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Poor Children in Rich Countries: Why We Need Policy Action

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Poor Children in Rich Countries: Why We Need Policy Action POLICY BRIEF ON CHILD WELL- BEING Poor children in rich countries: why we need policy action October 2018 On average across the OECD, almost one Stable, full-time parental employment is central child in seven lives in income poverty – to efforts to protect children from poverty. If all defined as living on a disposable income parents from poor families were in paid that is at most half the national median. employment, the poverty rate for individuals in households with children would fall from 11% to less than 6% on average. Child poverty rates increased in almost Promoting work among low-income parents two-thirds of OECD countries following requires strengthened support for affordable the Great Recession. The share of children childcare services. Moreover, parents from the living below the pre-crisis poverty line (as poorest families often face multiple obstacles to measured by ‘anchored’ poverty rates) their return to work, which requires both has increased sharply in Greece, Italy and appropriate and intensive assistance. Spain. A budget-neutral redistribution of family and In many countries, the depth as well as housing benefits to poor families can help breadth of poverty has increased in reduce child poverty. But children in poor recent years. The income of children in families experience multiple deprivation low-income families has dropped, with (including poor housing conditions and a lack of the largest declines for children in educational opportunities), which calls for a families with the smallest incomes. comprehensive strategy combating poverty in all its dimensions. Childhood is a critical period for the development of On average across OECD countries, one in seven human and social capital of individuals. children live in income poverty Unfortunately, however, far too many children do not On average across OECD countries, nearly one child in get the best possible start in life, due to poverty seven is currently living in relative income poverty during their early years. Poverty has a big impact on (Figure 1). Child poverty rates are especially high in children in different ways: it affects their material Chile, Israel, Spain, Turkey and the United States, living conditions, the quality of the relationships with where more than one child in five lives in income their parents, their health and educational outcomes, poverty. This is almost seven times higher than the and, later in life, their integration into the labour rate in Denmark. market and career prospects. Effectively combating child poverty is essential as it improves family and In many countries, children face higher poverty risks child well-being, and fosters sustainable inclusive than other population groups. This is especially the growth in future. case in countries where child poverty is relatively high (above 16% or so) – in these countries, children are Child poverty is not a new policy issue, but it has more frequently exposed to income poverty than the received renewed attention with the adoption of the general population (Figure 1). Sustainable Development Goals, including target SDG 1.2 to halve child poverty (as measured through Child poverty is increasing in many OECD national definitions) by 2030. The OECD is a member countries of the Global Coalition to End Child Poverty which is a global initiative to raise awareness about children Child poverty is on the rise in many OECD countries. living in poverty across the world and support global Using the usual ‘relative’ poverty measure (see Box 1), and national action to alleviate poverty and achieve child poverty rates have increased in almost two- SDG 1.2. Another reason for OECD countries to renew thirds of OECD countries since the start of the Great efforts in combatting child poverty is that children Recession in 2007/08. The Slovak Republic has seen often face higher poverty risks than other population the largest increase since 2007, at 5.4 percentage groups and many low-income families have points. But countries like France, Hungary, Greece, experienced a loss of income since 2007. Italy, Lithuania and Sweden have also seen relative child poverty rates rise by two percentage points or more over the same period. POLICY BRIEF ON CHILD WELL-BEING – Poor children in rich countries: why we need policy action © OECD 2018 1 Figure 1. Child income poverty rates in 2015-16 Share (%) of children (0-17) with an equivalised post-tax-and-transfer income of less than 50% of the national annual median equivalised post-tax- and-transfer income, 2015-16 or nearest available year Child poverty rate (%) Total population poverty rate Poverty rate 35% 30% High range of child poverty Intermediate range of child poverty 25% Low range of child poverty 20% 15% 10% 5% 0% Notes: Data are for 2011 for India and China; 2013 for Brazil;2014 for Australia, Hungary, Iceland, New Zealand and Mexico; 2017 for Costa Rica. Provisional data for Japan. Countries are categorised in low and high if they are half a standard deviation below or above the OECD average. Light blue bars refer to non-OECD countries. Source: OECD Income Distribution Database, http://oe.cd/idd. Trends in the alternative ‘anchored’ poverty rate – a Box 1. “Relative” vs. “anchored”poverty rate based on a poverty line fixed at 2005 levels (see rates Box 1) – tell a slightly different story (Figure 2). In There are several ways of measuring child poverty. The many OECD countries, child poverty as measured by usual or most common measure is the “relative” child the anchored rate has remained fairly stable or even poverty rate. This captures the share of children in declined since 2008. Chile, for example, has seen the households with incomes below 50% of the median equivalised income in given country and year, and is anchored child poverty rate fall by over 10 percentage entirely relative. When median incomes change, so points since 2008, mostly due to a sharp rise in does the poverty line: it “floats” over time. median household income. Others, however, have The relative child poverty rate is useful for capturing seen large increases. This is particularly the case in poverty at a given point in time, but can sometimes be Iceland, Italy, Spain, and especially Greece, where the misleading when comparing how things have changed share of children living below the 2005 poverty line over years. Its relative nature means that the threshold has trebled since 2008. for who is and isn’t consider poor is always changing. An alternative measure especially useful for Are low-income families getting poorer? comparing across time is the “anchored” child poverty Figure 3 takes the analysis one step further by rate – a rate based on a poverty line fixed at some given income level (though still adjusted for price inflation), examining how household income for children in such as the median equivalised income in a certain low- and very-low income families has changed since year. Using the anchored rate, it is possible to see how the start of the crisis. Trends vary considerably across many children are poor today based on the standards countries, as well as within countries across family of some point in the past. types and household income levels. Nevertheless, in Figure 2 compares the current 2015-16 relative poverty about two-thirds of the countries analysed, at least rate with an 2015-16 anchored poverty rate based on some categories of low-income families have become income levels in 2005. It shows that, while in most countries the 2015-16 anchored poverty rate is lower poorer since before the crisis. than the current relative poverty rate, in some (like Figure 3 Panel A shows how household income for Italy, Spain and Greece) it is actually higher. In these countries, declines in median income over the last children living with two parents changed from 2007 decade mean that there are actually more children to 2014 depending on their position in the income considered poor by 2005 standards than there are by distribution. The income in the bottom quarter of the the standards of today. income distribution fell in ten countries. 2 POLICY BRIEF ON CHILD WELL-BEING - Poor children in rich countries: why we need policy action © OECD 2018 Figure 2. Largest increases in anchored child poverty in Greece, Italy and Spain 2015 - Anchored child poverty rate 2008 - Anchored child poverty rate 2015 - Relative child poverty rate Poverty rate 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Notes: The ‘anchored’ poverty rate sets the poverty line at its 2005 level with yearly adjustments for price inflation. Poverty rates are « anchored » in 2006 for Chile, (Japan), Korea and Turkey; and 2007 for Austria and Spain - -- instead of 2005. Provisional data for Japan. Source: OECD Income Distribution Database, http://oe.cd/idd. The largest decline (-50%) happened in Greece, driven One important factor is an increase in the proportion in large part by a sharp increase in unemployment of children with a father and/or mother who works (80% of poor children in Greece had a father working full-time all year. For example in Poland in 2014, for most of the year in 2007, compared to only 66% in among children with parents working the whole year, 2014). Over the same period, the real minimum wage about 83% ha a father who works full-time (compared also fell by around 20%. to 48% in 2007), and 48% had a mother who works full-time (compared to 21% in 2007 1). It is also remarkable that, in countries where household income has declined, the drop has often In addition, in some countries, while the work been steepest for children in very low-income intensity of fathers in poor families with children families (the poorest 10%) (Figure 3 Panel A).
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