Proposals to reduce child poverty

Tackling the intergenerational transmission of poverty is a priority goal for the European Union. Two possible solutions put forward to curb this transmission are to create a universal child allowance (as proposed by Shaefer et al. for the USA) and to reinforce selective benefits for poor families with children (as defended by the High Council for the Family, Children and the Aged or HCFEA for France).

Factsheet

  • Geographical scope: USA and France.
  • Source:

H.L. SHAEFER et al. (2018): «A universal child allowance: A plan to reduce poverty and income instability among children in the United States», The Russell Sage Foundation Journal of the Social Sciences, 4(2).

Haut Conseil de la famille, de l’enfance et de l’âge (2018): Lutter contre la pauvreté des familles et des enfants. Constats et propositions du HCFEA, París: Haut Conseil
de la famille, de l’enfance et de l’âge.

1. Context

Child poverty has a powerful influence on children’s living conditions and opportunities for development and integration. In the European Union, the growing poverty that affects children constitutes a pressing problem for all its member countries.

2. Debate

The problem of poverty in the child population has received the attention of numerous studies and has prompted multiple proposals for solutions. In the United States, for example, Shaefer et al. (2018) advocate replacing the relatively regressive system of tax credits currently in place with a universal allowance – in turn subject to taxation – that would enable child poverty rates to be almost halved, by doubling the expenditure on support for families with children. The proposal is based on four criteria: the abovementioned universal nature of the allowance; a sufficient amount, paid on a monthly basis; an additional amount for younger children; and a reduction in assistance as the number of children grows. The study does not specify whether certain profiles would lose out as a result of the change, but if so this could be solved by letting families opt for whichever model is more beneficial to them: tax credits or direct allowances.

From an opposite perspective, a report by the French High Council for the Family, Children and the Aged (2018) proposes a selective child benefit – only for low-income families – that would be added to the existing extensive system of allowances. The document examines three scenarios: an increase in the child allowance stipulated for large families and single-parent families in the minimum income guarantee system; the introduction of a child supplement in the framework of the wage complement for low- income workers; and the creation of a specific benefit for families with children and income below a certain threshold, similar to the Spanish child benefit. The cost would be approximately 2 billion euros (less than the US proposal) and the reduction in child poverty rates would range between 5.2% and 13.6% (data calculated for 2016 and 2014 respectively).

3. Conclusions

In Spain, where economic support for families with children is provided basically through regressive tax credits that generate hefty expenditure, the American proposal is of great interest, both for its universal nature and for the underlying integration of the system of benefits and taxation. Indeed, allocating the current expenditure on tax credits to a universal benefit – or alternatively, enabling all families to enjoy a refundable tax deduction of a sufficient amount – could be a good way to advance, albeit gradually, towards a system of universal family benefits that would reduce child poverty and offset the additional expense that raising children entails for all families.