the case for family benefits
TRANSCRIPT
Children and Youth Services Review 34 (2012) 590–596
Contents lists available at SciVerse ScienceDirect
Children and Youth Services Review
j ourna l homepage: www.e lsev ie r .com/ locate /ch i ldyouth
The case for family benefits
Jonathan BradshawDepartment of Social Policy and Social Work, University of York, Heslington, York, YO10 5DD UK
E-mail address: [email protected]: http://www-u1 My information here came from a presentation by
Sydney, Australia in April 2011.2 Ben-Shalom, Y., Moffitt, R. and Scholz, JK (2011) An A
Anti-Poverty Programs in the United States Institute for RPaper no. 1392-11.
3 OECD (2011) Doing Better for Families, Paris: OECD.the poverty rate of single parent families from 36.9% toilies from 10.0% to 5.9% see Table 6.
4 It therefore revisits some of the arguments in Garfined Transfer Programs: The Case for and Against, New Yor
0190-7409/$ – see front matter © 2011 Elsevier Ltd. Alldoi:10.1016/j.childyouth.2011.10.009
a b s t r a c t
a r t i c l e i n f oAvailable online 14 October 2011
Keywords:ChildFamilyBenefitsComparison
The package of support for families with children in the USA is not terribly effective. The model of targetedsocial assistance is also the one that has been advocated by the World Bank in middle and low income coun-tries. It is failing poor children. This paper uses comparisons of child benefit packages in the European Unionand Central and Eastern European and Confederation of Independent States (CEE/CIS) countries derivedusing model family methods. It rehearses the arguments in favour of universal family benefits — the normin the EU. It calls for a new approach in the CEE/CIS and USA.
© 2011 Elsevier Ltd. All rights reserved.
1. Introduction
Sheila Kamerman (of course with Al Kahn) never succeeded inpersuading the United States to adopt a universal child benefit. Al-though Earned Income Tax Credit and SNAP have been much im-proved in level recently, both still taper out at low earning levels(well below a European poverty threshold) and they reached only7.2% and 9.3% respectively of the US population in 2008. TANF isvery variable between states but only helps 1.3% of the US familieswith children.1 Although (as we shall see) the US is no longer a lag-gard in the level of its family benefit package for working families,its social assistance regime for workless families surely leaves muchto be desired.2 The overall effort in terms of expenditure on familiesin 2007 was 1.17% of GDP compared with, for example, 3.56% inthe UK and 2.23% average for the OECD.3 Therefore, for this mainlyAmerican audience, this paper is devoted to restating the case forfamily benefits and particularly universal child benefits.4
There are two other motives. First universal child benefits areunder attack in a number of countries in the face of the economic cri-sis and the deficit — for example they have been reduced in Irelandand will be withdrawn from higher rate tax payers in the UK.
Second the US model has influenced the so called WashingtonConsensus which has determined the pattern of development of fam-ily benefit systems in low and middle income countries. As a result
sers.york.ac.uk/~jrb1/.Professor Michael Wiseman in
ssessment of the Effectiveness ofesearch on Poverty, Discussion
In 2004 cash transfers reduced21.9% and for two parent fam-
kel, I. (ed) (1979) Income-test-k: Academic Press.
rights reserved.
there are hardly any middle income countries in the world whichhas a decent family benefit system and only one (Argentina) with auniversal child benefit. The World Bank seems to hate universalchild benefits (though they have recently come out in favour of uni-versal minimum pension schemes5) and the targeted social assis-tance schemes that have been developed in middle incomecountries with their advice are failing miserably.
So this paper starts with rehearsing the arguments in favour of uni-versal child benefits. It then presents some comparative data on the roleof universal programmes in the universal family benefit systems inEurope (and the US) and then the CEE/CIS countries. Then it concludes.
2. Arguments in favour of universal child benefits6
2.1. Horizontal equity
They are recognition by the state of the burden being carried byparents in rearing children. The state and every citizen benefit fromparents' sacrifice and have an economic and social interest in ensuringthe best possible outcomes of the work of parenting. It is unfair for thesingle and childless to benefit but not to contribute. It is a wise invest-ment by the state to ensure that they do contribute. Child benefit alsoredistributes resources over the life cycle and from one generation toanother. It plays a considerable part in reducing inequalities.
2.2. Fertility
One reason that fertility has declined in so many countries is be-cause of the direct costs (of feeding, clothing etc) and the indirect
5 Dethier, J-J, Pestieau, P. and Ali, R.(2010) Universal Minimum Old Age Pensions.Impact on Poverty and Fiscal Cost in 18 Latin American Countries Policy Research Work-ing Paper 5292, World Bank.
6 For more arguments from a distinguished economist's perspective See also Atkin-son, A. (2011) The case for universal child benefit in Walker, A., Sinfield, A. and Walker,C. Fighting poverty, inequality and injustice, Bristol: Policy Press.
591J. Bradshaw / Children and Youth Services Review 34 (2012) 590–596
costs (interrupted employment, lost earnings and promotion fore-gone) of children. One way of mitigating those costs is to pay childbenefit (though child benefits alone are unlikely to be effective inturning around falling fertility).7 This is not an argument heard inBritain and probably not in the US but it is an important issue inmany other countries, including France, despite the fact that Francenow has one of the highest fertility rates in the OECD.
2.3. Poverty
In almost all countries children have a higher risk of poverty thanthe population as a whole and in many countries (including the US)they have a higher risk of poverty than pensioners (the other maindependent group). Child benefits play an important part in reducingpoverty rates and poverty gaps. If we did not have child benefit inthe UK child poverty would be 9 percentage points higher than it isbefore housing costs and 7 percentage points higher after housingcosts. In fact Child Benefit is nearly as good as (means-tested) childtax credit in reducing child poverty — without child tax credit childpoverty would be 12 percentage points higher than it is beforehousing costs and 10 percentage points after housing costs.
2.4. Well-being
There is some recent Canadian evidence8 that suggests that childbenefit programmes had significant positive effects on several mea-sures of both child and maternal mental health and wellbeing, aswell as a few measures of child physical health. They also found ef-fects of child benefits on test scores.
2.5. Take-up
Unlike means-tested benefits and tax credits child benefit isclaimed by almost all those entitled to it. One reason for this may bebecause they avoid stigmatising recipients as poor.
2.6. Administration
Universal (or near universal) child benefit schemes are mucheasier and cheaper to administer than means-tested alternatives. Inmost countries a birth certificate is the only evidence necessary.
2.7. Benefit to mothers
Child benefits paid to mothers or carers provide a source of in-come independent of the breadwinner. This is an important advan-tage in that it provides security where resources are not shared inthe household, or where, as a result of unemployment or illness,there are no other resources available. In times of crisis in familylife, such as separation, divorce, desertion or imprisonment, childbenefit remains a secure and certain income for mothers. There isalso evidence that mothers are more likely to spend money onchildren.9 Child benefit is also the passport to protecting the contri-butions record of parents with care.
7 Bradshaw, J. and Attar-Schwartz, S (2009) Fertility and Social Policy in Takayama,N. and Werding, M. (eds) Fertility and Public Policy: How to Reverse the Trend to Declin-ing Birth Rates, Cambridge MA and London UK:MIT-Press.
8 Milligan, K., and Stabile, M.(2011) Do Child Tax Benefits Affect the Well-being ofChildren? Evidence from Canadian Child Benefit Expansions, American Economic Jour-nal: Economic Policy 3:3, 175–205.
9 Lundberg et al. undertook an analysis of how family expenditure patterns changedin the UK when child tax allowances were abolished and transferred to wives in thelate 1970s. Increased spending on children's clothes coincided with these changes inincome distribution within the household (Lundberg, S., Pollack, R. and Wales, T.(1995) Do husbands and wives pool their resources? Evidence from the UK Child Ben-efit, University of Washington. http://www.chass.utoronto.ca/~siow/332/lundberg-pollak-wales.pdf). For a review of the uses of child benefits in the UK see Bradshaw,J. and Stimson, C (1997) Using Child Benefit in the Family Budget, SPRU/The StationeryOffice
2.8. No moral hazard
Universal child benefits are paid regardless of whether parents arein employment and regardless of their income. Therefore they do notcontribute to either the unemployment trap or the poverty trap. In-deed because they are paid on top of earnings they contribute to in-creasing in-work incomes and therefore incentives to work. Theyhelp to make work pay. They also reduce the number of peoplewith high effective marginal tax rates.
3. Child benefit packages and universalism in Europe and the US
This paper uses the model family method to compare family ben-efit packages. This method was more or less invented by SheilaKamerman and Al Kahn and its strengths and weaknesses havebeen reviewed elsewhere.10 Briefly it uses national informants to es-timate how a set of model families would be treated in each countryby the tax and benefit system given various assumptions about theircircumstances. The main strengths of the method are that it is away of comparing like with like and able to produce quite up-to-date comparisons. The main weaknesses of the method are that itprovides a picture of the formal policy, not how the policies workout in practice, and it is illustrative rather than representative.
In this section the data is from the CSB/MIPI data set11 of the childbenefit packages in 27 European countries and three US states12 inJune 2009.
Fig. 1 presents the family benefit packages in €13 purchasingpower parities per month at June 2009 for a couple with two schoolaged children with one earner earning national average earning. Thefigure shows the difference in the amounts that would be received/paid by such a family compared with a childless couple on the sameearnings. It is therefore the contribution made by the state in respectof children.
The package is made up of universal cash benefits, means-testedchild benefits, child tax benefits, local tax benefits and housing ben-efits. The most common element of the package is universal childbenefits in 19 of the 28 countries— Austria (Aut), Belgium (Bel), Bul-garia (Bul), Denmark (Den), Estonia (Est), Finland (Fin), France(Fra), German (Ger), Greece (Gre), Hungary (Hun), Ireland (Ire),Luxembourg (Lux) (missing data), Latvia (Lat), the Netherland(Net), Norway (Nor), Romania (Rom), Slovakia (Slk), Sweden(Swe) and the United Kingdom (UK). Of those that don't haveuniversal child benefits eight countries — the Czech republic (Cze),Lithuania (Lit), Poland (Pol), Portugal (Por), Slovenia (Slv), Spain(Spa) and the US have a child tax allowance and in Cze, Lit theallowances perform a similar function in that they do not vary withincome. There is only one country in the EU Italy (Ita) where thechild cash benefit is entirely means-tested.
There are a number of countries with both universal child benefitsand child tax allowances — Austria, Belgium, Estonia, France, Greece,Latvia, Romania, and Slovakia. There are means-tested cash benefitsstill payable at this income level in Bulgaria, France, Italy, Lithuania,Netherlands, Portugal, Romania, Slovenia and the UK. A small numberof countries have higher local taxes in respect of children (Estonia,Italy, Portugal and the three US states). Austria and Hungary stillhave housing allowances at this income for children.
10 Bradshaw, J. (2009) An international perspective on child benefit packages, inKamerman, S., Phipps, S. and Ben-Arieh, A. (eds) From Child Welfare to Child Well-being: An international Perspective on Knowledge in the Service of Policy Making, Spring-er: Dordrecht. pp293–308.11 Van Mechelen, N., Marchal, S., Goedemé, T., Marx, I., and Cantillon, B. (2011) ‘TheCSB-Minimum Income Protection Indicators dataset (CSB-MIPI)’. CSB Working PaperNo. 11/5. Antwerp: University of Antwerp.12 Nebraska, New Jersey and Texas.13 $1.24=€1.00.
Note: For Austria, Germany and the UK, means tested cash benefit include refundable child tax allowances.
-100
0
100
200
300
400
500
Aut
Bel
Bul
Cze
Den Est
Fin
Fra
Ger
Gre
Hun Ire Ita Lat
Lit
Lux
Net
Nor Pol
Por
Rom S
lk
Sln
Spa
Sw
e
Uk
Neb
rask
a
New
Jer
sey
Tex
as
Housing allowance Child tax allowance
Local property or other non-incomes taxes Universal child cash benefit
Means-tested child cash benefit
Fig. 1. The structure of the child benefit package for a couple plus two, one earner average earnings. Purchasing power parity € per month June 2009.
-2000
200400600800
1000120014001600
Aut
Bel
Bul
Cze
Den Est
Fin
Fra
Ger
Gre
Hun Ir
e Ita Lat
Lit
Lux
Net
Nor Pol
Por
Rom S
ln
Slk
Sw
e
Spa UK
Neb
rask
a
New
Jer
sey
Tex
as
housing allowance Child tax allowanceLocal property or other non-incomes taxes Universal child cash benefitMeans-tested child cash benefit Social Assistance
Fig. 2. The structure of the child benefit package for a couple plus two, one earner on a low wage. Purchasing power parity € per month June 2009.
592 J. Bradshaw / Children and Youth Services Review 34 (2012) 590–596
Fig. 2 presents the same results for the same family but this timefor a single-income couple with low pay — earning the minimumwage (in most countries) and in Denmark, Norway, Finland andSweden half of the average earnings. There are a number of othercountries with a means-tested child benefit at this income level (theCzech Republic, Poland and Spain). Some countries have a socialassistance top-up for low-paid workers (Bulgaria, Czech Republic,Finland, Lithuania, Luxembourg, Portugal and Slovenia). More coun-tries also have a housing allowance or housing benefit paid towardsthe rent at this income level which is more generous for familieswith children and, therefore, contributes to the child benefitpackage (Czech Republic, Finland, France, Greece, Hungary, Italy, theNetherlands, Poland and Slovenia). In a number of countries low
050
100150200250300350400450500
Rom Li
t
Por Pol
Spa Bul
Lat
Est
Cze Slk
Gre
Nor
Den Net
ppps %av
Fig. 3. The level of the child benefit package for a couple plus two, one earner average earnin
wage earners are not entitled to child tax allowances while averageearners are. These include Estonia, Greece, Romania and Slovenia.
3.1. The value of the child benefit package
There are two ways to assess the value of the child benefit packageand they give rather different results. Fig. 3 shows the value of thepackage in purchasing power parities and as a percentage of averageearnings. Using the PPP measure (on the left hand axis) Austria,Nebraska, Belgium, Slovenia and Germany have more generous pack-ages and Romania, Lithuania, Portugal and Poland the least generouspackages. When the comparison is made using the percentage of av-erage earnings (on the right hand axis) Slovenia, Nebraska and
02468101214161820
Hun Fin
New
Jer
sey
Ita
Sw
e
Uk
Ire
Fra
Tex
as
Ger Sln
Bel
Neb
rask
a
Aut
erage wage
gs in ppps per month (left hand axis) as % average earnings (right hand axis). June 2009.
0
200
400
600
800
1000
1200
1400
1600
Aut
Bel
Bul
Cze
Den Est
Fin
Fra
Ger
Gre
Hun Ir
e Ita Lat
Lit
Lux
Net
Nor Pol
Por
Rom S
lk
Sln
Spa
Sw
e
Uk
Neb
rask
a
New
Jer
sey
Tex
as
average earnings half average earnings
Fig. 4. Variation in the child benefit package by earnings in purchasing power parities. Couple plus 2 children. June 2009.
0200400600800
1000120014001600
Aut
Bel
Bul
Cze
Den Est
Fin
Fra
Ger
Gre
Hun Ir
e Ita Lat
Lit
Lux
Net
Nor Pol
Por
Rom S
ln
Slk
Sw
e
Spa UK
Neb
rask
a
New
Jer
sey
Tex
as
Lone parent +2 Couple +2
Fig. 5. The level of the child benefit package for a couple plus two and a lone parent plus two, both with one earner low earnings. Purchasing power parity € per month. June 2009.
593J. Bradshaw / Children and Youth Services Review 34 (2012) 590–596
Austria have the most generous packages by some way with Bulgaria,Texas and Hungary also up there with the leaders. In contrast Spain,Netherlands and Norway have comparatively low child benefitpackages.
Fig. 4 compares the child benefit package in purchasing powerparities at low pay and average earnings and gives an indication ofhow targeted it is in different countries. The biggest differences arein the Czech Republic, Finland, France, Lithuania, Portugal, the UKand US NJ. There is very little difference in the value of the child ben-efit package in Belgium, Denmark, Estonia, Germany, Greece, Norwayand Sweden. In Estonia, Latvia, and Spain the child benefit package isregressive providing more help to average earning couples with twochildren than the same family on half average earnings.
Fig. 5 compares the level of the package in purchasing power par-ities for a lone parent and a couple with the same number of childrenboth on low earnings. It can be seen that the package in most coun-tries is more generous to lone parents than couples. This means thatgovernments have made some effort within the package to recognisethe extra costs or hardships of lone parents raising children alone.However there are a number of countries that make no concessionto lone parents but treat them identically (Bulgaria, the CzechRepublic, Greece, Ireland, Lithuania, Luxembourg, Poland, Portugal,Spain and the US states). It is also notable in the figure that the Nordiccountries are all much more generous to lone parents in their childbenefit package and they are also countries with generally moreeffective child maintenance regimes14
Fig. 6 takes account of the costs of childcare. It shows how a loneparent with a preschool child would be supported if they workedfull-time on low earnings but had to pay for full-time childcare ofthe most prevalent kind in each country. Now the child benefit pack-age is negative in many countries (Czech Republic, Germany, Ireland,
14 Skinner, C., Bradshaw, J. and Davidson, J. (2007) Child support policy: an internation-al perspective, Department for Work and Pensions Research Report 405, Leeds: Corpo-rate Document Services.
Latvia, Poland, Portugal, Romania and the all three US states). In factonly in countries with childcare that is heavily subsidised does thechild benefit package remain positive.
4. Child benefit packages and universalism in CEE/CIS countries
Before the collapse of the Soviet Union and other state socialistcountries in the Central and Eastern Europe and Confederation ofIndependent States (CEE/CIS) region, children were the focus of fairlyeffective social protection policies. Generally there was free healthcare, free education, a system of state pre-school child nurseries, fullemployment and universal child cash benefits. Of course it was notperfect, but it provided a level of security against extreme poverty.
These systems were largely swept away during transition.
• User charges were introduced for health• and for education.• State nurseries were closed and parents needing pre-school provi-sion were forced to pay for it.
• Unemployment grew and while some countries (re)introducedcontributory unemployment insurance, it only protected those inthe formal economy. In many countries in the region parents wereforced to travel abroad to find work.
• Family incomes fell with a shift from two-earner to one earner andno earner households.
• Cash transfers to families with children became means-tested inmost countries. No country in the Region now has a genuinely uni-versal child benefit and in most countries the only cash benefitavailable to families with children is through so called ‘targeted’ so-cial assistance (TSA).
The World Bank has been behind these developments, providingtechnical and financial support and advice for such schemes, includ-ing the research base on child poverty. The data on poverty hasbeen derived from Household Budget Surveys, only rarely have
-1000
-500
0
500
1000
Aut
Bel
Bul
Cze
Den Est
Fin
Fra
Ger
Gre
Hun Ir
e Ita Lat
Lit
Lux
Net
Nor Pol
Por
Rom S
ln
Slk
Sw
e
Spa UK
Neb
rask
a
New
Jer
sey
Tex
as
Housing allowances Income tax Social security
Local property tax Universal child benefit Means tested child benefit
social assistance Childcare costs
Fig. 6. The structure of the child benefit package for a lone parent with one pre-school child, on low earnings. Purchasing power parity € per month.
594 J. Bradshaw / Children and Youth Services Review 34 (2012) 590–596
children been the unit of analysis, and the poverty thresholds usedhave been very low based on the Bank's $x per day concepts.
Typically TSAs are
• very targeted often using a (highly complicated) quasi means test;• they only help the very poor;• very many very poor families are excluded either by the quasimeans-test or because they do not claim;
• the benefits are very low — not enough to lift families out of pover-ty, indeed (as will be seen) old age pensions commonly contributemore to child poverty reduction;
• low paid working families are excluded;• and because the majority of poor children live in low income fami-lies in employment they have a limited impact on poverty;
• They are often expensive and complicated to administer, open tocorruption;
• They undermine incentives to work; to pay and report remissionsfrom abroad, and even marriage and household sharing;
These schemes are espoused by the World Bank because they fitwith the neo-liberal Washington consensus views about economics.They are attractive to national governments because they are ableto pretend that there is a safety net and one which does not costtoo much.
Non means-tested child benefits exist inBelarus for under 3sRomania for lone parentsRussia for under 3sTurkey for working families onlyTurkmenistanUzbekistan for lone parents only
Fig. 7. The child benefit package for a couple plus 2 (2 years 11 and 7) as a proportionof net income of childless couple with one earner on half average earnings, June 2009.
Ukraine for lone parents onlyTax benefits for children exist in
BelarusMoldovaTurkmenistan
Means-tested child benefits for employed families exist in allcountries except
Armenia,Azerbaijan,BelarusGeorgia,KazakhstanKosovoKyrgyzstanMontenegroTurkeyUzbekistanIn Turkmenistan only lone parents receive means-tested child
benefits.In Tajikistan only school age children receive means-tested
‘cash compensation’ benefits.
Bradshaw et al. (2010)15 used model family methods to comparethe child benefit packages in the region. In this case account wasalso taken of any formal charges that families would be expected topay for standard health care and education as well as childcare. Itwas found that having taken account of charges for education andhealthcare the child social protection package was negative for lowpaid families in all countries in the region except Ukraine, Bulgaria,Belarus, Turkmenistan and Serbia. That is the state effectively contrib-uted nothing to the costs of raising children. (Fig. 7 includes UK andSouth Africa as two comparators from outside the region).
Fig. 8 compares the level of social assistance payable to differentout of work families in $Purchasing power parities. The amountsvary by family type and overall are more generous for families withtwo children. However social assistance is very low or nonexistentin Kosovo, Tajikistan, Georgia and Turkey. In Georgia families withone child do not receive more state support than childless couples(in spite of extra expenses for health and education). In Russia,Romania, Kosovo, Georgia and Tajikistan, pensioners receive at leastdouble the support of families with children.
The average spend on family benefit in the OECD countries was2.23% % of GDP in 2007. The average spend on family benefits in theCEE/CIS region is less than 1%16 and in many countries it was muchless.
15 Bradshaw, J., Mayhew, E. and Alexander, G. (2010) Minimum Social Protection forfamilies with children in the CEE/CIS countries, A report for UNICEF.16 UNICEF (2009) Innocenti Social Monitor.
-1000
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Couple Cpl+1 aged 7 Cpl+2 aged 2 yrs 11 months, 7 Pensioner Cpl
Fig. 8. Level of income on social assistance by family type in June 2009 in 2007 $US PPPs.
595J. Bradshaw / Children and Youth Services Review 34 (2012) 590–596
As a result of the recession the problem is getting worse as almostall countries suffer from increased levels of unemployment, reduc-tions in income from remittances from parents working abroad, cutsin benefits and services and increases in the price of food and fuel.However there is evidence that some/most countries in the Regionare beginning to emerge from the recession and moving once againinto growth. Children did not benefit from the last period of growthand they will not benefit from the next unless policies are changed.
Fig. 9 based on secondary analysis of micro data in six countriesshows the child poverty rates before and after receipt of old age pen-sions and before and after receipt of targeted social assistance. Itshows that pensions for old people are more effective than targetedsocial assistance in reducing child poverty – households with childrenbenefit more from the presence of a pensioner than they do receivingtargeted social assistance.
5. Conclusion
So universal child benefits are dominant in the family benefit packageof European countries. They also exist in Canada and have recently beenintroduced in Japan (though they are now threatened following theTsunami). New Zealand and Australia have only income tested familybenefits but the Australian scheme excludes the rich. In middle incomecountries only Argentina has a universal child allowance, though theChild Support Grant in South Africa has effective universal coverage.
5.1. What are the objections to universal family benefits?
5.1.1. They are misspentThere is a popular belief that child benefits will be spent not on
children but on drink or drugs or gambling, and therefore if we are
0102030405060708090
Bosnia Georgia Kosovo Kyrgyzstan Serbia
With pensions Without pensions With TSA Without TSA
Armenia
Fig. 9. Impact of pensions and targeted social assistance on child poverty rates (2* foodpoverty except B and H and Serbia 4* food poverty).
going to support families with children, it should be done with in-kind benefits such as SNAP in the US. But most rich countries do notfollow the US model — they have child benefits paid to parents incash. They trust parents to spend their money in the interests oftheir children. No doubt they are influenced by the evidence reviewedabove that that is what parents will do.
5.1.2. We cannot afford universal child benefit systemsThere are really two answers to this challenge. First can we afford
not to tackle child poverty? There is a huge long term price17 paid bycountries who fail to invest in their children. Poverty is associatedwith poor health, low educational attainment, worse outcomes inemployment, family instability, crime, squalor and so on. Can we af-ford to carry on like this? Second how much are countries spendingon child benefits? Only 0.75% of GDP in the UK and very, very littlein all of the CEE/CIS countries.
5.1.2. It is much better to concentrate help on those children who need itmost
Better in what sense? It may cost less in benefit expenditure,though much more in administrative costs. However means-testedbenefits have a number of key defects.
• In some countries (but not all in Europe) they tend to be low bene-fits because they lack the political support of universal benefits.
• They tend to be too targeted — concentrating on the very poor,whereas many more families with children are strugglingfinancially.18
• As a result they are not much more effective in reducing povertyrates or closing poverty gaps.
• Not only is coverage poor but means-tested benefits suffer from lowtake-up as a result of ignorance of the existence of the benefit or
17 A series of studies has just been published by the Joseph Rowntree Foundationpointing up the huge costs of child poverty to individuals, government and society.The Exchequer costs are an estimated £12 billion per year and the costs in below-average employment and earnings levels are £13 billion per year. So the total estimat-ed cost is £25 billion, £17 billion of which would return to the Exchequer were childpoverty to be eradicated: ‘in the long term huge amounts would be saved from nothaving to pick up the pieces of child poverty and associated ills’ (Hirsch, 2008, p. 1).Hirsch, D. (2008), ‘Estimating the costs of child poverty: Roundup — reviewing the ev-idence’, York: Joseph Rowntree Foundation See also Blanden, J., Hansen, K. and Machin,S. (2010) The Economic Cost of Growing Up Poor: Estimating the GDP loss Associatedwith Child Poverty, Fiscal Studies, 31, 3, 289–312.18 In the UK not true for child tax credit but true for housing benefit, council tax ben-efit and working tax credit.
596 J. Bradshaw / Children and Youth Services Review 34 (2012) 590–596
that one might be eligible, or stigma associated with receiving it. Ifonly a small minority are eligible, then few realise that they areeligible. In the UK the latest HMRC analysis of the take-up of taxcredits estimates19 that £1.9 billion in Child Tax Credit and£2.3 billion in Working Tax Credit was unclaimed in 2005/6. Thetake up of CTC is higher for those on out-of-work benefits(91–93%) or those receiving WTC (90–93%) than it is for thosejust entitled to CTC (71–85%) or just the family element (68–75%).
• Then there are the complexities in demonstrating eligibility, theneed to produce documents. There have been noted problems ofend-of-year overpayments and downward ‘in-year adjustments’ ofTax Credits. Such overpayments (both in-year and between years)have to be paid back by adjustments being made to future TaxCredit payments. Repayment of Tax Credit debts may lead to peoplehaving a lower minimum income than the schemes imply.
• Means-tests are usually jointly assessed and with more fluid fami-lies this now makes the resulting benefits much less stable and reg-ular in terms of income for children as they will get disrupted eachtime partnership changes.
• The high marginal tax rates associated with means-tested benefitsproduce unfortunate behavioural effects. They reduce incentives
19 HMRC (2008) Child Tax Credit and Working Tax Credit Take-up rates 2005/06,London: HMRC.
to enter and stay in employment, increase earnings more and tosave.
The USA has followed a different path— in terms of family benefitsto that of European countries and the US model rather than theEuropean one seems to have been very influential (via World Bankadvocacy) in middle and low income countries. The result has beenfailure to provide adequate social protection for poor children. It isgood that more international bodies — UNRISD,20 OECD21 and mostexplicitly the ILO22 are now advocating universal social protectionfor children in developing countries. It could be a great example tothe world if the USA would universalize its package. Garfinkel etal.23 recommend that the simplest way to do it would be to makethe federal child tax credit fully refundable (cost $21 billion) and re-move the phase out for high income families (cost $6 billion). Thismay be “pie in the sky” in the context of the current deficit and theceiling on borrowing but it presents a vision of a better system forchildren and something to work towards.
20 UNRISD (2010) Flagship Report: Combating poverty and inequality21 For example in the OECD (2009) DAC Policy Statement Making “The role of em-ployment and social protection; making economic growth more pro poor.” http://www.train4dev.net/fileadmin/Resources/Publications/The%20Role%20of%20Employment%20and%20Social%20Protection-Making%20Economic%20Growth%20More%20Pro-Poor_Policy%20Statement.pdf22 Townsend, P. (ed) (2009) Building Decent Societies: Rethinking the Role of social se-curity in development, Palgrave and International Labour office. In this book Townsendargued that universal child benefit could be funded in developing countries by a Tobintax.23 Garfinkel, I., Rainwater, L. & Smeeding, T. (2010)Wealth and welfare states: Is Amer-ica a laggard or leader? New York: Oxford University Press. They also propose an as-sured (guaranteed) child support benefit to help lone parents.