From COVID-19 response to recovery: What role for universal child benefits?

Before the COVID-19 pandemic, more than one billion children either lived in, or were vulnerable to, falling into extreme poverty. As children are twice as likely globally to live in poverty than adults, the economic fall-out of COVID-19 is expected to hit them particularly severely, and estimates indicate that an additional 117 million children could fall into poverty (below national poverty lines) by the end of 2020 alone.

Children are not only more likely to live in poverty than adults, poverty impacts on children are particularly severe. Rarely do children get a second chance at nutrition, health care or education. The effects of poverty can be immediate and life-long, and what affects children now will be felt fully by societies and economies as they become the next generation of adults.

A growing evidence base underscores the significant impacts child benefits can have on child poverty, with positive effects on spending on children, their health, education, food security and protection. Despite this, children are significantly under-represented in social protection coverage: globally only 1 in 3 children have access to a child or family benefit.

With COVID-19 increasing child poverty rates and exposing the gaps in social protection systems, a recent ODI-UNICEF report on Universal Child Benefits: policy issues and options, provides new evidence and a framework for assessing the policy options for introducing or expanding child benefits. Drawing on experience from around the world, it asks: What are the benefits and limitations of alternative child benefit schemes? How have UCBs been achieved in practice?

Child benefits are commonly considered against poverty reduction objectives, and here evidence highlights the potential of UCBs. By achieving high population coverage and minimising exclusion errors, OECD countries with universalistic systems, including UCBs, achieve greater reductions in poverty than countries that rely more heavily on narrow means testing. Simulations for countries without UCBs, for which data are available, show that UCB programmes costing about 1% of GDP would reduce child poverty rates by as much as 20%.

UCBs offer additional positives which reinforce poverty reduction impacts. These include:

  • Alignment with human rights – with comparatively higher population coverage rates, UCBs are in line with principles of equality and non-discrimination. Within universalistic approaches, focusing additional resources on those facing particular discrimination and disadvantage, such as additional benefits for persons with disabilities, is also in line with human rights principles.
  • Supporting dignity and minimising shame – the impacts of the stigma of living in poverty can be exacerbated by programmes which narrowly target and emphasise the responsibilities of recipients. For children, this can be particularly pernicious as aspirations and expectations for the future are set in childhood. Processes of narrow targeting and punitive conditionality can stigmatise children and their caregivers. UCBs are less likely to be divisive in this way – for instance by reducing the need for informational checks or the fulfilment of strict behavioural conditions.
  • Promoting social cohesion and political support – UCBs have the potential to bind societies with a shared responsibility for supporting children and raising the next generation. Relatedly, they are associated with low inequality, high social trust and cohesion. In Finland, for example, UCBs along with other universal programmes, played an important role in forging the post-World War II social contract and cohesion efforts. This shared purpose, along with benefits for children across the income spectrum can lead to political support for benefits, leaving them more resilient to shocks and crises, including political ones.

 

The report highlights how, where they exist, UCBs are a cornerstone of social policy. It also points to important caveats. Access to quality social services is essential. Increasing resources in the home can make a difference, but if schools and health care are not available or are of low quality and families cannot receive support from social workers where needed, their impact will be curtailed. Relatedly, UCBs must be part of comprehensive social protection systems (or Social Protection Floors) that address risks across the lifecycle and include working-age benefits such as unemployment insurance, health care and sickness benefits and pensions in old age.

Despite the potential of UCBs globally, only one in ten countries has a UCB (defined as universal, unconditional coverage for at least 10 years of childhood), with a further 14 countries having a ‘quasi’ UCB either covering shorter periods of childhood (e.g. 0-2 years), with an affluence cut off, or achieving high coverage through ‘mixed systems’ combining contributory social insurance and non-contributory provision to achieve high population coverage.

The fundamental challenge, of course, is financing. UCBs with transfer amounts significant enough to make a difference are not inexpensive. Costs vary depending on the size of the child population and the economy. This makes UCBs relatively cheaper in higher-income countries. In OECD countries the average spending on child benefits is 1.7% of GDP, while in lower-income countries, a transfer that covered the gap to the international poverty line (a relatively low threshold) for 0-14 year-olds would cost 2.3% of GDP – well above the 0.3% that lower-income countries on average are currently spending.

This highlights the potential in many countries to start with smaller programmes and building towards universality, as was the case in countries ranging from Sweden to South Africa. For example, costs for a quasi-UCBs for children of 0-4 years, a crucial early childhood development window, would be 0.9% of GDP in lower-income countries. In middle-income countries, a more generous transfer for 0-14 year-olds would cost 1.1% of GDP.

But the argument for UCBs is not that they are inexpensive, rather that they are effective and can be the cornerstone of a child-sensitive social protection system. Certainly, available financing will need to increase. Domestic resource mobilisation will be essential, as child benefits and social protection systems make sense as part of a broader progressive system of taxes and transfers where everyone benefits, but contributions to the tax system will vary. In countries such as Mongolia and Zambia, taxation of natural resources has played a crucial role in financing their provision, and in Thailand and Costa Rica child benefits have been supported by internal resource reallocation, including from the military. For lower-income countries, in particular, international support and solidarity will be essential, including much-needed debt relief.

The ODI-UNICEF report was researched, written and finalised before COVID-19 unfolded. What seemed necessary but ambitious before COVID-19, now is more evidently urgent. The pandemic has served as a ‘wake-up call’ both for the need for expanded approaches to social protection and deeper and sustained investment. In recent months we have seen an unprecedented social protection response to the crisis. Some 111 countries have provided direct support to children and their families, including through UCBs and adjustments to other types of child benefits, demonstrating that rapid and significant change is possible. The responses have highlighted how countries with established child benefits with high or universal population coverage are able to scale-up protection when shocks hit, and their potential to continue to support children and their carers during the crisis response and recovery phases.

To give a few examples, in Mongolia, the government increased their Child Money Programme monthly benefit by five times from MNT 20,000 per month to MNT 100,000 for a duration of 6 months. Austria, Guatemala and the Philippines dropped the behavioural additions assigned to their child benefits. Argentina increased its Universal Child Allowance programme by $3,100 Argentine pesos (US$47) for current beneficiaries.  South Africa increased the amount of the Child Support Grant  from June to October by providing every caregiver with an additional R500 (US$27) per month. In Germany, families received a one-off child bonus of EUR 300 for each child in addition to its UCB. Some 18 million children and adolescents have received this bonus. Furthermore, tax relief has been granted for single parents, 90% of whom are women.

It is important to stress, however, that many of these COVID-19 measures are temporary – typically envisioned for approximately three months – and this raises concerns about a ‘cliff fall’ scenario if measures are abruptly and prematurely withdrawn as COVID’s economic consequences persist. Amplifying this concern, following fiscal expansion in response to the crisis, austerity may follow, as it did after the 2008 financial crisis.

This would be short-sighted. No child should see their potential unfulfilled due to the lack of a small amount of financial resources in the household, yet this is the case for hundreds of millions, perhaps more than a billion, children. The costs to them, their families and societies as a whole are hard to contemplate. UCBs are not a silver bullet, and the path to ensuring all children receive support will not be easy, but if ever there was a time to take the steps to reimagine social policy for children, now is it.

 


 

Francesca Bastagli is Director of the Equity and Social Policy Programme and Principal Research Fellow, at ODI. She specialises in public policy research and advisory work on the design, implementation and evaluation of social policy, with a focus on social protection policies and their poverty, inequality and employment outcomes. Her recent research is on fiscal policy and inequality, adapting social protection to the “future of work”, and social protection in contexts of displacement.

Ian Orton is a Social Protection Policy Officer at the International Labour Organisation’s Social Protection Department. Prior to this, he worked for the Social Inclusion and Policy Section of UNICEF in New York, for BRAC USA and the International Social Security Association. His interests have focused on social policy issues related to social protection and the financial crisis, universal child benefits and UBI.

David Stewart is Chief, Child Poverty and Social Protection in UNICEF, HQ and co-Chair of the Global Coalition to End Child Poverty. Previously he was UNICEF’s Chief of Social Policy in Uganda, and has researched, written and presented on the Human Development Reports and indices. David is currently focused on issues of child poverty measurement and policy response, including universal child benefits and strengthening social protection systems.

The responsibility for the opinions express in this article rests solely with its authors, and publication does not constitute an endorsement by the ODI, UNICEF or the International Labour Office.

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