5. Tackling child poverty

This chapter builds on the work by Thévenon et al. (2018[1]), “Child poverty in the OECD: Trends, determinants and policies to tackle it”, https://doi.org/10.1787/c69de229-en; and Riding et al. (2021[2]), “Looking beyond COVID-19: Strengthening family support services across the OECD”, https://doi.org/10.1787/86738ab2-en.

On average across OECD countries, 12.9% of children live in relative income poverty (see Chapter 1, Figure 1.7). In five OECD countries (Chile, Costa Rica, Israel, Spain, and Turkey), more than 20% of children live in relative poverty, whereas in 12 other OECD countries less than 10% of children live in relative income poverty. The lowest child relative income poverty rates can be found in Denmark and Finland, at below 5%. In 26 of the 37 OECD member countries for which the statistic is available, relative poverty rates for children are higher than poverty rates for the total population, with an average gap of around 1.2 percentage points.

Despite considerable efforts and the introduction across OECD countries of policies aimed at tackling child poverty, child relative poverty rates have increased between 2006 and 2016 in 11 of the 21 OECD countries with available data.1 The likelihood of growing up in poverty also varies across different types of household and with the employment status of the household. The OECD average poverty rate in households with children and only a single adult is, at 32.5%, more than three times higher than the poverty rate in households with children and two or more adults (9.8%).2 Similarly, poverty rates tend to be much higher in jobless households than in households where at least one adult works.3 On average across the OECD, 63.9% of individuals living in jobless households with children also live in relative income poverty, compared to only 8.9% of individuals in working households with children.

Poverty typically results from a large number of interrelated factors that all need to be taken into account when designing policies (Thévenon et al., 2018[1]). The macroeconomic environment and policy settings affect people’s labour market outcomes and fertility decisions, which in turn influence household income. A country’s tax and benefit system and broader social policy settings can mitigate the effects of demographic and economic changes on disposable household income, and thus poverty.

As such, anti-poverty policies need to span a wide range of policy domains, including employment policies, education and training, cash transfers, housing support, food security, family planning etc. Interventions in these areas can be grouped into two main groups. The first approach consists of redistributive transfers in cash or kind, generally targeted to households who are deemed poor based on observable criteria. The second type of policy intervention tends to work more directly at the market and institutional failures, essentially by making the key factor markets (labour, credit, and land) work better from the perspective of poor people, and giving them better legal protection.

Policy makers need to find the right balance between protection and promotion. On the one hand, protection policies help people deal with uninsured risks and avoid transient poverty, by providing short-term support to avoid that current consumption does not fall below a crucial level, even when some people are trapped in poverty. On the other hand, promotion policies aim to help people escaping poverty permanently. Such policies permit a sufficiently large wealth gain to put people in poverty on a path to reach a higher and stable level of productivity and wealth. As there are limits to the extent to which redistributive taxes and transfers can be used to reduce poverty while maintaining work incentives, the use of protection policies must be accompanied by more structural promotion policies that act on risk factors in a more sustainable way.

Increasing parental employment can be expected to lead to a major reduction in child poverty. A basic simulation presented in OECD (2018[3]) can serve to illustrate the point. If all parents were to be in paid employment (and assuming that poverty rates of working families remain at their current levels), the poverty rate in families with children would half, from an OECD average of 11% to 5.4% (Figure 5.1). In Spain, family poverty rates would fall from 20.2% to 11.4% if there were no jobless parents.

However, employment is no guaranteed remedy against high poverty rates (Nieuwenhuis, 2020[4]). The quality of a job is an equally important determinant of poverty, in particular among Spanish households. Shorter working hours and lower real minimum wages in the aftermath of the global financial crisis significantly contributed to lower income of full-time working fathers in Spain. Helping parents gain good-quality employment is therefore crucial for reducing child poverty and reversing the decline in living standards experienced by many families. It involves enabling parents to have a stable and if possible full-time job.

Thévenon et al. (2018[1]) point towards four key policy tools that can help in addressing the different employment barriers that poor families face, including:

  • Ensuring that barriers to employment are removed, including for the most disadvantaged people whose health status, social problems or low skill levels keep them away from the labour market. It requires accompanying intensively hard-to-place unemployed people and adapt assistance to provide better opportunities for them to participate in the labour market and move up (OECD, 2015[5]).

  • Making work pay for both parents and ensuring that tax/benefit systems provide first and second earners in couple families with equally strong financial incentives to work. Tax and benefit systems should ensure that employment of the second earner in a two-parent family or that of a single parent pays off, including after the costs of childcare have been paid and even if being employed results in the withdrawal of certain assistance benefits. Such policy settings encourage parental employment and durably protect children against poverty (OECD, 2011[6]).

  • Enhancing access to affordable all-day childcare after parental leave, to ensure low income parents can work full year and full-time and increase their earnings. In many countries, children from low-income families have a much lower access to formal childcare than wealthier families (OECD, 2020[7]). Children in single-parent families are less likely than their counterparts in two-parent families to be covered by childcare services, even though they lack the time partners spend on childcare. After-school care services are also needed for parents with school-aged children. Access to childcare services that are compatible with irregular or atypical hours is necessary for parents working outside standard schedules.

  • Granting learning and training opportunities to low-skilled parents. In order to combat chronic poverty and ensure upward mobility opportunities, parents from low-income families must be provided with opportunities to improve their skills and get access to better paid jobs (OECD, 2018[8]). Countries can encourage the vocational training market to develop a supply adapted to the needs of the least qualified and affordable for low-income families. In a longer term perspective, promoting high quality education system (including initial education and vocational training) is needed to prevent the risk of falling into chronic poverty.

Increasing the minimum wage may also be an option for reducing families’ risk of extreme poverty in the short term, but its long-run impact on poverty is likely to be limited due to the possible adverse effect on the employment rate of low skilled workers (OECD, 2015[5]; Bradbury, Jäntti and Lindahl, 2017[9]). The effect of raising the minimum wage on poverty depends on whether wage income is above or below the poverty line prior to the increase, as well as the incomes of other family members. Most US studies show that minimum wage increases would only have a small impact on poverty rates – though they nonetheless would tend to help families in the lower part of the income distribution (Bernstein and Shierholz, 2014[10]; Dube, 2019[11]; Sabia, 2014[12]; Moffitt, 2015[13]).

Returning to work is central to reducing the risk of poverty for families. However, having at least one parent working is not always a guarantee of getting out of poverty. On average across the OECD, slightly less than one in ten families with children and just one working parent lives on an income below the poverty line. For these families, as well as those where parents are not immediately employable, support with cash benefits and services is important.

In addition to employment-related measures, social benefits have an important role to play in reducing child poverty. In most OECD countries, per capita social expenditure has increased in recent decades. This growth in spending has coincided with a reduction in child poverty, with effects that appear particularly strong when the share of spending on low-income households increases. Estimations by Thévenon et al. (2018[1]), using data for 27 OECD countries from the mid-1990s to 2013/14, show that, on average, a 1% increase in per capita social expenditure is associated with roughly a 1% reduction in the relative child poverty rate.

Not only the level of social spending matters, but also the way in which it is targeted at the poorest populations. At given expenditure levels, reductions in child poverty are larger when a larger share of expenditure is directed towards the poorest fraction of the population – in line with the existing literature despite some mixed results (Box 5.1). More detailed analysis by Thévenon et al. (2018[1]), on changes in the poverty rate by family type, suggests that higher rates of social assistance payments are particularly efficient in reducing the poverty rate for families with two parents, whereas housing benefits are successful in reducing poverty among one-parent families and families with two jobless parents.

Nevertheless, the poverty rate of jobless single-parent families does not appear to be affected by the level of payment rates for assistance and housing allowances, probably because their standard of living before tax and transfers is so low that increases in the payment rates of housing allowances have been not high enough to lift these families out of poverty. In addition, the erosion of the social protection floor over time has limited the impact of social transfers on poverty reduction. Although social assistance benefits (whether they are paid in the form of social assistance or housing benefits) are important levers to reduce poverty among certain groups of vulnerable families, they are nonetheless insufficient to lift the most economically disadvantaged families out of poverty. As argued in Thévenon et al. (2018[1]), closing the poverty gap would imply increasing social transfers for working and non-working households, while maintaining average financial participation incentives at the bottom of the income distribution. Such policy combination would require a significant increase in public spending.

That said, investment in families is most efficient if it starts when children are young. OECD analysis of early years’ tax and benefit policies shows that the greatest variation in household income occurs for families with children in the period from birth to around the age of four, which is a period critical for child development and parental career development (OECD, 2011[6]). During the early years, sole-parent families generally face the highest risk of falling into poverty, compared with other family types. Starting to spend early on children is efficient, as it can yield a higher return than later investment for outcomes such as cognitive development. Spending early on children also contributes to equity as it reduces gaps between rich and poor families. The family environment not only plays a key role for a range of children outcomes but also lays the basis for long-term outcomes.

If Spain were to align its redistribution strategy to the ten OECD countries that reach the strongest reduction in family poverty through taxes and transfers, family poverty rates would reduce from 28% to about 11% (Figure 5.2). This scenario hypothesises a family poverty rate that Spain would reach if it were to achieve a poverty reduction similar to the ten best-performing OECD countries. If Spain were to reduce poverty as much as Denmark (the best-performing OECD country in reducing poverty through taxes and transfers), family poverty in Spain would only be 6.4%.

These simulations show that poverty can indeed be significantly reduced through the right set of social-fiscal policy settings. Even so, the approaches of these countries tend to differ significantly. For instance, Denmark devotes 61% of its spending on families to services, whereas countries like Austria and Ireland devote only 25% to services and instead heavily focus on cash benefits (Figure 5.3). Overall, all best-performing OECD countries devote considerable government budgets to families, and reducing family poverty through taxes and transfers would require a considerable increase in expenditure on families by the Spanish Government. Among the ten best performing OECD countries considered in this exercise, eight countries spend more on families than the OECD average – which stood at 2.4% of GDP in the mid-2010s). To reach the OECD average, Spain would need to nearly double its spending on families (1.4% of GPD in the mid-2010s). Especially the expenditure on cash benefits is very low compared with the OECD average.

The majority of OECD countries transfer at least 1% of GDP to families with children in the form of cash benefits, on average this amounts to about 1.2% (Figure 5.3). Spain, in contrast, devotes only 0.5% of GDP in cash benefits to families. Other OECD countries spends most of their family budget on family allowances, child benefits or working family payments, but also on maternity, paternity and parental leave payments and birth grants. A number of OECD countries also include one-off benefits such as back to school supplements or social grants in these amounts (such as payments to support one-off purchases for the home).

In-kind payments or public services for families, including childcare services, amount to 0.9% of GDP across the OECD on average. In-kind services can include childcare and day care services, home help for families, and a suite of family social services. The largest “service providers” are Denmark, Iceland and Sweden – which spend around three times as much on services as Spain, over 2% of their GDP in total. France also spends significant amounts on services for families (1.4% of GDP), compared to 0.7% of GDP in Spain.

While redistribution through tax breaks has been growing in OECD countries in recent years, the administration of child benefits through tax systems is not always straightforward (Box 5.2). Non take-up can be substantial due to application obstacles, lack of awareness on eligibility or lack of trust. Administrative simplicity, flexibility for changing circumstances, ease of compliance and additional outreach efforts are crucial to reach all families that are eligible. Lessons learned from behavioural insights, automation and artificial intelligence can help to ensure that more people claim eligible tax benefits.

Many of the OECD countries that perform well in comparisons of poverty and child well-being are strong investors in service delivery (OECD, 2011[6]). Addressing the needs of families in poverty indeed requires dealing with different issues that often intersect (OECD, 2021[24]). Case management of vulnerable families can be particularly complex for service providers as multiple issues such as poverty, addiction, domestic violence, or health issues have to be addressed for family support to be effective. Vulnerable families with the highest service needs are often those least likely to access mainstream services (OECD, 2015[25]). Matching families with services that meet their needs thus requires close co-ordination between various organisations delivering services.

A first step towards the development of an integrated approach of service delivery are whole-government initiatives and co-ordinated national strategies targeting parents and children or vulnerable families. For example, Lithuania’s Action Plan for Complex Family Services (2016-20) is implemented in collaboration with 60 municipalities throughout the country (OECD, 2021[24]). The plan aims to ensure access to community support services for families in case of emergency, as well as supports towards the reconciliation of work and family commitments.

Another way to build integrated family support systems are inter-governmental working groups and committees that bring together various levels of governments and ministries. Public family support agencies can join their efforts through funding, co-ordinated guidelines, and collaboration of monitoring and assessment of services. Australia is a working example of prioritising integration and joining-up services. Over the past decades, the Australian Government has made specific funds available for improving collaboration between service providers, community members, non-government organisations, businesses and all levels of government (OECD, 2015[25]).

The co-ordination of services across sectors through case-management is a third way to enhance service coherence. In this case, a case manager, also called family support worker, community development worker or project worker, helps families address key issues and connect with various support services. Case managers typically focus on building a long-term working relationships with the family to provide ongoing support and information. A key point of a client-centred approach to making family services successful is to treat the family as one whole unit and to consider the needs of all family members through approaches that may vary (Box 5.3).

Finally, the most comprehensive form of integration is the provision of services within one organisation. For example, the YMCA in Halifax is the largest multiservice organisation for women in Atlantic Canada (Riding et al., 2021[2]). Their services include housing, anti-human trafficking support, emergency employment programmes, childcare and early learning, microloans, financial literacy, income tax clinics, and peer leadership training. They work with multidisciplinary teams and use a co-ordinated plan of support to engage in joint problem solving. When the necessary resources to develop such a comprehensive approach are not available, an alternative to multiservice organisations is case conferencing. This approach allows practitioners from various organisations working with the same family to periodically come together to discuss a co-ordinated support plan, preferable with the family present.

The combination of conditional cash transfers and support services can be an effective way to increase service take-up and enhance their impact on family outcomes. For instance, the payment of a cash benefit can be made conditional on the participation in a specific programme, like medical screening, school meals or parenting classes. The evidence from experimental studies on “Cash+” suggest this combination attains better outcomes than when supports and cash transfers are provided separately (Bastagli et al., 2016[26]). The recent OECD report on Strengthening family support services across the OECD show that this approach is increasingly popular in OECD countries (Riding et al., 2021[2]). About half of capital cities support families in need who are taking up services through conditional cash transfers.

A growing body of evidence suggests that the period of pregnancy and the first 1 000 days of a child’s life are particularly important for their development and future outcomes (Riding et al., 2021[2]). This approach seeks to provide tailored supports to pregnant women and families with infants, identifying their individual needs, and addressing them before small problems turn into serious issues. The “first 1 000 days” strategy, used in countries like Australia, New Zealand, Finland, France and the United Kingdom, puts an emphasis on providing continuous assistance throughout early childhood development, as well as on the ability of the health care and social systems to do wellness checks, identify families’ needs and detect problems early and guide families to appropriate services (Box 5.4).

The variety of factors driving the evolution of family income suggest that only a range of policies addressing all these factors can significantly and durably improve children’s standard of living and reduce their exposure to poverty. Labour market-oriented policies can and should play a crucial role in reducing poverty, but adequate income protection schemes and family-oriented benefits remain also important instruments for improving the effectiveness of poverty alleviation. It involves measures with different objectives and means to either prevent poverty (by in particular raising parental employment and/or raising income gains from employment) or protect children and families (by ensuring that the assistance provided by financial aid covers all poor children and that it responds to the changing characteristics of poor families).

Some OECD countries tend to focus on prevention, particularly through activation policies aimed at reducing poverty by empowering parents to return to stable employment. In this case, a protective component may be missing for families whose jobs do not pay enough to get out of poverty or for whom there are many obstacles before they can work. Conversely, other OECD countries provide a relatively generous package of financial transfers to reduce poverty without, however, developing enough support for parents to get a job and reconcile work and family life. These two pillars are therefore important to develop simultaneously.

A successful anti-poverty strategy requires policies not only to reduce the incidence of income poverty or to prevent it, but also to mitigate many of the consequences that come with income poverty, including material deprivations and barriers to meet basic needs in health, housing and education. Thévenon et al. (2018[1]) highlight various elements that need to be considered in order to break the intergenerational transmission of disadvantages and improve opportunities for children from low-income families, including:

  • Health issues can act as an obstacle to education and result in poor physical and/or educational achievements, adding to the challenges faced by families. Promoting universal access to health care and public health policies that benefit poor children can ensure that children’s basic needs in nutrition, medical supervision and health care are met. Such a provision is especially important for the poorest segments of children who are most at risk of experiencing deprivation in nutrition.

  • Food insecurity can lead to serious physical growth problems and influence children’s school attendance and performance as well as the development of social skills. National school meal programmes are used in several OECD countries as a way to reach food-insecure school-age children directly and offset hunger and insufficient nutrition. Evaluation of the Healthy Start programme in England suggests that food vouchers can also provide an important nutritional safety net and potentially improve nutrition for pregnant women and young children living on low incomes (McFadden et al., 2014[38]). Finally, nutrition assistance can help direct practices towards healthy diets to combat the high risk of overweight and obesity in children from low-income families (Inchley et al., 2016[39]).

  • Children from disadvantaged backgrounds are disproportionately likely to miss out on formal early childhood education and care (OECD, 2020[7]). Yet, early interventions in childcare and education are effective policy tools to create level playing fields and to reduce gaps among children. The evidence suggests that the benefits of high quality childcare programmes on child and young adult outcomes are positive and often stronger for children from disadvantaged families than for those of wealth families. To foster the use of childcare services by low-income families and reduce inequalities across children, the availability and affordability of childcare places, as well as perceptions of service quality are crucial.

  • Economically advantaged parents display more optimal parenting behaviours across a range of domains, including more time spent with children, authoritative parenting, more sensitive and responsive mother-child interactions, greater language stimulation and better parent management. These parenting skills can make a difference for children’s cognitive and non-cognitive skills and underlines the importance of early childhood home education programmes that aim to improve the parenting skills and children’s socio-emotional skills among disadvantaged groups. Programmes such as the “Thirty Million Words” project in the United States or “Parler Bambin” in France increased conversations and resulted in increased language development.

  • Finally, children from poor families have a higher risk than others of living in poor quality housing and/or in an environment with noise, pollution, vandalism or crime problems. Low-income families tend to live in less affluent areas with lower quality housing, transport infrastructure, medical and childcare services, schools and sports and leisure facilities. Addressing spatial segregation would help to increase opportunities for children from disadvantaged backgrounds, but requires a range of well-co-ordinated local development and urban planning policies, including measures for housing and transport.

The remainder of this section sheds a light on the anti-poverty strategies of two countries in particular, France and Ireland:

  • France has taken a number of actions to prevent and fight poverty of families and children. First, the National Strategy to Prevent and Fight Poverty strengthens social investments in areas of education and training as well as support services and social emancipation through employment. Second, the National Child Protection Strategy (2020-22) gives priority to preventative measures and in treating children equally through ensuring equal access to opportunities and protections for all children. Third, the French First 1 000 Days approach aims to build children’s resilience by starting in the earliest stages of life. Box 5.5 describes each of these strategies in detail.

    In Ireland, the Child and Family Agency was established in 2014 and is now the dedicated State agency responsible for improving well-being and outcomes for children. It represents the most comprehensive reform of child protection, early intervention and family support services ever undertaken in Ireland. It was an ambitious move bringing together over 4 000 staff and an operational budget of over EUR 750 million. More information on Ireland’s anti-poverty strategy can be found in Box 5.6.

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Notes

← 1. OECD Family Database, Indicator CO2.2.B. Child relative income poverty rates, https://www.oecd.org/els/family/database.htm.

← 2. OECD Family Database, Indicator CO2.2.C. Poverty rates in households with children by household type, https://www.oecd.org/els/family/database.htm.

← 3. OECD Family Database, Indicator CO2.2.D. Poverty rates in households with children by household employment status, https://www.oecd.org/els/family/database.htm.

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