1. The introduction of market forces in the Dutch child care sector. Annmarie Marangos en Janneke Plantenga J.Plantenga@econ.uu.nl J.Plantenga@econ.uu.nl

2. Introduction of the Child Care Act by 1 January 2005 - tripartite financial structure - demand driven; key role for parents Presumed effects: increase in internal and external efficiency How about the exit and voice options of parents?

3. The market of child care; developments 1995-2005 The supply of child care services - concentration; - entry barriers; - prices; - diversity. The demand for child care services - information; - alternatives.

4. Supply side: concentration Table 1. Child care suppliers, number of locations and child care places Number of Organi- sations FacilitiesChild care places Facilities per organi- sation Child care places per organi- sation 1995833230765.1952,878,3 1996831249270.2683,084,6 1997802269278.3003,497,6 1998789291086.6853,7109,9 1999855318799.7883,7116,7 200010023932124.9383,9124,7 20019274479134.5444,8145,2 200210865620159.7625,2147,2 200311465717172.1335,0150,2 Source: CBS (Statistiek kindercentra (1995-2000); Statistiek welzijnswerk en kinderopvang (2001-2003)

5. Supply side: entry barriers Newcomers play a modest role in the market for child care Between March 2001 and April 2003 circa 4500 child places were realised by new suppliers, while in this period the total supply increased with almost 40.000 child places.

6. Supply side: prices Table 2: Hourly prices in the child care sector. Child care facilty Yearly increase After school care Yearly increase 20024,534,86 20034,979.7%5,094.7% 20045,245.4%5,528.4% 20055,688,4%6,1311,1% 20065,720.7%6,03-1,6% 20075,862,5%6,02-0,2% Source: Deloitte, 2003, 2004, 2005

7. supply side: diversity Little information on supply of additional services Lengthened opening hours: 10% of market Flexible care: 3% of market 24 hours care: 0.2% of market No clear trend

8. In summary: - Clear trend towards centralisation - Analysis of the growth indicates that the market is not very accessible market - The prices have increased but seem rather stable by now - No clear trend towards innovative products.

9. Demand side: information A real risk that parents overestimate the quality Little knowledge of costs nor actual prices In 2004, around 50% of the parents knew the sum they have to pay monthly for the formal childcare by child. A quarter only knows the total sum; they could not subdivide the costs to each child. More than 14% has no idea.

10. Demand side: available alternatives Tabel 3. Choices of parents with children in the age category 0-12: number of facilities available within 10 minutes, 2005. Average no alter- native available within 10 minutes 1 alter- native available within 10 minutes 2 alterna- tives available within 10 minutes 3 or more alternatives available within 10 minutes Total Children 0-4 Child care centre5.9412%19%11%58%100% Home based care0.281%18%1%0%100% Total6.1411%17%11%60%100% Children 4-12 After school care3.8515%24%13%48%100% Home based care0.1883%17%1%0%100% Total4.0315%21%15%50%100% Source: SEO 2005.

11. Demand side: available alternatives Source: SEO, 2005: monitor kinderopvang Deloitte & Touche, bewerking SEO/UU Table 4. Number of choices within the same child care form, according to parents Centre based child care (n=326) After school care (n=113) Home based care (n=42) Paid child minder (n=174) Unpaid child minder (n=495) No choice33%66%52%67%54% 1 alternative28%20%14%13%29% 2 alternatives21%7% 11% 3 alternatives6%0%5%1% 4 alternatives1% 0%2%0% 5 or more alternatives 6%2% 4%1% Not known5%4%19%7%5%

12. Demand side: high switching costs? Source: SEO 2005. Table 5. When would you consider switching to an alternative supplier? (n=838) Never52% When the alternative is (much) cheaper13% When the alternative offers more quality9% When the alternative is more closer to home4% When my employer offers child care facilities13% When my child minder is no longer available.6% Other reasons4%

13. High switching costs due to loyalty Loyalty in the child care market is important because: - the service is provided for parents as well as for children; - the relationship between demander and supplier is personal; - the relationship is long term, but temporary Loyalty weakens exit and strengthens voice

14. Added value of the introduction of market forces? - More uniformity - Consumers provide information on actual need The introduction of demand financing not only serves the interest of parents, but also solves the information problem of the government. The citizen hás to choose, because only then necessary information becomes available.