Child Poverty and Changes in Child Poverty in Rich Countries Since 1990

Abstract

This paper documents levels and changes in child poverty rates in 12 OECD countries using data from the Luxembourg Income Study project, and focusing upon an analysis of the reasons for changes over the 1990s. The objective is to uncover the relative role of income transfers from the state in determining the magnitude and direction of change in child poverty rates, holding other demographic and labour market factors constant. As such the paper offers a cross-country overview of child poverty, changes in child poverty and the impact of public policy in North America and Europe. The paper offers a set of country specific results, and also attempts to draw general lessons. First, family and demographic forces play only a limited role in determining changes in child poverty rates. These forces change only gradually and are limited in their ability to cushion children from detrimental shocks originating in the labour market or in the government sector, which are the sources of the major forces determining the direction of change in child poverty. Second, in countries facing severe economic crises it does not appear that the amount of social transfers available were increased in a way to cushion children from these changes and put a backstop on their risk of low income. Indeed, just the opposite appears to have occurred in countries experiencing the largest increases in child poverty. Third, there is no single road to lower child poverty rates. Changes in income transfers need to be thought through in conjunction with the nature of labour markets. Reforms intended to increase the labour supply and labour market engagement of adults may or may not end up lowering child poverty rates. At the same time increases in the level of support have also been shown to be a central ingredient in lowering the child poverty rate both when it is very high and when it is already quite low. In the majority of the countries analyzed there has been little progress in reducing child poverty rates. Child poverty unambiguously fell in only three of the twelve countries under study, the United Kingdom, the United States, and Norway. In the remaining seven countries child poverty rates were essentially unchanged since 1990 or rose significantly. The analytical approach does not aim to consider the behavioural interactions between the various variables on incomes. Nonetheless the analysis might be seen as a starting point for discussions of the extent to which children in some relatively rich countries have experienced changes in the risk of living in low income given the standards prevailing during the late 1980s and early 1990s.