Spending on family policies, and what works for child well-being
From Wikiprogress.org
Written by Dominic Richardson of the OECD, for the January 2012 edition of the Newsletter on Measuring the Progress of Societies.
Family polices in OECD countries are expected to address multiple objectives. One key objective is child development and well-being. Drawing from the OECD’s recent report on family policies and outcomes (Doing Better for Families [OECD, 2011]), this article briefly explores the question: how does the amount, type and timing of spending on family policies affect children’s outcomes?
Across the OECD, on average in 2007, spending on family policies (excluding education) amounted to 12% of the total national public social spending budget (OECD, 2011). In national wealth terms, this meant an average of 2.2% of GDP was spent on family policies, ranging from around 0.5% of GDP in Korea to over 3.5% in the United Kingdom and France (ibid). When adding education spending, which mostly goes to children under 18, expenditure on families tripled, and took the share of public money going to families with children to around 36% of total net public social spending on average.
However, despite there being some clear associations between poverty rates and spending levels on family benefits (OECD, 2011), countries which were spending more on families with children in 2007 were not always the countries with the best child well-being outcomes. Achieving good results for families with children, it seemed, not only depends on how much public money is spent, but also how money is spent.
A common form of intervention for families is cash transfers (at around 54% of total public family spending, excluding education – see Figure 1). Spending on in-kind benefits for families (including transport and food subsidies, childcare, protection services, etc.) averages to just over one third of the family spending. However, spending on in-kind benefits as a share of GDP in the OECD has almost doubled since the mid 1990s, whereas spending on cash transfers has remained stable (see OECD 2011).
Figure 1. Most public spending on families in 2007 was delivered in the form of cash benefits
Note: Countries are ranked in decreasing order of total family benefit spending in 2007. The OECD average is calculated as the unweighted average of all available OECD data. Public expenditure is that which exclusively for families (e.g. child payments and allowances, parental leave benefits and childcare support); spending on health and housing support also assists families, but is not included here. No data on tax breaks for Chile and Slovenia. For extended meta data and a complete comparison go here. For more information on social expenditure and the OECD Social Expenditure database see Adema et al (2011).
Source: OECD (2010), OECD Social Expenditure database.
Using the amounts reported in Figure 1, public education expenditures (see OECD, 2011), and the eligibility rules for family and education spending in different OECD countries, expenditure on children can be allocated by age (for details and methodology see OECD, 2009 and 2011). Based on spending figures for 2007, children in the OECD receive around 152,000 USD (adjusted for purchasing power parity) per head in public spending on family and education policies from birth up until their 18th birthday. Most of that spending is delivered in the later years (12 to 17 – around 39%), the bulk of which is education expenditure. The early years – when children are aged 0-5 – receive on average 25% of all OECD childhood spending, mostly delivered via cash transfers and childcare spending (see OECD, 2011).
Concentrating more of the spending on very young children is believed to be more efficient because in the early years children’s behaviours and skills are more malleable, they have greater caring needs, and closing disadvantage gaps between the rich and the poor is easier because gaps are smaller at the beginning of a child’s life (OECD, 2009). So how does the type and timing of public family spending associate with child well-being outcomes? Figure 2 breaks down the spending analysis, from Doing Better for Families, to allocate cash, in-kind, childcare and education spending to children age 0-5, 6-11, and 12-17 for 32 OECD countries. Spending amounts are then correlated to 5 child well-being outcomes.
Figure 2. Correlations between public family spending and child well-being measures, circa 2007
Note: Results report Pearson 2-tailed correlation coefficients and are categorised on the basis of the size of the coefficient (dark blue = >0.4, light blue =>0.3) be it positive or negative. For full definitions of the indicators, and associated metadata, please see OECD, 2011.
Source: Calculations of data on age-related spending and child well-being measures reported in OECD Doing Better for Families (2011).
Results should be interpreted with caution, given that they represent only associations between inputs and outcomes at the macro level, the results do not account for broader social and economic contexts, and they do not speak to causality. Nonetheless, the evidence here suggests that main effects of family spending are likely to be occurring in the early years and that benefits in kind are most commonly associated with variation in well-being (notably this includes the result for the income poverty measure – a result also found for 2003 spending data derived from OECD 2009).
These results add some weight to the assumption that early interventions may indeed be more efficient for child outcomes than later ones. And moreover, that in-kind services and childcare provision, particularly early and middle childhood, are more strongly associated to lower poverty rates than cash interventions (as they help parents access the labour market). Employment is key for families in reducing income poverty and improving living standards (cash transfers alone cannot do this because they are often too low). Service providers may also get better returns on their investment because of the economies of scale in this type of intervention.
The shift towards greater service provision (and particularly childcare) reported in Doing Better for Families is therefore promising for child well-being, but for this type of research to truly inform policy decisions more factors need to be accounted for. Changes in family formation, employment and education patterns, alongside pressures to consolidate public budgets, have created a serious challenge for countries searching for policies that meet the evolving needs of families with children. Competing (and perhaps complementary) demand on public budgets from other populations, such as pensioners, will also play a role. More robust research on how family policies (including child health and education policies) drive variation in child well-being outcomes, which takes account of these contexts, is needed. Understanding the relative efficacy of cash transfers compared to service delivery is essential for doing better for families and children.
Further reading and data
Adema, W., P. Fron and M. Ladaique (2011), “Is the European Welfare State Really More Expensive?: Indicators on Social Spending, 1980-2012; and a Manual to the OECD Social Expenditure Database (SOCX)”, OECD Social, Employment and Migration Working Papers, No. 124, OECD Publishing. http://dx.doi.org/10.1787/5kg2d2d4pbf0-en
OECD (2009) Doing Better for Children. OECD, Paris.
OECD (2010) OECD Social Expenditure database. OECD, Paris. www.oecd.org/els/social/expenditure
OECD (2011) Doing Better for Families. OECD, Paris.
OECD (2011) OECD Family database. OECD, Paris. www.oecd.org/social/family/database
