Investing in Every Child: An economic study of the costs and benefits of eliminating child labour

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The International Programme on the Elimination of Child Labour (IPEC) of the International Labour Organisation, published this report in December 2004. At the time of publishing it was the first integrated study of the economic costs and benefits of eliminating child labour throughout the developing and transitional world. It offers insight into the financial burden this action may bring and the economic impacts which may be expected, as a result of replacing child labour with quality education. This report presents findings at the global and regional levels, and applies individual country studies to illustrate some of the issues involved in measurement.

Quantifying the costs and benefits of eliminating child labour

A general programme of action was developed and hypothetically applied in all countries. Estimations were made of the cost of each element in within the programme as well as the projected economic gains from eliminating deleterious child labour and replacing it with education.
The programme components include:

•Costs
These components make up the costs of eliminating child labour, along with the lost opportunity cost of this labour itself – as in, the economic benefits that would be lost if children were removed from a portion of their productive activities.
–Education supply
Costs of building new schools, training and hiring new teachers, supplying additional educational materials
–Transfer implementation
Cost of administering the income transfer programme
Interventions Cost of achieving the urgent elimination of the worst forms of child labour and addressing the needs of special populations
–Opportunity cost
Cost borne by households due to the value of child labour foregone

•Benefits
There are also two principal benefits, the added productive capacity a future generation of workers would have due to their increased education, and the economic gains anticipated from improved health due to the elimination of the worst forms of child labour.
–Education
Benefit of improved productivity and earning capacity associated with greater education
–Health
Benefit of reduced illnesses and injuries due to the elimination of the worst forms of child labour

There are many other benefits of eliminating child labour, (enhanced opportunities for personal development and social inclusion), however as they are unable to be economically quantified the report makes no attempt to account for them.

Data sources and methodology

Three tiers of data were employed in the report. Research teams gathered information in eight countries, Brazil, Senegal, Kenya, Tanzania, Ukraine, Pakistan, Nepal and the Philippines. A second tier involved household surveys by IPEC and the World Bank for approximately two dozen additional countries, carried out during the past decade. For the remaining countries publicly available demographic, economic and education data was used as the basis for extrapolating from those with more complete information.

The methodology used in this study takes into consideration alternative estimations at every stage, as such there is not one result but a range of possible results, depending on what assumptions are employed. Despite this, a baseline estimate was produced, based on the most plausible, typically mid-range assumptions.

Results

The principal finding of the report is that the elimination of child labour and its replacement by universal education is estimated to yield enormous economic as well as social benefits. Globally, benefits exceed costs by a ratio of 6.7 to 1, the equivalent of an internal rate of return of 43.8%. All regions were found to experience significant net gains, although some more than others.
In terms of the net economic benefits versus the public sector costs required to achieve them, it was concluded that over a protracted period of approximately fifteen years, net costs are followed by an even longer period of still larger net benefits. Costs were found to be complete after 20 years, but the benefits were seen to continue for as many as 40 years past that point.