Outsourcing Domestic (Care) Work: The Politics, Policies, and Political Economy

Introduction

The “new political economy of outsourcing” of domestic work differs from the “old” outsourcing in important ways. Domestic services throughout the nineteenth and the first half of the twentieth centuries served the middle and upper classes. Women in these classes typically were not in paid work, but employed domestic help for running the household. Certainly, even today, there are very wealthy families where non-working wives rely on hired help for cooking, cleaning, and looking after the family. The new wave of domestic services, however, differs from the old outsourcing along three dimensions: (i) user demographics; (ii) the forms of service provision; and (iii) who the service providers are. Today, the household types that are most likely to rely on domestic help are relatively well-off dual earner households and elderly households. Second, forms of service provision are more varied as many households purchase services for a certain number of hours per week rather than hiring full-time help. Third, there is an increase in the number of migrant service workers reflecting a new phenomenon (Lutz 2002; 2008). This special issue looks at the new wave of domestic services as the result of attempts by households and governments to cope with three types of “deficits”—“care deficit,” “time deficit”, and “job deficit”—which are part of the new socio-economic realities wealthy countries confront. We thus conceptualize “outsourcing of domestic work” as a process by which both the state and family increase their reliance on private markets to carry out both care and non-care domestic work.

Before we delve into what the three deficits are and how they came about, it is important to clarify what we mean by “outsourcing of domestic work”. We recognize that domestic work involves very different types of work ranging from care (both elderly care and childcare) to cooking and cleaning. As Morel (2015) notes EU documents use various terms such as “local services”, “household services”, and “domestic services,” to capture the phenomenon of outsourcing, including various forms of care and domestic work, Lutz (2008) rightly makes the point that it is hard to disentangle the overlapping of care or domestic services in daily practices. For instance, when someone is paid to look after a frail elderly person, the care involves personal services such as feeding and bathing as well as household services such as making the bed and cleaning the room. Adding to the complexity, in labor force surveys and census data, those working in care and domestic work often appear in the same occupational category: those listed can have more qualified work, better wages, or work in institutional settings, but are placed in same code with those who are doing cleaning and household task, lower-waged labor, in private households. In this special issue, we use the general term of domestic services to capture the work performed in a low-skilled occupation in the expanding private market for domestic service sector in Europe.

This special issue combines four articles that discuss politics and political economy of outsourcing of domestic work with a Forum on Social Investment Strategy. At first sight, it might appear as if outsourcing of domestic work and the social investment strategy might have little in common. The policy paradigm of Social Investment Strategy focuses on activation of all workers—both men and women—as a way of getting everyone to contribute to the sustainability of the welfare state. It is also a strategy that is committed to the life-long learning to ensure the employability and productivity of the workforce. It is interesting to note that the emergence of political discourse on domestic services more or less coincides with the rise of Social Investment Strategy. Social Investment scholars generally consider the 1997 European Employment Strategy and the 2000 Lisbon Agenda as policy shifts that share strong synergies with the Social Investment ideas. Interestingly, this was precisely when the idea of domestic services and personal services was embraced at the EU level as part of the activation policies. However, when Social Investment Strategy advocates emphasize “stock,” “flow”, and “buffer” of human capital (see Hemerijck 2015), it is not completely clear what type of political economy it envisages. One thing that is clear is that Social Investment Strategy considers social democratic countries as models of high welfare/high flexibility/high gender equality. Social democratic “activation” of everyone's manpower—including that of mothers—premised on the political willingness to publicly shoulder women's otherwise unpaid care work. The beneficial side effect was that the government created good public sector jobs for women further activating more women into the labor force. Yet, today, Social Democratic welfare states themselves are undergoing changes. As early as the 1990s, Kangas and Palme (1992) warned that the level of demographic aging and slower economic growth would make it increasing difficult for the Scandinavian countries to solve social and labor market issues by expanding the public sector. And as they predicted, the size of public sector has been very stable since 1995.¹ In this context, it is worthwhile to note that when Denmark introduced the home service scheme in 1994, the aim was to link unemployment to domestic services for the elderly. It was a new attempt to increase services without expanding public employment. More recent changes such as the introduction of public subsidies for private outsourcing of domestic work in Finland and Sweden are much broader programs than the Danish home service for the elderly. Obviously a fuller activation of women with family responsibilities requires more than the outsourcing of care to the welfare state. Not fully addressed by the advocates of the Social Investment Strategy is women's unpaid tasks and the possible implications of different solutions.

The New Socio-Economic Realities and the Three “Deficits”

We situate “outsourcing of domestic work” in the context of three new socio-economic realities. First, women in wealthy countries are better educated and more likely to be in paid work. Second, governments in wealthy countries face new economic requirements as a result of more intense global competition and technological advancement. Third, at the same time, the levels of longevity achieved in wealthy countries have increased the number of very old people who need assistance in their daily lives.

It is well documented that women's educational investments have increased dramatically in wealthy countries. In the majority of the countries, women today surpass men in their educational attainment. The decline of manufacturing and growth of service section during the postwar years created more jobs for women and made greater educational investments worthwhile. The latest economic changes, however, have given rise to a new context in which highly educated women became particularly valuable. The intense global economic competition means that wealthy countries need to upgrade their economies to keep ahead of emerging economies. As emerging markets catch up with the more advanced wealthy countries, wealthy countries need to specialize in higher value added more technology- and knowledge-intensive sectors of the economy (Boyer 2004; OECD 1999; Rodrigues 2002). This is why the knowledge-based economy has become so important. The model of knowledge-based economy requires a steady supply of highly educated workers. In order to grow the economy, advanced industrial societies will have to sell more of technology- and knowledge-intensive goods and services. In other words, the new knowledge-based economy intensifies demand for highly skilled human capital, which can only be met by increasing the overall educational levels of the native population or bringing in highly educated workers from abroad (Goldin and Katz 2008). Given the high levels of women's educational investments, many governments are seeing the fuller activation of highly educated women's manpower as an economic imperative (see Shire 2015; Morel 2015).

In addition to new labor market pressures, demographic pressures in advanced industrial societies also mean the ranks of the elderly citizens, who need assistance in their daily lives, are increasing. Paradoxically, demographic aging also makes it important for governments to mobilize the manpower of women and everyone else—including older workers—as a way of sustaining the ever-increasing cost of the welfare state as well as preventing the size of the workforce from shrinking. As scholars of global care chain have noted, demographic aging and greater labor force participation of women increased the potential demand for private domestic services, childcare and eldercare in wealthy nations, which was filled by the flow of migrants from poorer nations (Ehrenreich and Hochschild 2003; Parrenas 2001). Welfare states provide care services in some countries, but that is not enough to release women from the lion's share of unpaid tasks they perform around the house even in gender egalitarian Scandinavian countries (Evertsson and Nermo 2007; Hobson, Susanne, and Judit 2011). In short, the new domestic services have emerged as one of the solutions to the triple deficits: (i) “time deficit” of highly educated women; (ii) “job deficit” as result of global competition and technological change; and (iii) “care deficit” due to demographic aging.

Not all these three deficits were equally important in all European wealthy countries. The care deficit was much smaller in those countries that had developed public services for elderly care and childcare when compared with countries that had not developed such services. Time deficit of highly educated women also varies across countries—if they wish to work. Highly educated women in conservative welfare states in Northern Europe—such as Austria and Germany—find it difficult to work full-time if they have family. This is because, in these countries, both public services and market-based were underdeveloped. This situation contrasts sharply with conservative welfare states in Southern European countries, where highly educated women have always had access to a large informal domestic services sector. In fact, the process of domestic services expansion in many European was not just an economic phenomenon but it also involved a political process of adjustment to the new challenges (see Kvist, Carbin, and Harjunen 2009; Kvist and Peterson 2010; see Morel 2015; Shire 2015; Hellgren 2015).

Outsourcing of Domestic Work and Varieties of Politics

Much of the recent research on care/domestic work in European societies has focused on convergence (Mahon et al. 2012; Williams 2012a, 2012b) in supply and demand. These reflect a set of conjunctures: the care deficit resulting from women's increased labor force and aging societies without an adequate increase in social investment in care for elderly and children. Alongside the demand is the emergence of private markets and the use of migrants who comprise a low wage sector, many of whom work informally and lack the social benefits and rights and protections of the majority in the receiving country (Anderson 2000; Lutz 2008; Leon 2010). However, while recognizing these apparent convergences, there is also an awareness of diversity and differences in the processes that shape these markets for outsourcing of domestic services: the politics and the discourses underpinning them. In this volume we underscore that it is important to look beyond supply and demand and consider the ways in which policies, specifically in Europe, have structured the markets for domestic services, and the shaped who are the employees, employers, and users of these services.

Politics, Policy, and Discourse

Political parties

Is there a particular political configuration that pushes a country to favor the expansion of private sector care/domestic services? It is difficult to find a clear pattern in the politics and policies that incentivize private markets when considering (i) support or opposition to expansion of private sector services; (ii) political desire to formalize and regulate the domestic service sector; and (iii) access to social benefits and protections. Right left cleavages explain some of the policy strategies but not others. Both left and right parties and their coalitions have introduced legislation that encouraged markets for domestic services, including vouchers, tax deductions, and tax subsidies, even in Conservative welfare regimes where Christian Democrats have been staunch supporters of the more traditional gender roles (see Shire 2015). Nevertheless, generally, left parties have been more likely to argue for social benefits and employment protections. As Hellgren points out in this volume, the Social democrats in Spain introduced legislation to formalize the sector in which employers (households) had to cover the social costs, but a year later the Conservatives amended the legislation so that most households would no longer be responsible. Shire notes that governments in Austria and Germany (sometimes in coalitions) have sought to formalize the sector through vouchers and tax credits. Christian Democrats were more concerned with providing family supports, particularly for elderly care. Social Democrats' main interest was the curbing informal labor. Both developed policies built around the assumption that those working in sector would be wives who derived benefits from their husbands, not migrants who would be employed in part time mini jobs without social benefits. In the Swedish case, the partisan lines have been distinctly drawn. The Conservative alliance introduced a generous tax subsidy for households to purchase private services (the RUT) in order to formalize and regulate the sector, and to provide those working in the sector with social benefits. The Social Democrats have always been opposed to the RUT. Currently, the left coalition parties, now in power, are seeking to reduce the subsidy. The Social Democrats and the Left party ultimately would like to phase it out.

Across the political spectrum in these countries who have incentivized private markets for domestic services, we do find common denominator: aims to streamline welfare budgets and the making of these services affordable to individuals and households. There have various strategies for doing this, ranging from taxes to subsidize the social costs to various kinds of exemptions that exclude domestic services from the standard employment protections in regular employment contracts. Tax subsidies, in reducing the cost of services, encouraged purchasers of service to shift from informal to formal employment and spurred the expansion of the private market through firm-based structures (Hobson and Fahlén 2015). Some countries, such as Spain and the Netherlands, placed domestic services in a category outside employment protections, “special regimes” (Leon 2010; van Walsum 2011). Now there are other less blatant forms of exemptions in place that have the same effect, which allow households to avoid paying social costs, but seek to regularize the sector: these include requiring full-time employment with one employer or placing income ceilings on the use of vouchers and tax deductions. These strategies perpetuate the informality in domestic services (Shire 2015; Hellgren 2015).

Political actors beneath and beyond the state

To understand the processes shaping both the emergence of private markets in domestic services, it is important to look at political actors beneath and beyond the state.² Unions have been visible in policy debates on informal employment and undocumented workers (Hellgren 2012; Van Hooren 2011). However, they have been passive in organizing domestic workers, often faced with constraints reaching those working in private households. This is true even among workers in firm-based private sector services. Hellgren (2015), considering unions in Sweden, also suggests that their ambivalence to this type of work has inhibited their activities to organize these workers in a country with high union membership: they see domestic services as basically nonegalitarian and oppose the use of tax monies for affluent middle-class families.

Other stakeholders, such as churches and NGOs for the undocumented, have been instrumental in promoting rights for irregular migrants, of which domestic workers comprise a large proportion (Hellgren 2012, 2015); these include healthcare and schooling for children. In Spain churches function as informal employment agencies, linking migrant workers with households (Hellgren 2015). Of course firms who profit from the sector³ have been some of the most active lobbyists at the EU and national levels for policies to expand the private markets (Morel 2015).

Looking beyond the state, the EU with its agenda of reducing public sector spending and creating more jobs with greater employment flexibility has been a promoter of private markets, seen as part of its overall strategy for growth and competitiveness (see Morel 2015). The ILO Convention on the rights and protections of domestic workers has had an impact in pressuring governments to formalize the sector (Hobson and Bede 2015; ILO 2011). Of course, firms who profit from the sector have been some of the most active lobbyists at the EU and national levels for policies to expand the private markets (Morel 2015).⁴

Political discourse

Formalizing the sector has been one of the main drivers for state intervention; and this discourse has been most salient in Northern Europe, which reflects the intolerance for informal work. However, two other discourses are also salient. One is to create low skill jobs and jobs for the unemployed as it was explicitly the case of Belgium and Denmark. The other is the political argument based on the promotion of gender equality. When tax subsidies for domestic services appeared in political discourse, those who favored it argued for the need to formalize the sector and collect tax revenues, but also maintained that private markets for domestic services would promote of gender quality (Hellgren 2015; Hellgren and Hobson 2011; Kvist, Carbin, and Harjunen 2009). For instance in Sweden, acknowledging the generous welfare state services and policies such as Daddy leaves had not yet resolved the gendered division of labor at home; the Liberals and Conservatives framed their generous tax subsidies (up to 100,000 SEK for a couple, around 10,700 Euros, a year) as a gender equality measure that would allow women more time to invest their human capital and be able to compete with men. In France, the main impetus behind the tax reductions (up to 12,000 Euros a year per household) was to create jobs for the unskilled, particularly for women, but gender equality and reconciliation of employment with family also was of part of discursive rationale. The situation in Southern European countries, however, differed.

The politics, policies, and discourse of domestic services in Southern European countries have their distinct trajectory. The welfare states in this group of countries provide relatively few social services leaving families to fend for themselves. They have always had the tradition of informal work whereby upper- and middle-class families hired low skill native-born women from rural areas as domestic help. Unlike in Northern Europe, such a traditional form of outsourcing had never really disappeared in the South. What should be noted is that as the younger cohorts of native-born women became better educated, the supply of domestic workers shifted to foreigners giving rise to what is called “a migrant in the family” model (Leon 2010; Simonazzi 2009). The governments in Italy and Spain have explicitly chosen to subsidize elderly households to outsource privately rather than to develop expensive public sector employment (Hellgren 2015 for the Spanish case; Van Hooren 2010). When compared with other wealthy countries, both Italy and Spain stand out for their high tolerance for undocumented migrant domestic workers. This is partly path dependent: the native-born domestic workers also used to work informally. However, when informal workers are from countries outside the Schengen area, they need formal employment contracts to attain and renew their legal residency permit. In Spain the politics and political discourse, even in the current recession, acknowledge the value and need for migrant domestic workers for managing the child and elderly care deficits. Similarly, in Italy, the presence of anti-immigration party such as Lega Nord has not changed this tolerance for migrant domestic workers. This signals how much Italian families depend on such workers particularly for elderly care (van Hooren 2010). In both Italy and Spain, the law requiring formal contracts for private domestic services has not been strictly enforced, and migrants without formal contracts risk their rights of residence.

Policies and markets

The markets for domestic services not only differ across societies, depending on welfare/are regime but also within them. The type of service and demand reflect differences in the public and private mix of care and the financing. There can be variations in what service is outsourced: childcare, elderly care or household services, or combinations of all three. There is a hierarchy in the sector, between those who work in institutional care, and those in private households; those who are employed in public sector (or outsourced by local governments) and those who are employed directly by a private firm or individual household. Simonazzi in her analysis of different national employment models recognizes this. Her typology (2009, 228) revolves around three dimensions: formal and informal, private and public care and the proportion of migrant and native workers. Based on her comparative analysis, she concludes that the low status and low pay, distinctive features of the sector, are not related to immigrant labor, but result from the care regime and their interaction with formal and informal markets. The Spanish and Italian cases fit this model best since in both countries trans-national migrants in the sector are part of the large informal sector, although the sector expanded with trans-national migration (Serrano and Sánchez-Domínguez 2015). Research on the Netherlands and Germany (van Hooren 2011; Shire 2015) show a large portion of native-born working in the private market for domestic services; both societies have a pool of married women working short part-time who have access to benefits through their spouses. Although explaining some aspects of the linkages in care policies, markets, and migration, Simonazzi's national employment models do not capture the complexity and variation for several reasons. First one needs to incorporate direct government subsidies shaping formal and informal markets, as shown in the articles in this forum. Jaehrling (2004), moreover, points to the importance of financial incentives. Second, the distinctions between formal and informal employment are less clear-cut in private markets even where there are strong regulatory systems. Firms often employ both formal and informal workers, more common in smaller firms (Hobson and Bede 2015). Furthermore having a “formal” contract may not in practice translate into having formal employment rights. Third, it is important to keep in mind that stratification exists even within the low-wage migrant sector: here the migration regime (points of entry and visa requirements) and the employment regime are interlocking domains (Williams 2012a): as more governments seek to formalize the sector, a migrant undocumented or awaiting papers is more likely to be employment informally at the lower tier of the sector with poor working conditions and sometimes half the wage (Hellgren 2015; Hobson and Bede 2015). Finally, the crisis itself has had an impact on the demand for migrant labor in private domestic service markets. There is some indication that the Spanish born are entering the sector in larger numbers reflecting the loss of jobs, resulting from the austerity measures and the recession (Hellgren 2015).

Implications of Outsourcing on Precarious Work and New Inequalities

The articles in this special issue on the politics, policies, and political economy of outsourcing address the economic and political conditions that lead to expansion in private markets for domestic services and the socio-economic consequences. Is the development of a private domestic service sector an answer to the afore-mentioned triple deficits? Can the private domestic services sector provide “good jobs” as the expansion of public childcare services has done? How does the access to private services differ from access to public services? Does the growth of private domestic services necessarily mean a step backward to a more unequal society?

Both Hellgren (2015) and Shire (2015) conclude that private domestic services sector is creating more precarious jobs. Morel notes that some countries encourage firm-based forms of domestic service provisions rather than employees having to negotiate their working conditions with each individual household. While creating incentives for firms to take over the sector may appear to be a strategy to create better formalized better jobs, Hellgren's comparative studies of Spain and Sweden suggest that this might not always be the case; migrants who work for private companies as well as those employed by households both experience precariousness in employment and suffer from poor working conditions (see also Hobson and Bede 2015). Hellgren's account of the reality of migrant domestic service workers after the introduction of RUT offers insights on the possibilities of regulating this sector.

Shire highlights an intriguing set of complex set of political and policy evolutions in Austria and Germany. Both countries have introduced policies to promote private markets, a voucher system and tax credits, respectively. In Germany, the Social Democratic initiated Hartz reforms had the unintended consequence of increasing the number of marginal or “mini-jobs” in the domestic services sector, which were legally exempted from social security contributions as part time jobs and became sources of “cheap” jobs. Neither vouchers nor tax credits had the intended effect on regularizing the sector, and have left in place, low wages and lack of social protections. Shire underscores the gap in inequalities that these policies have produced: by promoting affordable home-based household service work, they improve the possibilities of the high-educated women to enter full-time work with full protections, but leave those who service them unprotected in insecure and precarious employments.

Estévez-Abe directly addresses the relationship between inequalities in societies and outsourcing in this volume. It considers both the household-level and national-level characteristics and the increase in the likelihood of outsourcing of house cleaning by cohabiting and married couples in wealthy countries. Not surprisingly, her findings show that indicators of class such as income and education matter greatly in outsourcing. She shows that household income and the educational levels matter for outsourcing. She also reports that while the percentage of low skill migrants in the workforce positively correlates with the outsourcing of house cleaning, while the percentage of native-born low skill workers mattered much less. In contrast to the other three contributions on outsourcing of domestic services are concerned with the latest developments in European policies, Estévez-Abe focuses on the characteristics of economies where outsourcing of house cleaning might have been more prevalent prior to the introduction of vouc tax subsidies in many European countries. (She analyzes the data from the early 2000s.) Because her focus is outsourcing during the period preceding the introduction of vouchers and tax subsidies, her article does not answer if government interventions reduce the effects of socio-economic class on the likelihood of outsourcing. Morel's contribution explores why some countries opted to introduce vouchers and tax subsidies, and their consequences.

Morel's contribution provides an overview of how domestic services became a national political issue in many European countries as well as part of the EU level discourse and analyzes the political and economic reasons behind government interventions into domestic services sector. While formalization of domestic services work and creation of low skill work were both very important for many governments, Morel highlights how the EU articulated a fuller activation of high-educated women stood out as a new policy goal. She maintains that Nordic countries such as Finland and Sweden, because of their highly egalitarian wage structure in which low skill work is expensive, have used tax subsidies to lower the cost of domestic services not publicly covered by the welfare state. Interestingly, these are also countries where the relative share of low-skilled people in the population (with or without immigrants) is small—a characteristic that Estévez-Abe (2015) associates with lower odds of outsourcing. After surveying the policy developments in Austria, Belgium, Denmark, Finland, France, Germany, the Netherlands, and Sweden, Morel concludes that there is now state-driven forms of labor market dualization and welfare inequalities plaguing European countries.

These articles shed light on the question of whether public policies that promoted the emergence of private markets have increased inequalities within these societies: the most obvious divide exists between the precarious situations and low wages of migrants who perform services and those who are purchasing services. The emergence of private markets for domestic services also signals greater equalities in the capabilities for reconciling employment with family and having more leisure time between middle and upper class women compared with women in paid work who cannot afford these services (Shire 2015; Hobson 2014; Hobson and Fahlín, 2015; Hesig 2011). The existing research suggests that the tax subsidies for domestic services are most often used by high income families, hence benefiting those with the most resources (Halldén and Stenberg 2013). For example in Sweden and France with some of the most generous tax subsidies those who take advantage of these services are among the most affluent in France (Morel 2015) and in Sweden (Halldén and Stenberg 2013 and Hobson and Fahlén 2015). Finally, we know from numerous earlier studies that where private markets have dominated child and elderly care, it is the high-educated middle and upper class women who have greater possibilities for job choice and for career possibilities (Evertsson et al. 2009).

Outsourcing of domestic services might reduce care and time deficits of the relatively well-off segments of the society. But it does not resolve the job deficit—especially if we care about the quality of jobs. Does the activation of more workers mean we, as society, should minimize unpaid work turning formerly unpaid work into paid work that tend to be poorly paid precarious jobs? It is clear that this is an important political question we face. Saraceno's response to Hemerijck's contribution to our Forum urges us to think about the social meaning of unpaid work.

Acknowledgements

The articles in this forum were presented at a special panel at the conference Revisioning Gender: Complex Inequalities and Gender Dimensions (Stockholm 2014), which was supported by the Bank of Sweden Tercentenary Foundation, The Swedish Research Council for Health, Work and Welfare, and the Linnaeus Center on Social Policy and Family Dynamics. Estevéz-Abe would like to acknowledge that research for this work has been supported by Abe Fellowship funded by the Center for Global Partnership and administered by the Social Science Research Council.

Notes

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