What Works Best in Reducing Child Poverty: a Benefit or Work Strategy?

This paper assesses the extent to which child poverty is associated with the work status of parents.

Child poverty is firmly on the policy agenda in many OECD countries. One of the main issues in the debate is the appropriate balance between the so-called “benefits strategy” (increasing the adequacy of benefits for low-income families with children) and the so-called “work strategy” (promoting policies to increase employment among poor families). The need to choose between these two apparent alternatives is sometimes seen as a consequence of an unavoidable trade-off between adequacy of benefits, work incentives and the costs of assistance.

This paper assesses the extent to which child poverty is associated with the work status of parents. It is found that in nearly all OECD countries child poverty rates are significantly higher for jobless families than for families with at least one parent in employment, and are also higher in single-earner families than in two-earner families, and in sole-parent households compared to two-parent households. While jobless families are nearly everywhere the most disadvantaged among the poor, the analysis finds, however, that on average across OECD countries only around one-third of poor families with children are jobless, although this ratio varies widely – from less than 20% (Austria, Greece, Italy, Japan, Luxembourg, Mexico, Portugal, Turkey and the United States) to 60% or more (Australia, the Czech Republic, Germany and Norway).

The paper discusses possible policy directions for OECD countries. The fact that all countries with very low child poverty rates (less than 5%) combine low levels of family joblessness and effective redistribution policies supports the view that successful anti-poverty strategies should seek a balanced approach combining improved benefits where necessary and improved incentives to work The article assesses the extent to which child poverty can be reduced by policies which successfully promote higher parental employment and more effective benefit systems, identifying wide variations across countries in the effectiveness of different policy approaches.

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