Child Poverty and Material Deprivation in the European Union During the Great Recession

Abstract

The 2008 financial crisis triggered the first contraction of the world economy in the post-war era. This paper investigates the effect of the economic crisis on child poverty and material deprivation across the EU-28 plus Iceland, Norway and Switzerland. First, it examines if children were affected by the crisis to a greater extent than the population as a whole. Second, it analyses inequities among households with children and the degree to which those in workless households, migrant households, lone parent families and large families were at a greater risk of poverty and deprivation. Finally, it studies the extent to which social safety nets may have softened the negative impact of the economic crisis. The paper observes a negative relationship between the absolute change in economic output and the change in material circumstances of children: absolute increases in both child poverty and deprivation between 2008 and 2012 were larger in countries experiencing greater falls in GDP per capita. The relationship was stronger for child poverty, indicating that household income is more responsive to macroeconomic shocks. The effect of adverse economic circumstances was not distributed equally among households with children: in countries most affected by the crisis, notably Greece and Iceland, child poverty and deprivation rates rose substantially faster among children in workless households, lone parent families and migrant families than among the population of children as a whole. Controlling for the socio-demographic structure of the child population, both the child poverty rates and the severe deprivation rates were significantly lower in countries with more generous safety nets. However, once total social spending and working-age unemployment were accounted for, the effects of the minimum income protection indicator were no longer statistically significant. Social spending was associated with lower risks of child poverty at the start of the crisis only, when many European countries implemented fiscal stimulus packages, while unemployment had large effects on both poverty and deprivation throughout the entire period 2008-2012. This suggests that social safety nets and social spending did not shield children from the effects of labour market turbulence during the Great Recession.