Welfare states provide social benefits both in cash and in kind. In Europe, cash benefits include income transfers, such as retirement pensions, family benefits and unemployment allowances, while in-kind benefits are usually derived from the use of publicly provided services, such as healthcare, education, early childhood care and care for the elderly. Ignoring the value of publicly provided services results in an incomplete picture of the economic well-being of households. This may lead to inaccurate comparisons between countries and within countries over time. In their publication “Estimating the value of social services” the SWINS researchers from Antwerp focus on two categories of services that take up a central position within the project framework, notably early childhood, education and care (ECEC) and healthcare. They develop a more refined methodology to estimate the value of publicly provided social services.

Social services and policies have become key components of European welfare states, especially with the rising importance of the social investment paradigm. High levels of spending on these services are often seen as an indicator of the commitment to social investment. However, estimating the value of the in-kind benefits that households derive from the use of publicly provided services is not straightforward.

The three primary challenges relate to the way to:

1. value the in-kind benefits for households;
2. allocate the benefits to individuals or households;
3. account for differences in needs across individuals or households.

their valuation, drawing on various strands of literature. These private contributions were estimated either using the tax‑benefit microsimulation model EUROMOD or derived from household budget survey data. For allocating the in‑kind benefits, the authors used the actual‑consumption approach for ECEC services and the insurance‑value approach for healthcare. To address the challenge of accounting for differences in needs, they relied on the methodology for constructing needs‑adjusted equivalence scales developed by Aaberge et al. (2010, 2017, 2024).

The authors find that deducting private contributions has a larger impact on redistributive outcomes for healthcare services than for ECEC services, which reflects the larger size and coverage of healthcare services. The income-dependent character of private contributions, present in several countries, is also apparent when these payments are incorporated into an extended income concept that includes the value of public service.

The incorporation of income-based private contributions into the valuation of public services reveals the social gradient embedded in these services which often remains concealed. The extent to which this gradient emerges, however, depends on the specific design of the private contributions. Income-based contributions introduce a form of vertical redistribution among service users, transferring resources from higher-income to lower-income beneficiaries, resulting in a higher net in-kind valuation for the latter. Nevertheless, ECEC services continue to benefit higher‑income households more, which is largely explained by the fact that the use of ECEC services is skewed toward higher‑income households in most countries.

The inclusion of private contributions in the valuation of healthcare services similarly exposes the underlying social gradient, particularly in countries where private contributions are more strongly linked to income. Interestingly, the net in-kind value of healthcare does not necessarily exhibit a strictly negative relationship with income; instead, a reverse U-shaped pattern is observed in many countries.