to restrictive criteriatolow eligibility levels offunding of theprogrammestocomplicatedapplicationprocedures families. However, arangeofissues–fromlow awareness by offering amixofdifferent income-supportschemes to Governments acrosstheregionarecombatingpoverty in poverty in thepastfive years. uneven andslow, withafew countriesexperiencing arise rates intheregionhave decreased,progresshasbeen incomegroups. population acrossallcountry While poverty poverty. Poverty ratesfor children arehigherthantheadult continue tobeover-represented amongthoselivingin 1 Asia numberofchildrenAn unacceptable inEuropeandCentral million children live below nationalpoverty lines Serbia, Tajikistan,Uzbekistan. Turkey,and Ukraine Turkmenistan, Kosovo (SCR1244), Kyrgyzstan, Moldova, Montenegro, NorthMacedonia,Romania, Azerbaijan, Belarus, Bosnia andHerzegovina, Bulgaria,Croatia,Georgia, Kazakhstan, UNICEF’s Europe andCentral Asia regioncovers 21countries: Albania, Armenia,

in EuropeandCentral Asia Universal ChildBenefits © UNICEF/UN064155 1 (ECA)aregrowing upinpoverty; anestimated22 for everychild Regional SocialProtection Brief:4 Central Asia in Europeand Benefits Universal Child 2 . Children 2 the mostvulnerablefamilies. andbenefitsaugmenting thesewithadditionalservices for already provide universal ornearuniversal child benefits, OECD countriesandafew countries intheECAregion providing them withmuch needed cashsupport.Most all families withchildren, including themostvulnerable, and economicprogress.Universal ChildBenefits canreach poverty, boost child development andsupportoverall social gained prominenceasapotentialpolicytooltoreduce child (UNICEF, 2015). Universal ChildBenefits have recently reducepovertyof theseprogrammestosustainably exclusion ratesultimately underminetheeffectiveness access thesupportthey need(UNICEF, 2015high ). The – meansthatmany low-income families areunableto measurements (UNICEF, 2017). However, this isconsideredtobeanunderestimation given theissuesaroundpoverty 2 What is a Universal Child Benefit?

A Universal Child Benefit (UCB) rests on three principles: legal frameworks and fiscal space. This brief follows the predictability, unconditionality and universality. Universal classification outlined in the UNICEF and ILO (2019) paper Child Benefits must beunconditional , paid regularly and which makes the distinction between a full UCB and to every child in the country regardless of their family’s three categories of quasi-UCB (qUCB). It should be noted income, employment status, or level of need. UCB can that several countries in Europe and Central Asia provide take many forms with wide variations across design universal birth grants, but these are not considered as and implementation based on differences in countries’ UCBs as they are a one-off payment. social needs, political economy, institutional capacities,

Table 1: Categories of Universal and Quasi-Universal Child Benefits

Universal Child Benefits (UCB)

Child or family allowances, paid on a regular basis as cash or tax, to the primary caregiver for all dependent children under the age of 18 years (in some circumstances benefits are paid to those above the age of 18 or stop when a child reaches 16 or 17). The benefits should be paid for a minimum of ten years as this represents a significant portion of childhood.

Quasi-UCB

Short-term, age limited Benefits paid to all children for a limited period of the life course (e.g. to all children under the age of three).

Means-tested that cover large majority Benefits covering the vast majority of the child population, while ‘screening out’ high income households.

Mixed-scheme A combination of social insurance and non-contributory means-tested benefits to achieve universal or near universal coverage of children.

Source: UNICEF and ILO (2019)

What issues does a UCB address?

There is much debate over UCBs and if they are the right of studies from European countries shows that the direct policy instruments for combating child poverty, supporting cost of children ‘measured as the loss of standard of child development and bolstering overall socio-economic living due to the presence of children in the household, is development. To better understand the merits of a UCB, relatively high’ with children accounting for between 20 and we need to clarify which problems are to be addressed and 30 per cent of households’ budgets (Letablier et al., 2009, ask if a UBC supports achieving those goals. p.9). Often the extra costs associated with children come at a time in life when earnings and savings are at a low Issue: Families are at a higher risk of poverty. Child point, meaning parents have less money available to invest poverty is prevalent in the ECA region: in over half the in their children. Having children does not inexorably lead countries in the region more than a quarter of children to financial hardship; the extent to which children strain a live below national poverty lines (UNICEF, 2017). Families family’s financial position depends on several factors such with three or more children are strikingly more at risk of as the number and age of children, marital status, place poverty than the general population (UNICEF, 2017). One of residence, household income and the availability of of the main arguments for a UCB is that it reduces poverty benefits and services. and financial strain families experience by offsetting the costs of raising children. The additional expenses for food, Families in the ECA region face several financial and labour childcare, education and other childrearing necessities, market constraints that undermine their economic security coupled with indirect costs related to forgone employment and access to social protection. Employment should and earnings in lieu of parenting responsibilities make offer a pathway out of poverty, but this is only the case families more susceptible to economic instability. A review ‘if job quality is sufficient, including adequate earnings, 3 job security and safe working environments’ (ILO, 2019, outcomes across a number of domains: poorer health and p.1). The changing nature of work and lack of decent nutrition, lower school enrolment and achievement, and work opportunities means it is harder to reduce poverty behavioural issues. A growing body of evidence (Johnson through employment alone. Following the transition to a et al, 2016; Nobel et al, 2015; Hanson, et al., 2013; Lipina market economy, informal and vulnerable employment and Colombo, 2009) points to how poverty actually alters became dominant in the region and is particularly high for the structure of brain development leading to diminished women. In 2016 ‘in-work’ poverty affected over 10 per cent cognitive skills, particularly around language, memory of workers in Romania (18.6 per cent), Turkey (13.5 per and impulse control. Children from low-income families cent), Serbia (12.3 per cent) and Bulgaria (11.6 per cent); have less access to quality services, such as childcare, rates are higher among the self-employed and those aged schools and healthcare, compounding these early 18 to 24 years old (Peña-Casas et al., 2019). Low wages disadvantages. Studies show that experiences of poverty and unstable employment coupled with limited access to and scarcity create additional mental burdens which can social protection and services makes it tougher for families reduce cognitive resources available for other tasks such to escape poverty and perpetuates the intergenerational as decision making or parenting (Mani et al. 2013). When transmission of poverty. disproportionate amount of parents’ time is occupied with juggling expenses and making difficult choices (e.g. putting food on the table or having enough money for warm Issue: Poverty blunts child development. It is well- clothes) they are less able to provide consistent nurturing established that poverty is harmful to child development, and responsive care and have less time to teach children and young children are particularly vulnerable to its effects critical skills such as emotional regulation, executive (Cooper and Stewart, 2017; UNICEF, 2016; Duncan et function, and positive social skills. In some cases, this can al, 2014; Brooks-Gunn and Duncan, 1997; Aber et al, result in poor parenting practices, including harsher and 1997). Low incomes are associated with substandard detached parenting styles.

Box 1: How Income Affects Child Development

Different models have been proposed for how income may affect child development. First is the investment model (also called the family resources theory) which argues that time and money are the two basic resources parents have at their disposal to invest in their children. The investment model contends that income matters to children because it enables parents to buy a variety of things that support learning and healthy development, including material goods such as books and educational toys; experiential goods like extracurricular activities and trips; and a positive home environment including a healthy diet and good quality housing. It also argues that children from low-income families lag behind their economically advantaged counterparts in part because their parents have fewer resources to invest in them. Economically disadvantaged parents may also have less time to invest in their children, particularly if parents must engage in more than one economic activity, have nonstandard work hours, and must balance work and care responsibilities. The ability of a household to turn money and time into positive child outcomes will not only depend on economic status but also on the social characteristics of the household, such as educational level and parenting abilities. The family stress model (also called the family process model) holds that poverty is stressful and can have a negative effect on family functioning, parenting behavior, and relationships. Poverty related stress can diminish parents’ ability to be supportive, consistent, and involved with their children. Poor parenting, in turn, hurts the social and emotional development of children, which limits their educational and social opportunities. Poverty can also compromise parents’ cognitive resources (‘bandwidth’) with damaging consequences for preforming cognitive tasks, such as planning and financial decision making. These theories are not mutually exclusive and can interact with detrimental consequences. Research by Waldfogel and Washbrook (2011) concluded that a substantial portion of the income-based gap in children’s developmental outcomes was due to differences in parenting style (such as responsiveness) and the home learning environment*.

Sources: Duncan and Magnuson (2011), Cooper and Stewart (2017), Shafer et al (2018); Shah, Mullainathan and Shafir (2012) * The home learning environment measure used in this study considers the amount of educational materials such as books or toys that are in the home; parent time spent using those materials with children, and time spent taking children to other environments such as libraries.

Issue: Social protection systems are complex and proof of citizenship, proof of unemployment or a birth fragmented. Social protection systems are riddled certificate; procuring each may entail a fee (UNICEF, with complications that can prevent families from 2015). In the Western Balkans, applicants may be required accessing much needed benefits. Administrative rules to produce up to 27 official documents to apply for and requirements are often complex, burdensome benefits, with separate application processes for different and restrictive, confusing potential claimants and staff types of benefits in most countries, requiring multiple administering the benefits (UNICEF, 2015). This can lead visits to Centres for Social Work (UNICEF, 2015). Some to errors in applications, or exclusion errors because programmes in region require reapplication every six of unclear criteria for eligibility. Some benefits require months. Sometimes requirements are so complex and applicants to obtain a number of documents, such as onerous that applicants simply give up. 4 Issue: Social protection systems have high exclusion numbers of families living in poverty. In Kyrgyzstan errors: Reforms in the region have led to narrower for instance, the main social protection programme targeting through means-testing and proxy means-testing. for children and families, the Monthly Benefit for Poor While means-tested benefits have advantages – they are Families, reaches 74 per cent of children in the bottom 5 expected to be less expensive than universal benefits percent of households, leaving nearly 1 in 4 of the poorest and may have greater redistributive effects – evidence children without support (Gassmann and Timar, 2020). suggests that poverty targeting also has several drawbacks Means targeting is demanding in terms of collection and which can undermine effectiveness. Means-tested management of data, monitoring, verification and fraud programmes run the risk of gaps in coverage and creating control. Most social assistance programmes in the region disincentives to work and savings due to high taper rates, require interviews and household visits. While in theory higher administrative burden and not being sensitive these operational procedures can help minimize fraud and to sudden changes in income or well-being. Restrictive inclusion errors, they come at a cost in terms of time and eligibility criteria, including the choice of assets, low money. The ILO estimates the average administrative costs disregard limits, or low poverty/vulnerability thresholds can for targeted programmes at 11 percent compared to 3 per result in programmes that are well targeted to the poorest cent for universal (Ortiz et al. 2017). segments, but conversely end up excluding significant

Box 2: Universal Child Benefits as Automatic Stabilizers

Throughout Europe and Central Asia social protection systems have played a critical role as countercyclical stabilizers in the face of economic and financial crises, by mitigating the negative impact on employment, smoothing disposable income and consumption and maintaining wellbeing. The stabilization role can either be automatic (programmes are designed to respond in times of shock) or through discretionary government action (ad hoc measures implemented after a shock occurs). Automatic stabilization can kick in immediately, providing income support/replacement to those already integrated into the benefit system. Traditional automatic stabilizers have constraints: unemployment insurance does not provide equal protection to different kinds of workers. For those unprotected, means-tested programmes have eligibility thresholds and require documentation and home visits which can delay support. Discretionary actions can temporarily expand access to benefits and have played a substantial role in governments’ crisis response, but these actions are not immediate, may take time to create and come with challenges in implementation and delivery. Universal programmes, such as Universal Child Benefits, have proven to be an effective means to extend support to affected households; such programmes not only provide continued income support but can also provide targeted increases in benefits (UNICEF-ODI, 2020). The extent to which Universal Child Benefits act as an effective stabilizer will depend on the proportion of households with children and the adequacy of the transfer level. © UNICEF/UNI304661 5 Issue: The stigma and shame of poverty. Poverty can discouragement by programme administrators against have determinantal effects on a person’s psychosocial certain groups seeking benefits (e.g. Roma) can heighten wellbeing including low self-esteem and increasing the indignity experienced by claimants. Stigma can also social exclusion. For children, poverty can come at ‘deep lead to non-take-up of benefits, which, again, limits the emotional costs’ (Ridge, 2011) and social protection poverty reduction effect. Rationing support through programmes can exacerbate the feeling of shame means-tested programmes can perpetuate the notion that depending on their design and delivery. For instance, some people deserve support while others don’t. This can the distribution of Uzbekistan’s in-kind winter clothes reinforce stereotypes about people living in poverty – they programme is done in front of classmates, parents and are lazy or misspend their money. Such perceptions can school administration. Anecdotal evidence suggests that undermine public and political support for social protection the practice causes embarrassment and exacerbates schemes. The notion of ‘deserving versus underserving’ stigma felt by children; there have been cases reported can result in a patchwork of programmes that attempt to where children ask their parents not to apply for the provide support to a narrow segment of the ‘deserving’ programme to avoid receiving clothes in front of their population, while limiting access to the ‘underserving’ classmates and teachers (UNICEF, World Bank and ILO, which can contribute to inefficiencies and ineffectiveness. forthcoming). Likewise, systematic discrimination and

Would a UCB solve these problems?

Issue: Families are at a higher risk of poverty. and services (e.g. universal childcare) could leave families Universal Child Benefits would serve as an income floor worse off. While gains could be made from eliminating for families, reducing financial strain by increasing the inefficient programmes such as fuel or energy subsidies, amount of available income to cover essential expenses any transition to UCB should be based on a rigorous and investments in children. UCB can also respond to the assessment of how policy reforms will affect different financial burden of unpaid care or high childcare costs. categories of families and children. Rigorous research shows that when parents receive cash transfers, they spend it wisely. Evidence from Poland’s Issue: Poverty blunts child development. There is 500+ programme revealed that the increased income from a growing body of evidence demonstrating that cash the UCB contributed to higher consumption and savings transfers can play a role in supporting child development. rates, while decreasing debt (EPIC, 2018). The programme Such transfers should be viewed as an investment in was shown to reduce extreme poverty from 11.9 to 6 human capital of the next generation. A review by Cooper per cent (World Bank, 2017). Canada’s Child Benefit plan and Stewart (2017) found that increasing income has reduced child poverty by 40 percent (IMF, 2018). Reducing significant positive effects on children’s outcomes, with child poverty today can yield sizable reductions in costs cash transfers during early childhood having the greatest in the long run by increasing productivity and incomes impact on cognitive outcomes while social and behavioural and expanding the tax base. However, the impact a UCB outcomes were improved when funds were received in has on poverty depends on different design factors and middle childhood or adolescence. Critics of UCB argue what programmes (if any) would be replaced. Expanding that funds should be directed towards services and that the reach of child benefits while maintaining inadequate sector-based strategies are more effective for supporting benefit value may limit the effectiveness of tackling child child development. Improving the quality and coverage of poverty. Critics argue that a UCB, under a budget-neutral services is essential, and while the review also concluded scenario, would be less effective at reducing poverty and sector specific spending did have impact, these were inequality as resources would be spread too thin across all more domain specific. Whereas increasing household income groups. Universal Child Benefit programmes that income was shown to have a positive impact across a integrate some aspects of targeting have the potential for range of domains (mental and physical health, cognitive poverty reduction; for instance, universal programmes that and behavioural) across family members (both children provide additional benefits or have higher benefit levels and adults) in addition to improving the home environment for certain vulnerable households or introduce phase-outs (Cooper and Stewart, 2017). However, it is important to be for higher income brackets (UNICEF-ODI, 2020). Replacing mindful that the debate on UCB does not turn into a choice benefits and services with a UCB should be carefully between income supports and services as the best means assessed as losing other income supports (e.g. poverty- to support child development – both services and income targeted child allowance), benefits (e.g. housing subsidies) security are vital. 6 Box 3: Universal Child Benefits and Affluence Testing

Affluence-tests are a form of means-testing: an individual’s or household’s eligibility for benefits is assessed and those households determined to be wealthy are excluded from receiving benefits. South Africa and the United Kingdom have applied it to their child benefit schemes. Like poverty targeted means-testing, the process of identifying wealthy households in contexts without verifiable data on income can be challenging in practice. Two methods for identifying wealthy households are a Proxy Affluence-Test (PAT) and the use of filters and combinations of filters. The successful implementation of targeting rests in the selection of a simple and transparent set of eligibility criteria and making the application process as fast and hurdle-free as possible (for both applicants and staff). The PAT employs a process very similar to proxy-means testing. It compiles a long list of household characteristics that are correlated with household well-being. A regression analysis is then conducted in which the relationship between household consumption per capita and the potential indicators is estimated. Those indicators that are statistically significant predictors of monetary well-being are then used to predict household consumption. Households above a certain threshold are excluded. Although the expected outcome of the PAT would be slightly more equitable (assuming perfect implementation), its complex calculations are difficult to explain which, like a PMT, can created a sense of lack of fairness and transparency in decision making. It would require a long list of household assets to be verified (e.g. value of car, number of cattle etc.) and home visits to be conducted for each applicant. A less transparent and complex targeting method such as the PAT could increase public perceptions of corruption or manipulation in the process. A technically easier approach is the use of a few easy-to-observe “affluence-filters”. Potential filters should be assessed to determine if they are statistically more prevalent among the top 20% compared to the rest of the population and characterize a high enough proportion of the wealthy to identify a substantial share of them. Targeting through “affluence filters” relies on a few indicators that are easy to observe based on existing sources of information. Examples of filters and data sources are household demographics (civil registries); asset ownership (registries of property ownership – land, real estate, vehicles); educational attainment (Ministry of Education databases) and income and tax data (tax and contributory social security databases). As with all targeting approaches, trade-offs between exclusion and inclusion errors are inevitable. Policymakers must decide which type of error they tolerate more. In principle, exclusion errors are more harmful to the objectives of a child benefit since excluded children are deprived from this support to their well-being and development, even if this means that some of the benefits will be captured by those who are better off than the target population. Inclusion errors on the other hand are a less efficient use of resources and potentially jeopardize the political and societal support for the program. Analysis should be undertaken to assess the effectiveness of reducing exclusion and inclusion errors. The effectiveness of targeting approaches can be assessed by coverage rates (inclusion and exclusion - paying close attention to the bottom quintiles), distribution across consumption quintiles, individual- level distributional outcomes and the impact on reducing child poverty. Costs and cost-efficiency therefore need to be considered when evaluating various options for targeting.

Source: Gassmann and Timar (2020)

Issue: Social protection systems are complex and fragmented. The extent to which UCBs will reduce bureaucratic barriers and fragmentation will depend on the design of the programme. It will also depend on whether or not the UCB replaces other benefits or acts as a complement to other targeted programmes (e.g. disability benefits, low- income benefits) which may still be onerous and restrictive © UNICEF/UNI320512 (UNICEF-ODI, 2020). One of the potential advantages of a UCB or qUCB is that they can reduce the ‘cognitive taxes’ on applicants as ‘filling out long forms, preparing for a lengthy interview, or deciphering new rules’ takes time and mental resources (Mani, et al 2013, p.980). Simplified application procedures can be particularly helpful for expanding access, reducing burdens on both administrators and applicants. Gradual reforms to Ukraine’s Universal Child Grant application procedures resulted in true ‘universal’ coverage of children under the age of three with almost non-existent exclusion errors. In countries that implement UCBs the application procedure varies. In some cases, it is automated, linked to the birth registration process, in others it is done through filing income taxes, while some countries still require applicants to gather and submit documentation, either online or in person. 7 Issue: Social protection systems can have Issue: The stigma and shame of poverty. Another high exclusion errors: Universal programmes are common argument for UCB is to overcome stigma. Moving straightforward, easy to administer and easily understood by cash transfers from being emblematic of poverty to child claimants. Coverage of the poor is higher where child benefits benefit as a right means that all families can access the are universal, such as in Romania, where 74 per cent of the benefits with dignity and free from stigma. Enrolment in UCB poorest quintile are reached by the State Child Allowance, is less invasive as they generally require less documentation, compared with 14 per cent for the means-tested Guaranteed household visits and compliance visits (UNICEF-ODI, 2020). Minimum Income programme (UNICEF, 2015). Universal Making benefits universal can also serve as an expression Child Benefits support children of the working poor and the of social solidarity and affirming the societal value of children transient poor, an important advantage over the current and parenting which can increase social cohesion and benefit systems given the increase in vulnerable employment. political support for programmes. Enshrining Universal Child Benefits within a country’s legislative framework means that programmes represent a legal right to all citizens (and in some cases non-citizens) and all citizens can exercise that right, thereby reinforcing the social contract and promoting the state-citizen relationship.

What are the experiences from other countries?

Universal Child Benefits are a core element of social such as cash payments or through the personal income tax protection systems in countries, though the design and system either as tax credits or tax allowances3. The table delivery of the programmes differ. Eligibility for UCBs below provides a snapshot of the different approaches vary depending on age, residence or citizenship criteria. countries take in providing UCBs. Payments can be delivered through different modalities,

Table 2: Examples of Universal Child Benefits Across Europe and Central Asia

Universal Child Benefits (UCB)

• Familienbeihilfe in Austria is paid to all resident children until the age of 18, it can be extended under some conditions. Average payment is €105/child/month. • In Romania the universal child allowance benefits children younger than 18. The benefit amount varies by age, with 200 lei ($47) a month for each child under the age 3 and 84 lei ($20) per month for each child aged 3 to 18. • Lapsetoetus in Estonia benefits all resident and temporary non-residents up to the age of 16. The first two eligible children receive €55 each, while each subsequent child receive €100 a month. • Hungary’s Családi Pótlék pays monthly benefits for children under the age of 18; 12,200 forints ($43) is paid for the first child, 13,300 forints ($45) per child for two children and 16,000 forints ($54) per child for three or more children. A higher benefit level is paid to single parents. • Latvia’s Gimenes Valsts Pabalsts pays a monthly benefit to all children between the ages of 1 and 15 years. The benefit level varies depending on the number of children: €11 for one child; €23 for two children; €34 for three children; and €50 for four or more children. An additional child raising allowance is paid for children younger than age 2. • The Rodzina 500 Plus in Poland pays 500 zlotys ($131) for the second and each subsequent child younger than age 18. The benefits can be received from the first child for families with incomes under a certain level. • Slovenia’s child allowance benefits all children under the age of 18 years. The benefit level varies based on eight income categories and the number of children in the family. Two additional supplements are offered alongside the child allowance: one for single parents and another for childcare.

3 Tax credits are subtracted from the amount of tax owed. Tax credits can be further divided into full, partial or non-refundable. Tax allowances are the amount which can be deducted from taxable incomes. 8

QUASI-UCB (qUCB)

qUBC with age limits • Under Turkmenistan’s childcare allowance 65% of the social benefit base value – equal to 209 manat ($60) in 2020 – can be claimed at any time before a child’s third birthday. • Ukraine’s Universal Child Birth Grant is paid to all permanent residents. The birth grant is equal to 41,280 UAH which is split between a one-time payment of 10,320 UAH ($433) paid at birth (or adoption), with the remainder paid in monthly instalments of 860 UAH ($36) until the child reaches 3 years old. • The Belarus Child Allowance is available for all children under the age of 3. The benefit level is set at a proportion of the national average wage: 35 per cent for the first child and 40 per cent for subsequent children.

qUCB with phase-outs • Canada’s Child Benefit provides a monthly benefit to all children under the age of 18 years. The benefit amount is based on income and the number and age of the children. The benefit phases out as income rise. A supplemental benefit is provided for children with disabilities. • Denmark’s child and youth benefit (or child cheque) is paid for each child until they reach the age of 18. The amount a family receives depends on the age of children and the family income. Once a family’s income exceeds a certain level (DKK 850,652 in 2019), the benefit is reduced by 2 per cent of the amount by which the family’s income exceeds the threshold. For example, if a household has an income of DKK 100,000 over the threshold, the benefit is reduced by DKK 2,000, or if a family’s income is three times the average wage the benefit would be phased out entirely. • The United Kingdom provides a universal Child Benefit (maximum £82/month/child) but it is taxable for high-income families who may opt out rather than receive benefits and pay taxes on it.

Mixed-schemes • Belgium’s mix of contributory (employment related and civil servant benefits) and non-contributory schemes are paid to families with children under the age of 18. • In Argentina, the contributory (ANSES contributor benefits) and non-contributory (Asignaction Universal por Hijo) schemes provide benefits to children under 18 years. • Moldova’s childcare benefit provides support to parents of young children through a mix of contributory and non-contributory measures. For contributing parents, the benefit lasts until the child reaches the age of three and the amount is 30 per cent of salary. Parents outside of the contributory systems receive the benefit until the child is two years old (it increased from 1.5 to 2 in 2016) and the amount is fixed.

Source: SSA, 2018; SSA, 2019; ILO-UNICEF, 2019

Countries have a number of design options available in Hungary and Latvia increase as the number of children when developing their UCB depending on objectives, increases but the opposite is true in New Zealand where the demographics, fiscal constraints, current institutional setups level of family tax credit for the first born is higher than for and administrative capacity. The table shows a wide variation subsequent children (UNICEF-ODI, 2020). when it comes to eligibility. Some countries impose age Some countries provide supplemental benefits alongside limits, for instance Belarus, Ukraine and Turkmenistan their child allowance schemes to particularly vulnerable provide universal benefits only to young children. While children. For instance, children with disabilities receive the majority of countries provide benefits to citizens and additional benefits in Austria and Sweden. In other cases, legal residents, there are exceptions. Refugee children supplements are provided for single headed households and children of foreigners are covered under reciprocal such as in Slovenia and Hungary. The Canadian Child Benefit agreements in Denmark and Hungary (SSA, 2018) and provides lower- and middle-income families with higher Estonia extends UCB coverage to temporary non-residents payments. While benefits of Poland’s 500+ programme (UNICEF-ODI, 2020). Countries such as the United Kingdom, are generally paid to families starting with the second Canada and Denmark limit the access of high-income child, families below a certain income (EUR 180 per family families through the introduction of taper rates, affluence member or under EUR 280 per family member if the child is tests or by considering benefits as taxable income. disabled) can receive the benefit starting from the first child. Administrative simplicity (or complexity) of registering for Benefit amounts can differ based on the child’s age, birth order a child benefit can influence the take up of the benefit and or the number of children in a family. For instance, in Romania the resulting coverage rates. In Austria the child allowance children up to the age of three receive around $47/month is automated at the point of child registration with the while children aged 3-18 receive approximately $20/month. The municipality. To receive Ukraine’s child benefit parents must Rodzina 500 Plus in Poland pays about $131 for the second complete and submit a simple application form upon a and each subsequent child younger than age 18. Benefits child’s birth which can be done online or in person. 9 © UNICEF/UNI220332

What would UCBs cost in the ECA region?

The costs of UCBs and qUCBs vary based on transfer size, By international comparison, many countries in the region demographics, coverage rate and administrative costs. For invest quite a lot in social protection as a share of GDP. But instance, in Austria, Canada and Belarus UCB programmes there are considerable variations among countries both in cost 1 per cent of GDP whereas in Sweden and France the share of GDP dedicated to social protection overall and in it is 0.6 per cent and in Ukraine 0.5 percent of GDP is the shares devoted to different elements of social protection allocated to its UCB. UNICEF-ODI (2020) simulates costs systems. Allocations to child and family benefits on average of different UCBs for countries in the ECA region with are a relatively minor component of social assistance and recent data on median income or consumption in national have been falling over recent years (R-UNDG IBC SP, 2018). household surveys. The exercise considered two different However, the simulations indicate that for most countries UCB designs – a ‘full’ UCB covering all children aged 0-14 the estimated costs of a UCB, even the most generous years and a quasi-UCB covering all children up to the age of level, represent a modest portion of the total expenditure 4 years old. For each design the transfer level is simulated on social protection, but would require for some countries at three different values: 10%, 20% or 30% of the median increased investment in social protection programmes for income or consumption. children. The UNICEF-ODI exercise only simulated the costs of different transfer values for different coverage groups, it did not simulate the different impact on poverty.

Table 3: The costs of a UCB valued as a proportion of median household income / consumption (% of GDP)

Total social Costs of UCB (% GDP) Costs of UCB (% GDP) Total social Median protection for 0-14 population for 0-4 population protection Income/ expenditure for Year expenditure Consumption 0-14 population excluding (PPP) excluding health 10% 20% 30% 10% 20% 30% health (%GDP) (%GDP) Kyrgyz Rep 137.24 2016 1. 4 2.8 4.2 0.6 1. 1 1. 7 5.4 1. 2 Tajikistan 157.72 2015 2.4 4.7 7. 1 0.9 1. 8 2.8 — 0.43 Armenia 184.83 2016 0.5 1. 0 1. 5 0.2 0.4 0.5 5.1 1. 18

Moldova 247.47 2016 1. 0 2.0 3.0 0.3 0.7 1. 0 12.6 — North 270.22 2014 0.4 0.8 1. 2 0.1 0.3 0.4 — — Macedonia Kazakhstan 296.47 2015 0.4 0.8 1. 2 0.2 0.3 0.5 3.9 0.19 Ukraine 313.83 2016 0.7 1. 4 2.2 0.3 0.5 0.8 20.6 1. 8 Serbia 335.58 2015 0.6 1. 2 1. 8 0.2 0.4 0.6 17 1. 3 Montenegro 367.37 2014 0.5 1. 1 1. 6 0.2 0.3 0.5 — 0.15 Tu rke y 410.71 2016 0.5 1. 0 1. 5 0.2 0.3 0.5 9.3 0.44 Bulgaria 460.10 2014 0.4 0.9 1. 3 0.1 0.3 0.4 13.9 1. 9 Bosnia and 471.00 2015 0.5 0.9 1. 4 0.2 0.4 0.7 — 0.2 Herzegovina

Source: UNICEF (2020); ILO World Social Protection Report Data 2017-2019 (accessed 04-Feb-2020: https://www.usp2030.org/gimi/AggregateIndicator.action#expenditure; https://www.usp2030.org/gimi/Children.action) 10 © UNICEF/UN0285241 © UNICEF/UN044436 © UNICEF/UNI212826

Some countries in the region have already undertaken at the cost of the programme but also considered the costing exercises on extending Universal Child Benefits. impacts on child poverty. The three options would have a For instance, simulations conducted by Gassmann and greater impact on poverty reduction over the existing child Timar (2020) of different options for extending Kyrgyzstan’s benefits. In 2018, the existing schemes reduced national MBPF show a cost ranging from 0.65 percent of GDP to and child poverty rates by 7.2 per cent and 8.9 per cent cover all children under 18 months to 2.85 per cent GDP respectively. Simulations estimated that the most modest to cover all children. Both options would be at current option would reduce national poverty by 21.3 per cent and benefit levels and costs exclude administrative costs: child poverty by 26.6 per cent by 2030. The most generous currently the MBPF costs 0.47 per cent of GDP, not option, costing 1.82 per cent of GDP in 2030 would have including administrative costs (Gassmann and Timar, 2020). an even greater impact, reducing national and child poverty In Uzbekistan UNICEF (2019) assessed three options to by 28.2 per cent and 35.3 per cent respectively. Similarly, gradually expand existing poverty-targeted child benefits modelling of options for a Universal Child Benefit of 50 GEL to a near-universal system covering 75 per cent of children in Georgia showed that extending benefits to all children by 2030. The analysis estimated that the most modest under the age of 16 would reduce child poverty from 27.4 option (initially covering all children under the age of 3 to 18.8 per cent at the cost of 1.2 per cent of GDP (UNICEF, years, expanding to all children under 13 by 2030 at the 2019a). A second option which would taper the benefits same level of benefits) would cost 0.8 per cent of GDP in once income reached a certain threshold would cost 2020 growing to 1.29 per cent of GDP in 2030. To put this roughly 0.9 per cent of GDP and result in a child poverty in context Uzbekistan invests 9.7 per cent of GDP in its rate of 19.7 per cent (UNICEF, 2019a). social protection programmes. The analysis not only looked

What are the financing options for UCBs?

Extending Universal Child Benefits in ECA would not government revenues. Different options are available necessarily require a major mobilization of resources; for for creating fiscal space through expanding domestic relatively modest investments – less than 1 per cent of revenue, from more traditional approaches (increasing tax GDP – several countries in the region could implement a revenues, generating efficiency gains through simplified version of a UCB (see table 3 above). Reforming systems administration and improving financial management, to be more inclusive and responsive to family needs will reallocating funds from existing schemes) to more require greater attention to countries’ social protection innovative financing mechanisms, including blending financing structures. In ECA, social protection systems contributory and non-contributory funding streams, are primarily funded by domestic financing: systems are sovereign wealth funds or earmarked taxes. highly reliant on employee/employer contributions and 11 Taxation is one of the most stable sources of financing. Government of Ukraine could collect US$ 860 million in Despite the high levels of labour informality and constrained addition revenue if tobacco taxes were raised to 70 per tax capacity across the region, several countries have cent of the retail price. However, any consumption tax will instituted successful tax reforms leading to large tax be regressive, and so the pros and cons – particularly the revenue increases, including Georgia, Ukraine, Albania, impact on low-income populations – should be carefully Armenia, and Kyrgyzstan. Even countries with limited weighed. Tax revenues from different industries, such as capacity and coordination mechanisms can take measures natural resource extraction, tourism (hotels and airlines), to improve tax administration and collection, including and financial transactions, have also been earmarked for curbing tax avoidance and evasion. Reforms to the tax social spending in places like Brazil, Bolivia, Mongolia, and system, for instance changes to income tax, introduction/ the Maldives (Ortiz, et al., 2019). increasing consumptions taxes, or property taxes, would need to be accompanied by a comprehensive analysis, Alongside increasing revenue, governments can take considering the impact that raising taxes would have on steps to maximize the efficiencies of social protection poverty and inequality. The distributional effects to any programmes either through reprioritizing allocations changes to the tax-benefit structure should be carefully or by increasing efficiency gains through improved assessed to ensure progressivity. Another tax measure that administrations. Governments can assess current is gaining traction is the introduction of hypothecated taxes. programmes through Public Expenditure Reviews (PERs), For instance, earmarked taxes on tobacco or sugary drinks and other types of thematic budget analyses replacing are being introduced to finance health care, social services high-cost, low-impact investments, such as subsidies, and social protection in a number of countries, including with those with larger socio-economic impacts (Ortiz Romania, North Macedonia, Argentina, Malaysia and the et al., 2019). Cost efficiencies can also be generated by Philippines. Such taxes have the potential to generate optimizing institutional arrangements, information systems sizable revenue streams. WHO (2011) estimated that the and delivery mechanisms.

Is it time for a UCB?

The decision about whether to implement a UCB will 2. Coverage and beneficiary incidence with a focus be based on several factors: the coverage rates and on coverage at the bottom of the income distribution. effectiveness of the current programme for reducing child Beneficiary incidence should disaggregate coverage poverty, the country’s capacity to create fiscal space, and rates by decile and can include additional categories institutional capacity. Any policy reform should be based on a such as those below the poverty line, those at risk thorough analysis of the trade-offs between different options. of poverty, and those neither at risk nor under the Rigorous assessments should gauge the effectiveness of poverty line. Where possible, categories should be current programmes against a UCB (full and quasi) and other disaggregated by age to show coverage of children. alternatives along the following key dimensions: Focus should be on understanding the potential inclusion and exclusion errors which can arise from 1. Impact on poverty reduction (examining the poverty different approaches to targeting. An additional headcount, poverty rate, and the poverty gap, including consideration is how targeting may impact non-take up child poverty) of implementing different child benefit of benefits due to a narrow or highly complex application design features, such as a full or quasi-UCB (with and compliance procedures (UNICEF-ODI, 2020). or without additional top-up for vulnerable groups), current or expanded poverty targeted programmes. 3. Fiscal costs of a universal programme versus Understanding the share of children and the share of alternative programmes. This should not only include households with children as well as where they sit the costs of the transfers but administrative costs. in the income distribution are also critical to consider While consideration should be given to poverty when making decisions about UCB (UNICEF-ODI, 2020). reduction efficiencies based on costs it is also Equivalence scales can be applied to capture the impact necessary to take into account the challenges that of transfers on poverty at the household level and allow may undermine optimal take-up of benefits. Forward for comparisons of living standards across households looking costs projections will be driven by the age of different sizes and compositions, so child poverty structure of the population. Falling fertility rates may effects can be better captured. Design approaches such reduce programme costs but could potentially reduce as taper rates, which can influence incentives, and tax revenues due to a higher old age dependency ratio economic distortions such as those related to labour and a growing proportion of people working in the market participation, the number of hours worked, and informal economy. time used for other productive purposes such as child raising, should also be investigated. 12 4. Financing options evaluating and comparing different Universal social protection has a long history in the financing reforms, particularly around efficiency, region. However, following the transition to market fairness or distributional impact, compliance, economies, governments introduced narrow poverty- administrative feasibility and cost (Ortiz et al., 2019). targeted programmes often with complex administrative Aspects of timing, political feasibility and the extent procedures. This has led to a large number of vulnerable to which they can create fiscal space will need to and low-income families not accessing support due to be considered along with “winners and losers of a overly restrictive eligibility criteria or highly cumbersome proposed financing reform” (Ortiz et al., 2019). application procedures, stigma or lack of awareness about benefits causing low take-up rates. Limited coverage, 5. Institutional capacity to deliver child benefits, coupled with low benefit levels, means family and child including ability to target, enrol and distribute benefits, benefits are not having a sustained impact on reducing and raising resources equitably and sustainably should child poverty. be carefully examined. A number of countries in the region have been investing 6. Political economy considerations of universal or in their systems and taking steps to extend coverage. target benefits will determine public support for any Universal Child Benefits should be a part of a basket programme reform. Increasing coverage to middle- and of policy options available to countries. Universal Child high-income groups may lead to increased political Benefits can address many of the systemic issues support for programmes, which in turn could lead that undermine the effectiveness of social assistance to increased budget availability and sustainability. A programmes for reducing poverty and supporting child better understanding of public perception of different development. Countries can take different approaches to programme options can support the design and gradually implement or move towards UCBs based on their framing of UCBs thereby increasing their legitimacy specific institutional, fiscal and political contexts. This can and political support (UNICEF-ODI, 2020). allow countries to make a staged transition to universal social protection. © UNICEF/UN0219157 13 References

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for every child

This Issue Brief was written by Louisa Lippi and is a product of UNICEF Regional Office for Europe and Central Asia. For further information contact: Pamela Dale ([email protected]). 15 16

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