Informal Caregiving and Caregivers’ Labor Supply in the Netherlands
Nowadays the majority of the developed countries experiences population aging. Therefore, the population of the elderly with disabilities or severe medical conditions, as
well as the demand for care services is increasing. These trends can be observed in the Netherlands as well. For instance, the most recent edition of Health at a Glance1 reports the prediction that the share of population aged 65 and over may rise from 18% in 2015 to about 28% in 2050 in the Netherlands; and informal carers are the very important source of long-term care in OECD countries. Informal caregivers can be defined as people providing any help to older family members, friends and people in their social network, living inside or outside the household, who require help with everyday tasks. The report shows that, on average across OECD countries, about 13% of people aged 50 and over provide informal care at least on a weekly basis. In the Netherlands this number is even higher: 17% of people from this age group are caregivers. Remarkably, the data reveals that the number of female carers is only slightly larger than the number of male caregivers: less than 58% of Dutch daily carers are women. However, women are usually less attached to the labor force, thus the effect of informal care provision on the labor supply can differ between men and women.
Even given that the available data on informal care is limited, it is clear that many caregivers are not young. Nevertheless, a significant share of them consists of people in
working age. It is noteworthy that, according to Gray and Hughes (2005), 45% of male and 30% of female caregivers claimed that their caring responsibilities were the main reason why they were out of the labor force. However, Leigh (2011) suggests that some respondents felt social pressure and overstated their willingness to be employed. It is plausible that people who are less attached to the labor market might be more likely to become caregivers. Moreover, it should be mentioned that many informal carers are over 50, thus they may face some problems in returning into the labor force and prefer to retire if they have such an opportunity. Nevertheless, it is still reasonable to assume that a significant number of the informal caregivers are at the margin of the labor market and thus understanding how caring responsibilities affect the labor supply of carers is an important question for policymmakers who are interested in increasing or maintaining the labor force participation rate.
It is also important to mention that, although formal care arrangements can substitute informal care, public expenditure on long-term care in the Netherlands equaled 4.2% of the country’s GDP and this was the highest value in the European Union.2 Therefore, supporting informal carers might help to limit the expenditures. Nevertheless, the negative labor supply effect can reduce the cost savings. It might be difficult for some informal caregivers to combine employment and caring responsibilities, thus it is possible that they decide to switch to part-time jobs or even leave the labor market, and as a result, the tax revenues of the government fall.
The impact of informal care provision on the labor market outcomes is currently an active area of research. Most recent publications on the topic report a negative link between caregiving and labor supply. However, the size of the estimated effect varies from negligibly small to substantial. It is reasonable to assume that the difference in findings depends not only on the methodology used but also on the LTC system and the labor market policies of the country under examination. Therefore, the aim of this paper is to evaluate the effect of informal care provision on the labor supply of caregivers in the Netherlands. In particular, this goal presupposes the estimation of the impact on the labor force participation, on the probability of being retired and on the number of working hours. Recent literature on this topic shows that it is important to distinguish between the types of care being provided because it might be helpful for structuring LTC policies. Therefore, the effects of extra-residential care, extraresidential chore assistance, and intensive care provision are evaluated. The SHARE dataset, that covers a period from 2004 to 2015, is used in the analysis.3 The effects for men and women are examined separately given their different attachment to the labor force.
The rest of the thesis is structured as follows: The review of empirical literature is presented in Section 2. Section 3 provides a description of long-term care systems in
OECD countries in general and in the Netherlands in particular. The results of an empirical analysis are presented in Section 4. Finally, Section 5 draws a conclusion.