FEDERGON Complementary impact analysis of earn-back effects of the service vouchers system in Belgium

FEDERGON Complementary impact analysis of earn-back effects of the service vouchers system in Belgium September 2010 TABLE OF CONTENTS I Objective...
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FEDERGON Complementary impact analysis of earn-back effects of the service vouchers system in Belgium September 2010

TABLE OF CONTENTS

I

Objectives of this study: to calculate indirect effects of the SV system ....................................2

II

Scope and methodology of this study .......................................................................................4 II.1

Earn-back effects are cash receipts or cost savings ...................................................4

II.2 The estimates in this report are based on data in existing studies and a survey with SV organisations .......................................................................................................................4 II.3 III

IV

The estimates in this study are prudent, minimalist estimates ....................................5

The SV system ..........................................................................................................................6 III.1

The introduction of the SV system...............................................................................6

III.2

How does the SV system work? ..................................................................................7

III.3

The scope of the SV system in 2009 ...........................................................................8

III.4

The direct earn-back ratio of the SV system is 39,1%.................................................8

Analysis of the indirect effects of the system ..........................................................................10 IV.1

Effect 1: less unemployment benefits through job creation .......................................13

IV.2

Effect 2: employment multiplier effect........................................................................15

IV.3

Effect 3: consumption multiplier effect.......................................................................16

IV.4

Effect 4: support function effect generated by SVO ..................................................17

IV.5

Effect 5: substitution effects through the conversion of PWA/ALE and domestic care22

IV.5.1

Cost incurred in monitoring the system ............................................................... 22

IV.5.2 Substitution effect by PWA/ALE that have been converted to PWA/SVO, and PWA workers that have transferred from a PWA to a private or not-for-profit SVO......... 23 IV.5.3 Substitution effect caused by the fact that part of the SV services has been previously provided (and financed) under other systems (thuiszorg/aide à domicile)...... 26 IV.5.4 Substitution effect caused by the fact that part of the SV services has been previously provided by OCMW/CPAS and private companies ......................................... 27 IV.6

Effect 6: Earn-back effects generated by Sodexo .....................................................28

V Conclusion: the total earn-back effect is at least 196 MEUR higher than estimated in previous studies.................................................................................................................................29

I OBJECTIVES OF THIS STUDY: TO CALCULATE INDIRECT EFFECTS OF THE SV SYSTEM The system of service vouchers (“SV system”) is assessed by IDEA Consult1 on an annual basis on behalf of the Federal Public Service for Employment, Labour and Social Dialogue (“FPS ELSD”). The main goal of this evaluation is to estimate the overall benefits or effects of the SV system and its cost. So far, the evaluation has only taken into account the direct effects and direct costs of the SV system. The following figure shows the effects that have been calculated by the FPS ELSD. The shaded effects, to the right hand side, are effects that have been identified but not yet calculated.

Figure 1: overview of effects identified by the FPS ELSD Source: Evaluatie van het stelsel van de dienstencheques voor buurtdiensten en -banen 2009, 30 June 2010, p. 86

1

IDEA Consult reports: Evaluatierapport IDEA Consult 2004, 2005, 2006, 2007 & 2009

Federgon – Complementary Impact Analysis of the SV System – September 2010

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In April 2010, Federgon requested PricewaterhouseCoopers to perform an assessment of those indirect effects and indirect costs of the SV system that have not been calculated up to now (shaded area of figure 1). PwC identified six mechanisms by which the federal government and the social security system earn back part of the costs of the SV system: .  Effect 1: Earn-back effects generated through the employment of workers in the former jobs of the new SV workers (labour market substitution);  Effect 2: employment multiplier effect: multiplier effect related to the extra consumption by workers who were unemployed (inactive) or had a lower income before;  Effect 3: consumption effect at the client side;  Effect 4: support function effect: indirect costs in support of the system;  Effect 5: substitution effects through the conversion of PWA/ALE and domestic care  Effect 6: Sodexo: the VAT, social charges etc. on costs made by Sodexo in order to run the SV system. Based on existing and published studies, annual reports and official statistics, PwC has made partial estimates for four of these six mechanisms.

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II SCOPE AND METHODOLOGY OF THIS STUDY II.1

Earn-back effects are cash receipts or cost savings In April 2010, PricewaterhouseCoopers and Federgon organised a workshop in order to validate and complete the indirect earn-back effects of the SV system. The earn-back effects are the effects on the federal budget and the social security budget. Effects can be measured in terms of: 

additional cash receipts for the federal budget/social security budget;



a reduction in expenditure (cost savings).

An indirect earn-back effect is a secondary effect caused by the system. The receipt or income is purely incremental, i.e. would not have been realised without the current SV system (e.g. VAT the service voucher organisations pay to the Federal Public Service for Finance on IT infrastructure needed for the system). The estimates of the earn-back effects in this study are made for 2009.

II.2

The estimates in this report are based on data in existing studies and a survey with SV organisations The estimates in this study are entirely based on figures and data published in other studies and reports. In this study, clear reference is made to the data sources. In some instances, effects needed to be recalculated or extrapolated to the entire group of SV workers or SV organisations. In those cases, the assumptions underlying the calculation or extrapolation are clearly documented. The indirect effects related to the support function in the SVO are based on a survey conducted for this study in the period June-July 2010. The sole objective of this survey was to gather cost data from the accounting systems of the SVO for 2009.

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II.3

The estimates in this study are prudent, minimalist estimates Where different alternatives for calculating or extrapolating figures were available (e.g. when extrapolating the support function cost reported by the survey respondents to the entire population of SVO, one can use the number of SV hours, the number of SVO or the number of workers as a basis for extrapolation), the parameter producing the most prudent, minimalist result has been used. Effects that could be calculated but the results of which could neither be supported by other sources nor validated otherwise were reported “pro memoria” (e.g. the corporate tax obligations of Sodexo for its SV activities). Due to the overall minimalist approach in quantifying the indirect effects, it is obvious that the real earn-back effects in 2009 must have been more substantial than reported in this study.

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III THE SV SYSTEM III.1

The introduction of the SV system On 1 January 2004, the SV system was introduced in Belgium. The service vouchers were an initiative of the federal government in order to promote the creation of additional jobs and to reduce undeclared employment. For the following tasks, a private individual can use service vouchers:  domestic assistance (in-house): cleaning the house, including washing the windows, doing the laundry and ironing, cooking and sewing.  domestic assistance (outside the house): doing groceries, ironing in an ironing atelier, providing assistance with the transportation of persons under specific conditions. Before the introduction of this system, domestic help was also provided to some target groups but it was organised on a different scale and with a different scope:  PWA/ALE: The local employment agency abbreviated to “PWA/ALE”, is a non-profit association. It allows long-term unemployed workers to perform activities that are not performed in the “ordinary labour circuit” due to their nature or their occasional character. Part of these activities concerns domestic aid for individuals. Since 2004, the domestic aid activities of PWA/ALE have been transformed into SV activities. So far, 236 out of 560 PWA have converted their domestic aid activities into a PWA/SVO.  Home care Home care is financed by the Regions in Belgium and provided by private and not-forprofit organisations to people who are in need of nursing at home or need aid in the household. The objective is to support, at home, the elderly, people with a chronic disease or people with a physical or intellectual handicap. Also people who were in hospital and still need aid at home, and terminal patients, can qualify for home care. This regional home care system exists alongside the SV system.

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III.2

How does the SV system work? The SV system is organised by RVA/ONEM and the issuance and clearing of vouchers is done by a third party service provider. Figure 2 shows the financial flows in the system.

Figure 2: Actors in the service voucher system 1. The service can be rendered by workers who are employed by an organisation that has been granted special recognition by the federal government as a service voucher organisation. SVO can be commercial ventures, temporary employment agencies, not-for-profit organisations, PWA, OCMW/CPAS and self-employed persons who engage wage-earners. 2. A person who wants to use the service voucher system can order service vouchers from the issuing company. For the time being, Sodexo has a contract with the RVA/ONEM to issue vouchers. For each service voucher, the user pays 7,50 EUR to Sodexo. With one voucher, he or she can pay for a 1-hour service provided by one of the recognized companies. 3. After the worker delivered the service, he/she receives a service voucher from the user. 4. The employee hands over the service voucher to the organisation for which he/she works. 5. The company sends the service vouchers to Sodexo. Sodexo pays the organisation 20,80 EUR per service voucher.

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6. The difference between the actual cost of the service (20,80 EUR) and the price that the user has paid for the service (7,50 EUR) is financed (13,30 EUR) by the RVA/ONEM. 7. The real cost for the user of the vouchers is actually lower than the 7,50 EUR he/she had to pay to Sodexo. This is because, up to a certain limit, the user can obtain a tax deduction of 30%. In other words, the real cost of the voucher for the user is no more than 5,25 EUR or 25,2% of the total amount of 20,80 EUR that Sodexo pays to the company. 8. In some instances, the RVA/ONEM will support a worker who was unemployed before and who takes a part-time job under the SV system, by providing a supplementary allowance.

III.3

The scope of the SV system in 2009 During 2009, there were 665.884 users of the service voucher system. The total amount of purchased vouchers increased between 2004 - 2009 from 8,1 million to 78,6 million vouchers. During 2009, 120.324 people were employed by more than 2.000 companies in the framework of the service voucher system.

III.4

The direct earn-back ratio of the SV system is 39,1% In its annual evaluation, the FPS ELSD calculated that the system costs 1.212,3 million EUR and that 481,4 million EUR was earned back via taxes and social charges. The overview on the next page summarizes these calculations.

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[MEUR]

Expenses Earn-back

Federal budget for the SV system Support costs for the implementation of the SV policy Cost of income tax deduction* Total cost

1.041,9 11,1 159,2 1.212,3

Less unemployment benefits through direct job creation

313,6

- Cost of job activation allowances

-53,2

- Cost of guaranteed income benefits

-40,3

- Cost of temporary unemployment benefits for SV workers

-10,6

Social security contributions received through direct job creation minus applied deductions (structural deductions, deductions for target groups and work bonus, and corrected for the substitution effect of workers that used to work in domestic care before)

192,7

Wage withholding tax received Total net direct earn-back effect

%

79,2 481,4

39,7%

Figure 3: overview of the direct earn-back effects Source: Evaluatie van het stelsel van de dienstencheques voor buurtdiensten en -banen 2009, 30 June 2010, page 93-97

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IV ANALYSIS OF THE INDIRECT EFFECTS OF THE SYSTEM Based on a workshop with Federgon and PricewaterhouseCoopers on 30 April 2010, six indirect effects have been identified that might be interesting to analyse and quantify. The following indirect effects have been recognized: 1. Effect 1: Earn-back effects generated through the employment of workers in the former jobs of the new SV workers (labour market substitution); 2. Effect 2: employment multiplier effect: multiplier effect related to the extra consumption by workers who were unemployed (inactive) or had a lower income before being employed through the system; 3. Effect 3: consumption effect: spend analysis of the clients (extra consumption through extra spare time); 4. Effect 4: support function effect: indirect costs in support of the system; 5. Effect 5: substitution effects through the conversion of PWA/ALE and domestic care; 6. Effect 6: Sodexo: the VAT, social charges etc. on costs made by Sodexo in order to run the SV system.

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A schematic overview of these 6 effects can be found below:

Figure 4: overview of the direct and indirect effects of the service voucher system The mind map summarizes all the direct and indirect effects that have been taken into account in this study. The nodes in black have already been calculated in the yearly evaluation reports of the FPS ELSD2. The blue nodes represent the indirect effects 2

Evaluatierapport 2004, 2005, 2006, 2007 & 2009

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identified by PricewaterhouseCoopers. The blue nodes with a “+” or a “-“ represent either a positive or a negative earn-back effect for the federal government. The blue nodes with a question mark are indirect effects that have not been quantified in this study. These effects require further examination or surveying before earn-back effects can be calculated. In the next paragraphs, an overview of each of these 6 effects is presented and discussed in more detail.

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IV.1

Effect 1: Earn-back effects generated through the employment of workers in the former jobs of the new SV workers (labour market substitution) One the main goals of the SV system is to create additional jobs. The FPS ELSD yearly evaluates the background of the SV workers in a survey. Survey results in 2008 show that 23,2% of the SV workers were unemployed before they started working under the SV system3. By providing work for the unemployed, the following earn-back effects are created: the unemployment benefits are no longer expensed and the workers will contribute to the social security system themselves through the social security contributions on their wages and they will pay income taxes. In fact, this effect is a recurring earn-back effect as long as the new SV job exists. In the evaluation studies carried out to date, no earn-back effects have been taken into account for workers who did hold a previous employment. However, if their old position was filled by another person, that means that the SV worker has taken up a new position (i.e. “function”) and additional employment (with earn-back effects) has been created. In order to estimate the additional earn-back effects, a scheme of previous occupation is needed. This scheme was entirely based on existing surveys and studies.

Figure 5: new jobs of SV workers reduce unemployment benefits

The studies of the FPS ELSD4 have identified 3 main direct earn-back effects that are related to the SV workers for the federal government:

3

Evaluatierapport, 2007, page 63.

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1. the earn-back effect of lower unemployment payments (313,6 MEUR) 2. the earn-back effect of social security contributions (192,7 MEUR) 3. the earn-back effect of personal taxes (79,2 MEUR) In addition to these effects, the indirect effect of the creation of new jobs needs to be considered. For the category “employed elsewhere”, no earn-back effects were taken into account in the SPF ELSD study. The survey carried out on behalf of the SPF ELSD among 1.094 SV workers, showed that almost half of the SV workers who held a previous employment resigned because they wanted another job5. Only 13,8% were laid off due to a restructuring operation or insolvency of their employer. 15,3% had a temporary contract that had ended, so probably some of these positions were indeed merely temporary and were not filled by someone else. These percentages apply to the whole population of workers who had a paid job (so also including illegal employment or the same job but not under the SV system). If the results of this survey are applied to the 28,9% of workers who had an employment contract outside the home care sector, the conclusion is that it is safe to say that approximately 78% of the old positions (i.e. “functions”) have been filled by other workers. A recent study, performed by Gesellschaft für Angewandte Wirtschaftsforschung mbH6, confirms that, with the introduction of the service voucher system, additional long term jobs have been created. The results of their survey (conducted in 2010) show that 76% of the SV users in 2010 had no household help before the SV system was introduced. This means that, of the total service hours in 2009, more than 58.500.000 service hours have been “created” by the system: prior to the SV system, the users cleaned their home themselves. The study also indicates that approximately 6% of all service voucher users actually replaced unofficial labour by SV services. Furthermore, the study conservatively forecasts that the fraction of people switching from unofficially employing household help to the service voucher system will be between 10 and 15 percent. Assuming that indeed 78% of the workers who were employed before entering the SV system left a job that still exists, the recurring reduction in unemployment benefits for this category amounts to 75,3 MEUR. The additional income taxes and social security contributions related to these new jobs have not been calculated for prudential reasons (it is not 100% clear whether or not they have already been taken into account in the initial estimations).

4

Evaluatie van het stelsel van de dienstencheques voor buurtdiensten en -banen 2009, Report 30 June 2010 – These estimates also include the earn-back amounts for PWA workers and people on welfare 5 Evaluatierapport, 2007, p. 63 6

Research project: Acceptance and perceived prevalence of the Belgium service voucher system, Gesellschaft für Angewandte Wirtschaftsforschung mbH, February 2010, p. 20

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IV.2

Effect 2: employment multiplier effect Due to the implementation of the service voucher system, people that were unemployed before, have found a new job. This has a positive effect on the revenue side for the federal government as earn-back effects will follow from the personal taxes and the social charges payable in connection with these newly created jobs. Apart from these direct effects, there are other indirect spill-over effects: due to the fact that these people have an (increased) income, their consumption will increase. If the additional consumption is domestic consumption it will generate additional turnover for businesses in Belgium and hence create additional employment. This will generate additional income for the federal government: on the one hand, there will be additional income from corporate tax paid by companies and from VAT levied on the additional sales transactions and, on the other hand, additional employment will cause the amount payable by way of unemployment benefits to decrease, and the amounts of social security contributions and income taxes to increase.

These indirect effects are represented in the scheme below:

The additional employment will in itself generate a new spiral of additional turnover and hence new jobs. In fact, the only leakages in this system are the fact that people might consume abroad, buy imported goods or save their money. In economic terms, this is a complex multiplier effect that of course diminishes the further one goes in the value chain. Research by the federal planning agency has shown that this effect differs according to the sector of the economy in which additional employment is created. The multiplier effect has not been estimated in this study.

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IV.3

Effect 3: consumption multiplier effect Families or individuals who use the service vouchers have more spare time. It can reasonably be expected that, because of this additional spare time, these people will consume more (e.g. spend more time (and increase consumption) practising their hobbies), or will be more productive (work additional hours and hence pay more income taxes and social security contributions). The indirect effects related to the consumption effect are presented in the scheme below:

The service voucher system will have a positive indirect effect for the federal government due to: 1. higher VAT revenues due to the fact that the SV users have more spare time and therefore it can reasonably assumed that they will increase their consumption; 2. higher corporate tax revenues due to the increased demand; 3. higher receipts of social security contributions and personal taxes and lower payment of unemployment benefits. However, it is expected that, of the six effects, this might be the smallest and that it will be partly offset by the budget that users spend when buying vouchers (as they cannot spend this money on consumption) .

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IV.4

Effect 4: support function effect generated by SVO This paragraph highlights the indirect effects generated by the SVO. In order to support the SV system, these companies have to make investments (and pay non-refundable VAT) and hire support staff to manage/support the company (creation of additional jobs). Moreover, the SV companies also pay corporate taxes (private sector) and other taxes and duties including (but not limited to) property tax and municipal taxes. These main indirect effects are represented in the scheme below.

In order to estimate the indirect earn-back effects generated by the SVO, PricewaterhouseCoopers has conducted a survey amongst Federgon members. The following steps have been taken in order to conduct the survey: 

 

2 interviews with Federgon members in order to get a good view of the way they are organised, the activities that drive the support cost, and the investments that were made in order to put the support organisation in place; Setting up an electronic survey accessible to all Federgon member companies; 3 interviews with non-Federgon members in order to gather more qualitative information and to check whether the average cost for the Federgon members is also a reliable cost estimate for the support function of non-Federgon member companies.

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In total, 22 Federgon members out of 60 participated in the survey. On an aggregate basis, these 22 companies together reported 18.257.425 service hours. This is approximately 23,1% of the total “service voucher sector”. The respondents were requested to list their costs as stated in the annual accounts for the year 2009. This resulted in the following cost categories per service hour:

Figure 6: Breakdown of the different cost types per service voucher hour for 22 respondents 63% of the total cost of a service hour is salary cost (salaries include both the salaries of the workers and the salaries of support staff and management). 25,5% of the reported cost of a service hour relates to social security contributions (both worker’s and employer’s). The table below indicates the more detailed results of the survey as well as the outcome of the extrapolation (made by PricewaterhouseCoopers) of the answers for the whole sector.

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The weighted average cost per service hour of the respondents was 18,00 EUR. The variance of this cost between SVO is relatively large. This can be explained by the way the cost per hour is calculated: Total cost per service hour = total cost per SVO/total hours worked by SVO This equation can be influenced significantly by the productivity of the work force: the total cost contains the total personnel cost (so also inactive hours) whereas the total hours worked only represent productive hours, paid for by the user. Inactive hours can be caused by: - absence of the worker (for less than 1 month); - inability of the SV worker to perform his/her tasks because the user is absent or cancels the appointment; - training; - team meetings, planning meetings, team building. In the evaluation report 2006, the FPS ELSD indicates that only 74,22% of the contractual hours registered by RVA/ONEM have been registered as worked hours by RSZ. The variance in productivity combined with the fact that SVO have different working hours and contracts (different joint industrial committees – PC/CP) results in a large variance in working hours/FTE in the sector. From the evaluation reports, the following figures can be deduced: -

an average SV worker works 17,4 hours per week; 1 FTE equals 1.848 working hours according to RVA/ONEM calculations; 1 FTE equals 1.694 working hours according to the Federgon survey results.

In the extrapolation, we have used 1.848 hours/FTE in order to extrapolate costs. This results in a lower, more prudent estimate than the 1.694 hours/FTE. Previous surveys (e.g. the PwC survey conducted on behalf of the FPS ELSD in 2006) have shown that the temporary employment agencies, apart from the PWA, have a

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relatively lean cost structure. Hence, the extrapolation of the cost per hour of Federgon members is a prudent estimation for the whole sector. Based on the extrapolation of the survey results, the following earn-back effects generated by all SVO have been identified: 1. VAT revenues: 7,6 MEUR 2. Corporate tax: 12,8 MEUR 3. Social security contributions for support staff: 92,8 MEUR 4. Other taxes and duties: 1,1 MEUR 5. Less unemployment benefits through the creation of new jobs: 22,3 MEUR 6. Additional advance income taxes (i.e. in the form of wage withholding tax) through the creation of new jobs: 23,0 MEUR Each of these effects is explained into more detail below: 1. VAT revenues In order to support the SV system, the SV companies have recurring operational costs. On these expenditures, the SV companies pay (partly) non-refundable VAT. This VAT can be considered as an indirect earn-back effect for the federal government. Based on the extrapolation of the data from the survey, PricewaterhouseCoopers calculated that the earn-back effect of VAT on operational costs incurred by the SVO is 7,6 MEUR. 2. Corporate tax Private SV companies need to pay corporate tax on their profits. Based on the extrapolation of the amount of reported corporate tax in the survey, the earn-back effect from corporate tax can be estimated at 12,8 MEUR (note: corporate tax was only extrapolated to the private sector SVO using the proportion of service hours of this type of organisations). 3. Social security contributions of support staff Operating an SVO requires both support staff and managerial staff. The survey resulted in an average proportion of support staff compared to workers of 2.505 FTE/42.741 FTE for the entire SV system, being 5,56%. This corresponds to 1,09 FTE support function per SVO. Based on the extrapolation of the data from the survey, the earn-back effect of social security contributions can be estimated at 47,5 MEUR. 4. Other taxes and duties Beside the earn-back effects mentioned above, the companies also need to pay other taxes and duties. Based on an extrapolation on the basis of number of service hours, the earn-back effect can be estimated at 1,1 MEUR. 5. Less unemployment through the creation of new jobs The survey shows that approximately 2.505 FTE additional jobs were created. These new jobs represent a saving in unemployment benefits of at least 22,3 MEUR (at the minimal benefit level assuming 1 FTE = 1 person).

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6. Additional income taxes through the creation of new jobs New jobs do not only generate additional social security contributions but also additional income taxes. The income tax effect was estimated based on the relationship between this effect and the unemployment benefit effect as estimated by the FPS ELSD for direct job creation. It amounts to 23,0 MEUR.

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IV.5

Effect 5: substitution effects through the conversion of PWA/ALE and domestic care

In addition to effects 1 to 4, there are various budgetary effects at the level of the federal government that also need to be taken into account. These effects are: 1. Costs incurred by the government in monitoring the system 2. Substitution effect ensuing from the conversion of PWA into SVO and the integration of PWA workers in the SV system 3. Substitution effect caused by the fact that part of the SV services has been previously provided (and financed) under other systems (thuiszorg/aide à domicile) 4. Substitution effect caused by the fact that part of the SV services has been previously provided by OCMW/CPAS and private companies They can be visualised as follows:

Each of these effects are discussed into detail in the following paragraphs.

IV.5.1

Cost incurred in monitoring the system These costs mainly relate to the Commission that grants the approvals in the sector and the department of external services (monitoring of the system). There are 2 main authorities responsible for investigation of fraud:  The Task Force Dienstencheques/Titres-Services (Administrative control): this Task Force was created in May 2009. They operate by checking databases, verifying

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administrative data coming from other departments and scanning images of cheques submitted. The RVA/ONEM (Field control): once fraud can be suspected, the RVA/ONEM performs specific checks. In addition, the RVA/ONEM also performs routine checks. These investigations are done by 11 decentralised unemployment agencies7.

Currently there are 147 inspectors who spend 10% of their employment time investigating “dienstencheques/titres-services” companies8. These additional functions generate the following earn-back effects:  less unemployment benefits  social security contributions paid by the employees  additional income taxes These effects are offset by the fact that the RVA/ONEM has to pay the salaries and the social security contributions of these new positions and has also invested in supporting material (PC, communication etc.). Therefore, the total effect is estimated at –1 MEUR. This is a prudent estimate. It is not clear whether this cost has also been included in the 11,1 MEUR support costs for implementing the SV policy already reported by the FPS ELSD.

IV.5.2

Substitution effect by PWA/ALE that have been converted to PWA/SVO, and PWA workers that have transferred from a PWA to a private or not-for-profit SVO Most PWA/ALE were founded in 1995. After a quick start, almost every municipality in Belgium had its PWA/ALE. In 1995, 5.000.000 PWA vouchers were sold and, in 1999, their number had grown to more than 35.000.000. PWA vouchers can be used for a broad range of activities such as gardening and baby-sitting. The vouchers can also be bought and used by not-for-profit organisations or local authorities such as schools. In 1999, approximately 28% of the vouchers were used for domestic care. The PWA system differs from the SV system not only by scope but also by organisational set-up. The figure on the next page shows the financial flows in the PWA system.

7 8

Source: http://www.rva.be/web_Rapport/D_rapport/Rapport_3/3_6_Titres/ContentNL.htm Source: http://www.senate.be/www/?MIval=/Vragen/SchriftelijkeVraagPrint&LEG=4&NR=5472&LANG=fr

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Figure 7: overview of the financial flows in the PWA system The most significant difference is that there is no employment contract between the PWA/ALE and the PWA worker, who remains unemployed and receives an additional allowance from the OCMW/CPAS or Payment Office. The RVA/ONEM actually receives the difference between the price paid by the PWA user and the reimbursement after the PWA/ALE also received a contribution. Since 2004, the federal government has obliged PWA to convert their domestic care activities to regular SV activities. This regulatory change has had two major effects: -

A lot of PWA converted their domestic care activities into sui generis PWA/SVO, that are recognized under the SV system. Part of the PWA workers now works as a SV worker for a PWA/SVO under the SV system;

-

Quite some PWA workers stopped their PWA activities and took up SV employment with a private or not-for-profit SVO (not PWA).

In order to estimate the scope of both effects, the evolution of PWA workers over time was analysed.

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Figure 8: Evolution of the number of PWA workers for 2000-2009 (source: RVA/ONEM) The overall development of PWA workers shows a sharp decline as from 2004. In the period 2004-2009, the number of PWA workers was halved and actually decreased by 20.000. A comparison of figure 8 with the evolution of the unemployment rate in Belgium and the Regions shows that the decline cannot be explained by, for instance, a sudden drop in unemployment rates during the same period.

Figure 9: comparison between the evolution of PWA workers and the evolution of the unemployment rate in Belgium

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The comparison of both graphs shows that the sharp decline in PWA workers since 2004 cannot be explained by a sharp decline in unemployment figures (although it should be noted that, in Flanders, PWA workers were not included in the unemployment statistics until from 2005). Hence, it can be concluded that approximately 10.000 workers were converted to PWA/SVO workers and that approximately 10.000 workers joined other SVO types. The PWA/SVO conversion had the following effects: 

PWA still use the same facilities and continue their non-SV operations, so the savings for municipalities are minimal.



PWA no longer receive 20% of the difference between the voucher price and the allowance.



The RVA/ONEM no longer pays unemployment benefits to workers (direct job creation).



The RVA/ONEM no longer receives part of the difference between the price of the voucher and the extra allowance of the employee.



OCMW/CPAS no longer pay benefits to people on welfare (direct job creation).



Since 2006, the wage of the PWA coordinator needs to be paid back to the RVA/ONEM, i.e. for the part the PWA works for SV (Royal Decree of 27.1.2006, amended by Royal Decree of 11.12.2006) => this is an additional earn-back effect of 5.339.000 EUR (of the total PWA civil service cost of 31.061.000 EUR).

In this study, we only take into account the latter effect as the other effects have already been estimated by the FPS ELSD. For the 10.000 workers that have transferred to other types of SVO, the same reasoning applies.

IV.5.3

Substitution effect caused by the fact that part of the SV services has been previously provided (and financed) under other systems (thuiszorg/aide à domicile)

A recent study shows that, in Flanders, 3,3 million service voucher hours are consumed by the target group for subsidised domestic care. This is partly a substitution for (more expensive) private domestic care hours and partly extra growth (partial solution for the waiting list in the sector).

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The FPS ELSD has corrected the estimated direct effects for this category of workers (some 8% of the population) because the services had been previously provided under another system that was, however, financed by another authority.

IV.5.4

Substitution effect caused by the fact that part of the SV services has been previously provided by OCMW/CPAS and private companies The same logic as in IV.5.3. applies to this category of workers.

Federgon – Complementary Impact Analysis of the SV System – September 2010

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IV.6

Effect 6: Earn-back effects generated by Sodexo As of 1 January 2008, Sodexo is responsible for the printing and distribution of the “dienstencheques/titres-services”. For each voucher Sodexo distributes, it receives a payment from the requestor (7,50 EUR) and an additional subsidy from the federal government (13,30 EUR). As of 1 January 2008, Sodexo also receives an additional expense allowance of 0,0852 EUR (excl. VAT) for each service voucher. Considering the fact that, in 2009, approximately 78.214.717 service vouchers were distributed, the total cost of the expense allowance for the federal government is estimated to be 6.663.893 EUR. We assume that this expense has been included in the total support cost of 11,1 MEUR, so no additional costs are taken into account in this study. The evaluation studies, on the contrary, have not taken into account the earn-back effects of the support function of Sodexo. These can be summarized as follows:

The amounts have been estimated based on the cost of SVO per FTE support function.

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V CONCLUSION: THE TOTAL EARN-BACK EFFECT IS AT LEAST 196 MEUR HIGHER THAN ESTIMATED IN PREVIOUS STUDIES The estimates of four of the six effects have shown that the total earn-back effect is at least 196 MEUR higher than estimated in previous studies. The table below summarizes all the effects that could be estimated:

The estimations were made in a prudent, minimalist way, which means that the earn-back effect of the mechanisms as described in this table will actually be higher. Apart from the effects summarized in the table, other effects have been identified, but they could not be calculated due to a of lack of substantial data. These effects, such as the employment multiplier, might be very substantial.

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