Cash versus Child Care Services in Finland

Abstract

In 1985 the Finnish Parliament passed a law which stipulated that all children under age three were to be guaranteed a day care place as from the beginning of the 1990s. The law was made possible by a political compromise in which the agrarian Centre Party won the backing it needed to push through a system of state subsidies for the home care of children. As an alternative to a day care place, parents were now given the option of taking a child home care allowance and using that allowance either for purposes of looking after their child themselves or for paying for a private place. Measured in terms of the number of users, the child home care allowance was a hugely successful innovation. Most parents of small children have used the allowance for at least some period of time. This was due above all to the size of the allowance compared with other social benefits. However, following cutbacks in allowance expenditure of more than 20 per cent from 1995, the use of home care allowances declined at almost the same rate as the allowances were reduced. This brought significant short‐term savings to the Government and to local authorities, but in the longer term other costs have been rising. There has even been a sharp, unexpected decline in the birth rate. The case of Finland goes to show that, even in a country where wage‐earning motherhood has become firmly established, income transfers through family policy can have a very significant influence on the numbers opting temporarily for homemaking.