Child poverty

 

While there have been many positive changes in recent decades, the challenges for children remain great: children are significantly more likely to live in poverty than adults, and the impact of poverty on children can be devastating and lifelong, with implications for future generations and society as a whole. Children face these challenges globally, in richer and poorer countries alike.

Crucially, although perhaps less recognized, there are specific solutions to address child poverty. These range from direct transfers and benefits that reach families with children living in poverty, to ensuring real access to quality services for all, to addressing the stigma and discrimination that can block children’s hope and potential.

Yet, in many countries, child poverty is not explicitly targeted as a national priority, and it is not routinely measured or reported on. Two years ago, a diverse group of organizations came together to form a Global Coalition to End Child Poverty to work collectively for change.This guide harnesses our knowledge and experience to support national processes to achieve Sustainable Development Goal 1 on ending poverty.

In recent years, the world has made remarkable strides advancing development. Yet, more than 700 million people still live in extreme poverty. Children are disproportionately affected. Despite comprising one third of the global population, they represent half of those struggling to survive on less than $1.90 a day.

Children who grow up impoverished often lack the food, sanitation, shelter, health care and education they need to survive and thrive. Across the world, about 1 billion children are multidimensionally poor, meaning they lack necessities as basic as nutrition or clean water. 

An estimated 356 million children live in extreme poverty.

The consequences are grave. Worldwide, the poorest children are twice as likely to die in childhood than their wealthier peers. For those growing up in humanitarian crises, the risks of deprivation and exclusion surge. Even in the world’s richest countries, one in seven children still live in poverty. Today, one in four children in the European Union are at risk of falling into poverty.

No matter where they are, children who grow up impoverished suffer from poor living standards, develop fewer skills for the workforce, and earn lower wages as adults.

Yet, only a limited number of Governments have set the elimination of child poverty as a national priority.

In all countries, the well-being of children is determined by three broad sets of factors, what we refer to as demographics, labor markets, and government policy: the family, the market, and the state.

By demographic or family factors, we have in mind four influences: the average age of parents, the education of parents, the number of children per household, and family structure as indicated by whether the child is living with a single parent or not. As a first approximation, these are independent of government income transfer policies, though this could also vary from country to country. Older parents are more likely to be better situated to care for their children, if for no other reason than that more labor market experience implies higher earnings. We capture these life cycle effects by measuring the average age of parents. In a similar vein, more-educated parents are likely to have better labor-market skills, lower chances of unemployment, and higher earnings when employed. We measure this by using an indicator of whether the father had a university degree and another indicator of whether the mother had a degree.8 Children living in households with fewer siblings are likely to have a higher material living standard, while those living with a single parent are likely to have a lower standard. With fewer siblings, the household’s resources need not be spread as thinly, and we capture this by measuring the number of children in the home. This could change in response to the fertility decisions of parents or to the home-leaving age of children. Finally, with both parents present, children are more likely to be in a household in which at least one adult is working or to be in a household with an overall higher wealth. To measure this, we use a binary indicator of whether the child lives in a single-parent household.

The impact of the labor market on changes in child poverty rates is measured by two variables: binary variables indicating whether the parents are working, and the annual earnings they each obtain. These are influenced by broader forces determining employment growth and the distribution of income and will vary a good deal across the 12 countries. Business cycle and structural influences on the demand for labor associated with technical change and globalization certainly play a role in all places. But some countries, Hungary and Germany for example, also experienced important changes associated with the transition to market economies. Many of these factors are also independent of government transfers, but there could certainly be important interactions between the structure of social policy and labor supply, particularly among the lower paid.

These labor market variables are measured for fathers and mothers separately, since patterns of labor market participation vary considerably across gender and since in some countries, child well-being may depend differently upon the labor-market success of mothers than of fathers. The greater the employment rate among fathers and mothers, the less likely children will live in poverty, but this will also depend upon the amount of money they actually earn. Changes in annual earnings reflect changes in wage rates, hours worked per week, and number of weeks worked per year, but our analysis does not distinguish between these influences.

Finally, the impact of the state is measured by changes in the amount of transfer income received by the household. All other things equal, the higher the likelihood of eligibility for government transfers and the greater the average amount of income support, the lower the chances of child poverty. However, the average amount of cash transfers may not fully reflect the extent of social support from the state if households are in receipt of noncash benefits, either in the form of targeted benefits or through the provision of other public goods. For example, Garfinkel et al. (2006) attempted a valuation of these benefits in a number of countries by using the LIS data in order to illustrate their impact on the income distribution. A strictly income-based analysis does not necessarily account for the value of these benefits, which may vary considerably across countries. Their analysis suggests that noncash benefits may be particularly important in the United States. If these were given cash value and assigned to household income, the child poverty rate would be considerably lower.

The analysis is intended to uncover the relative influences of these factors on the overall change in child poverty rates. In particular, in order to assess the impact of government transfers, we need to estimate what the child poverty rate would have been if no other factors had changed. Therefore, we begin with the development of a counterfactual income distribution that is based on all influences other than government transfers being constant. This standardized income distribution allows us to derive the child poverty rate that would have prevailed at the end of the period if labor markets and demographics had remained unchanged. The difference between this poverty rate and the actual child poverty rate represents a starting point for understanding the role of the tax-transfer system. We create a standardized income distribution for each country by combining two methods, what we refer to as reweighting and rank-preserving exchange.