Family policy in Slovakia: In urgent need of reform

Slovakia has a reputation for radical reforms, but in recent years the former “Tatra Tiger” has come to a troubling standstill. As stagnant economic activity takes away optimism about the future, the country faces renewed concerns about its long-term development. Ironically, a country that has criticized Western European nations for their sluggishness and excessive welfare could now learn a thing or two from them. Family policy would be one such area.

Foto: CreativeCommons/ ratsbeyfus

For example, in Germany, one of the governing CDU’s main slogans for this year’s parliamentary elections was “More for Families.” Slovakia, too, is facing dismal demographic prospects. With current levels of fertility, dependency ratios past 2040 will be among the worst in Europe. However, for local politicians, a discussion on reversing negative demographics is a non-starter. Family policy remains dominantly seen as government hand-outs to the poor.

The problem of low fertility rates

While in 1970 a Slovak woman gave birth to 2.4 children on average, in 2011 this figure was only 1.45. Despite a rise in the recent years, overall fertility in Slovakia remains below most other OECD nations (see Graph 1).

Graph 1. Total fertility rates in 1970 and 2011
Source: OECD Family database

At the moment, the country still ranks among the youngest in Europe, as far as old-age dependency ratios are concerned. The number of people aged 65 or over is only 17% of people aged 15-64. It will keep its advantage of a relatively young population for a few decades. However, the situation will change quickly after 2040. Because Slovakia’s strong generational cohorts will enter old age, and because of current low fertility levels, Slovakia will rapidly become one of Europe’s oldest societies. In 2060 it will have an old-age dependency ratio of 62% (see Graph 2). That means, for every 100 people aged 15-64, there will be 62 people aged 65 years or more.

Graph 2. Projected old-age dependency ratio (%)
Source: Eurostat population statistics

An attempt at solving the ageing problem has been the introduction of a private pension pillar by the second cabinet of Prime Minister Mikuláš Dzurinda. Although private pensions take some pressure off the public pension system, they are not a panacea to population ageing.

It’s not that people don’t want to have children

While the rising importance of careers for women certainly played a role in plummeting fertility rates, changes in attitudes cannot really explain away the universal drop in fertility. According to a recent Eurobarometer survey, in most countries the number of children that families intend to have is above 2 children per woman on average. That is not only high enough to avert drastic population ageing; it even comes close to the replacement rate of around 2.1 children per woman, which would be sufficient to replace the current working population in most developed nations. Unfortunately, the actual number of births is lower than the intended one. It seems that the reason why families have so few children is that they face material obstacles to fulfilling their wishes.

Graph 3. Mean ultimately intended family size (women aged 25-39)
Source: Recalcalculated from Family sizes in Europe: Evidence from the 2011 Eurobarometer Survey

Family policy isn’t just about handing out cash

Governments have reacted by increasing spending on family policies. Yet the results vary from country to country. The family policies of France, Sweden, Denmark, Finland, Britain and Ireland are often quoted as the best, as these countries tend to have the highest fertility rates. On the other hand, the countries of Southern Europe and the CEE region do not fare so well. Let’s have a look at the reasons for the glaring differences in fertility across Europe. In the following chart, we can see total expenditure of OECD countries on family policy, divided into three distinct classes (Graph 4).

Graph 4. Public expenditure on family benefits, 2009 (% of GDP)
Source: OECD Family database

The first class is spending on tax benefits. As we can see, tax benefits do not play a significant role in family policies, with the exemption of a few countries like Germany, the Netherlands, the Czech Republic or Slovenia. As for Slovakia, there is a tax credit which enables parents to deduct more than 250 euros from their yearly income tax for every child up until the age of 25.

The second type of spending includes expenditures on childcare and pre-school education services. We can see that the leading countries in this category are the United Kingdom, France, and the Scandinavian countries. These countries are often cited by academics as examples of well-functioning family policies because of higher fertility rates. The family policies in these countries are based on widely available childcare services, the promotion of gender equality and a family-friendly work environment, as well as generous cash benefits. Women in these countries don’t have to make tough choices between having a job and having a child.

The third class of public spending is cash benefits, which would include instruments like maternity and parental leave payments, as well as other child-related payments in cash. The leading countries in this category are Ireland, Luxembourg, Austria, Australia and Estonia.

As for Slovakia, total spending on family benefits is slightly below the OECD average. The dominant class of public spending on family benefits is cash. Slovakia provides families with several types of cash benefits in addition to regular maternity and parental leave payments. However, the efficiency of these benefits is often questioned as the country’s fertility rate is relatively low. For example, a controversial benefit introduced by the first Fico government is one which provides every family with a one-time benefit of more than 800 euros in cash at childbirth. Although popular with the public, critics say that the benefit does little to encourage people to have more children.

The case for providing childcare services

The fundamental problem with family policy in Slovakia is that it is very one-sided. It virtually ignores childcare and pre-school education services. As we can see in the following chart, family cash benefits in Slovakia measured by their proportion to the economy are robust. Expenditure on maternity and parental leave payments per child are above OECD average, on a par with Scandinavian countries (Graph 5).

Graph 5. Spending on maternity and parental leave payments per child born, 2009 (% of GDP per capita)
Source: OECD Family database

On the other hand, the availability of childcare and pre-school education services in Slovakia is below average (Graph 6). Enrollment of children at the age of 3-5 years is not terrible, but every year thousands of Slovak children fail to enter kindergarten despite a high demand by parents. In 2012 alone, more than eight thousand children were not admitted to pre-school education for a lack of capacity, especially in Slovakia’s largest cities. Unlike many Western European countries, Slovakia does not have a comprehensive nationwide pre-school education system. Pre-school education facilities are in the competency of regional governments, with parents having to pay significant monthly fees of 300 euros or even more (average monthly gross wage in Slovakia is less than 800 euros). The national government provides parents with cash benefits of up to 230 euros a month as a subsidy for fees, but this solution is universally regarded as not being satisfactory as it fails to provide every child with an equal chance of getting admitted to kindergarten.

Graph 6. Enrolment of children aged 3-5 years in pre-school education, 2010 (%)
Source: OECD Family database

As for the availability of childcare for kids aged less than 3 years, in Slovakia these facilities are almost unavailable (Graph 7). As a consequence, mothers in Slovakia usually have to take a long leave from their jobs to take care of their new-born children.

Graph 7. Enrollment of children under 3 years of age in formal care, 2010 (%)
Source: OECD Family database

Even Germans are doing it

An excellent example of how things are changing even in conservative countries can be found just a few hundred kilometres from Slovakia. Germany has so far had one of the worst examples of family policy in Europe (and many Germans would probably agree with that notion). For a long time it had relied on the notion that a woman’s priority job is to take care of children under the age of 3. The state supports families with various benefits in cash, tax and regulations. But the policy doesn’t bring much; combining careers and motherhood in Germany is very hard. Germany has one of the lowest fertility rates in Europe and faces one of the worst prospects of ageing. According to demographic projections, Germany’s population is expected to shrink from current 82 million to roughly 66 million by 2060 (see Graph 8).

Graph 8. Population projection for 2010-2060 (millions of inhabitants)
Source: Eurostat population statistics

But now the country’s politicians are actually doing something about the situation. Recent German cabinets have pushed to improve the availability of formal childcare via the so-called KiTas (Kindertagesstätten), especially for the 1-2 year olds. Although there is some disagreement between the SPD and the conservative CDU/CSU on the priority of formal childcare versus subsidies for mothers, Germany is moving away from its conservative model towards one that is inspired by countries like Sweden and France. A law was passed in August 2013 that should guarantee a place in a KiTa for every child under the age of 3 years. So far, the guarantee is only on paper; although thousands new KiTas are being rapidly established throughout Germany, there still isn’t enough of them. The outgoing Merkel cabinet drew up the goal of providing a capacity for 1 million children in KiTas.

Slovakia could learn from Western Europe

Improving the conditions for families has proven to be very popular with voters in Western Europe, so why are Slovak politicians missing an opportunity to gain young mothers’ votes? One of the reasons may be that in the two decades since the fall of Communism in Eastern Europe, other topics were higher on the agenda. Politics in Slovakia has so far been dominated by the need to transform a centrally planned economy into a competitive market economy, reforming the pension and healthcare system, entering Western political organizations like the EU and NATO, and fighting corruption.

Another problem is that Slovakia has a fragmented political system that is deeply divided on ideology. The left side of the political spectrum is dominated by a statist political party, Smer-SD, that likes to call itself a European social-democratic party but clearly isn’t one. Smer’s ideology has largely been based on simply rejecting pro-market reforms introduced by the Slovak centre-right. Instead of being a progressive social democracy, it is a reactionary force that has virtually no progressive reform agenda of its own. Although improving childcare is an agenda typical for social-democratic parties across Europe, if you try to look it up in the manifesto of the current Slovak government, in the section “Family Policy,” you are not going to find a word about it.

Suggestions for policymakers

What should Slovakia’s politicians do to improve the demographic prospects of the country? First of all, they should stop looking at family policy as a policy of government hand-outs for poor families. Instead, they should start to look at it as a policy of helping families cope with the challenges they face in the modern world. The discussion has so far been mostly focused on benefits in cash and tax. Instead, policy should focus on helping parents (not just women) combine their professional careers with parenthood. Improving the availability of childcare and pre-school education should be a top priority.

In addition, the state should promote family friendly employment policies in the labor market. Slovakia’s complicated system of cash benefits should also be revised. Certain benefits should be increased (i.e., maternity leave payments), while other benefits could even be scrapped altogether (i.e., one-time payments on childbirth) so that funding is used for benefits that are more effective. Spending should be focused on a few priority instruments instead of being spread on a plethora of various ineffective benefits.

Bureaucracy is a problem, too. For example, parents who apply for the family tax credit must also apply for proof that their child is going to school regularly, which is a problem if their child is studying abroad. Money should go where it is needed with the least bureaucracy possible.

The most important thing, though, is that future reform is based in sound analysis and not ideology. There is a danger that some parties, especially on the conservative side of the spectrum, might refuse to support what they might see as “weakening of the natural role of women as mothers.” Currently there is a tendency towards radicalization on the part of Christian democratic parties in Slovakia. Just recently, various Slovak Christian conservative politicians have supported a massive pro-life demonstration organised by the Catholic Church. The most astonishing thing about the demonstration was that it demanded a complete ban of abortions, even for rape victims or in cases where the mother’s life was threatened!

But going the road of ideological radicalization is unlikely to lead the Slovak centre-right out of its current crisis, because it will only lead to more fragmentation and polarization. Instead, searching for common-sense solutions is the right way forward.

Tomáš Meravý

Tomáš Meravý

served as junior adviser to former finance minister Ivan Mikloš in 2011-2012 and Head of the Economics, Finance and Business section of SDKÚ-DS, a Slovak centre-right opposition party (2012).