may in future result in the reduction or even taking away the EU funds granted to Poland).

In the opinion of Henryk Nakonieczny, the really effective solutions include the fight against flexible forms of employment which deprive young people of reproductive age of the possibility to use the benefits, including parental benefits, that are available to employees on employment contracts. However, this theory has as many supporters as opponents.

OF