Free Market Fundamentalist Opinion

Dutch Child Care Would Pay Price for Government’s Failure

Child benefits need an overhaul, but the government’s reforms would hurt child-care providers.

Amsterdam Netherlands daycare center
Daycare center in Amsterdam, the Netherlands (Klein & Co)

Dutch child-care providers would pay the price for the government’s failed child-care policy.

The last Dutch government resigned over a scandal in child-care benefits. Thousands of parents were wrongly accused of fraud.

The current government, a coalition of the same four parties (including my own), would replace the benefits to parents with subsidies to child-care providers. Child care would be almost entirely subsidized with parents paying just 4 percent of the costs.

Industry groups expect an increase in demand while the sector is already understaffed.

Experts fear a loss in competition and innovation. All but the most expensive child-care providers would be forced to standardize their programs and their rates in order to qualify for subsidies.

Change is needed

Some 20,000 Dutch families were falsely accused of benefits fraud in the last decade. Forced to pay back (tens of) thousands of euros in child support, the mistake plunged many into bankruptcy.

The current government is paying out €5.5 billion in reparations.

No wonder it wants to eliminate the benefits, but the government’s ambition, to make child care 96 percent free, has flaws.

Dutch child care is better than most

Dutch and UNICEF research rank child care in the Netherlands among the best in the world. Only Scandinavian countries and Luxembourg score higher.

There is a wide variety of providers. Around half are commercial. The other half are not-for-profit. The average rate of center-based, pre-school daycare is €8.95 per hour. After-school centers charge €7.98 per hour on average, babysitters and nannies €6.45. Rates are higher in Amsterdam.

How child-care benefits work

The government sets maximum hourly rates in order to calculate child-care benefits: currently €8.50 for pre-school, €7.31 for after-school and €6.52 for home-based child care. Parents pay more expensive care out of pocket.

For child care under the price ceilings, the government pays 33 to 96 percent, depending on the parents’ income.

There are seventy income scales. When parents get a raise at work, they have to let the tax authority know right away. If they move up an income scale, their child-care benefits are reduced. If they fail to report a change in their income, they might be accused of “fraud”.

Non-working parents don’t qualify for benefits.

The government’s plan

The coalition parties would reform the system in two ways:

  1. Pay 96 percent of child care to all parents. So get rid of the income scales.
  2. Replace benefits to parents with direct payments to providers.

That removes any possibility of fraud (or “fraud”) by parents.

The maximum rates would remain. They are adjusted annually.

Government spending on child care would more than double from the €3.5 billion paid out in benefits last year.

Industry expects staff shortages

Providers worry they won’t be able to meet an increase in demand. “We’re already short on staff,” Emmeline Bijlsma of the trade association Kinderopvang tells the national broadcaster NOS.

70 percent of pre-school, and 79 percent of after-school, daycare centers have vacancies.

Kinderopvang werkt!, a roundtable of industry groups and trade unions, estimates that the sector will need to find 50,000 workers in the next ten years.

ABF Research, which analyzed the impact of the proposed reforms for the government, believes that, without the reforms, employment in child care will rise 11 percent, resulting in 7,000 vacancies by 2031. With the reforms, there would be a 30 percent increase in demand for child care, resulting in a shortage of 29,000 workers.

That would mean fewer daycare centers, fewer caregivers per child, shorter opening hours — and probably waiting lists.

Reforms fall short of their goals

Wealthy parents will pay a premium to get their children into high-quality child care without delay.

Wim Groot, a health-care economist, warns that the rest of the system will be reduced to a “one size fits all” to accommodate the government’s price ceilings.

One of the ruling parties’ arguments for reform is that widely available child care will help prevent inequalities developing at an early age. If Groot is right, they would achieve the opposite: kids of wealthy parents getting the best child care, the rest mediocrity.

Mothers are unlikely to work more

Another goal is to get more women into full-time work. Three in four women work part-time in the Netherlands, the highest share in the EU. But only 10 percent want to work more.

The Netherlands Bureau for Economic Policy Analysis doubts free child care would help. German states that made child care free of charge didn’t see an increase in employment. They saw a decrease in informal child care provided by neighbors and relatives.

Outcomes differ

In Quebec, child care has been heavily subsidized for twenty years. Parents pay $8.35 per day. Yet French-speaking Canadian teenagers don’t score better in high school than teenagers in other provinces.

In the United States, by contrast, child care for low-income families does appear to boost academic performance later in life.

Canadian researchers blame commercialism. But in the United States, all child care is commercial.

One state failure leads to the next

Such differences in outcomes could open the door to more state intervention. Once the government is paying daycare centers, it will want a say in how they’re run.

Left-wing parties in the Netherlands already want child-care centers to prepare children for primary school. Some would even merge child care and primary education.

So one state failure (the benefits scandal) leads to another (“free” child care with waiting lists) to the next (government meddling in child-care programs).

Bijlsma is wary. Young children don’t learn in school-like ways, she argues. Better to let them play: “That’s how children aged 0 to 6 learn.”