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Journal ArticleDOI

Paying for children: the state's changing role and income adequacy

01 Jan 2013-Journal of Social Policy (Cambridge University Press)-Vol. 42, Iss: 03, pp 495-512
TL;DR: In this article, the authors consider the extent to which the UK state covers the additional cost of having children, for non-working and low-earning families respectively, and conclude that the current system has come close to covering this cost for some low-income families, but has started to withdraw from this position.
Abstract: In a number of countries, the state has become more closely involved in helping lowincome families with children to make ends meet – including those with low earnings as well as out-of-work families. The adequacy of such support can be assessed against benchmarks measuring the additional cost of a child in households that maintain spending at a level sufficient to participate adequately in society. A socially-defined minimum income standard provides an empirically-based benchmark, which allows more meaningful measurement of adequacy than measures based on relative income or actual spending patterns. Using evidence from the Minimum Income Standard for the United Kingdom, this paper considers the extent to which the UK state covers the additional cost of having children, for non-working and low-earning families respectively. It finds that the present system has come close to covering this cost for some low-income families, but has started to withdraw from this position. The paper concludes by considering advantages and pitfalls for countries of adopting targeted forms of support for children focused on income adequacy. Such support can help working as well as non-working families escape poverty, but also makes them heavily dependent on state transfers to make ends meet.

Summary (1 min read)

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Introduction

  • Having children imposes large additional costs on households.
  • Moreover, a new technique, the Minimum Income Standard (MIS), applied in several countries, anchors such a benchmark in social consensus about what comprises a minimum acceptable standard of living.
  • Allowances or tax credits supporting working families with low incomes in and out of work were pioneered in several English-speaking countries where growth in lone parenthood and in earnings inequalities have tended to be greatest (OECD, 2001: 35, 67).
  • Hirsch et al. (2012) use this in combination with new qualitative research on the drivers of family costs to observe and comment on the additional cost of each child, by birth order, at each year of age up to the eighteenth birthday.
  • Moreover, sharp withdrawal of state support as earnings rise can also trap families on incomes that may still not be enough for an acceptable living standard.

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Paying for Children: The State's Changing Role
and Income Adequacy
DONALD HIRSCH
Journal of Social Policy / Volume 42 / Issue 03 / July 2013, pp 495 - 512
DOI: 10.1017/S0047279413000238, Published online: 26 April 2013
Link to this article: http://journals.cambridge.org/abstract_S0047279413000238
How to cite this article:
DONALD HIRSCH (2013). Paying for Children: The State's Changing Role and
Income Adequacy. Journal of Social Policy, 42, pp 495-512 doi:10.1017/
S0047279413000238
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Jnl Soc. Pol. (2013), 42, 3, 495–512
C
Cambridge University Press 2013
doi:10.1017/S0047279413000238
Paying for Children: The State’s Changing
Role and Income Adequacy
DONALD HI RSCH
Centre for Research in Social Policy (CRSP), Department of Social Sciences, Loughborough
University, Leicestershire, LE11 3TU
email: donald.hirsch@googlemail.com
Abstract
In a number of countries, the state has become more closely involved in helping low-
income families with children to make ends meet including those with low earnings as well
as out-of-work families. The adequacy of such support can be assessed against benchmarks
measuring the additional cost of a child in households that maintain spending at a level sufficient
to participate adequately in society. A socially defined minimum income standard provides an
empirically based benchmark, which allows more meaningful measurement of adequacy than
measures based on relative income or actual spending patterns.
Using evidence from the Minimum Income Standard for the United Kingdom, this paper
considers the extent to which the UK state covers the additional cost of having children for
non-working and low-earning families respectively. It finds that the present system has come
close to covering this cost for some low-income families, but has started to withdraw from this
position. The paper concludes by considering advantages and pitfalls for countries of adopting
targeted forms of support for children focused on income adequacy. Such support can help
workingaswellasnon-workingfamiliesescapepoverty,butalsomakesthemheavilydependent
on state transfers to make ends meet.
Introduction
Having children imposes large additional costs on households. The fact that this
could be expected to lower the material living standards of adults who decide to
have children does not necessarily prevent them from doing so. Even in societies
where children are no longer an insurance against destitution in old age, they
bring intrinsic value to families, rather than just being seen as an expense.
Nevertheless, governments intervene to help cover the cost of children, for
a number of reasons. Family allowances have been used by a wide range of
countries, in some cases as part of pro-natalist policies (Grant et al., 2004)and
more generally to express social solidarity with those raising the next generation
as well as to help smooth household living standards over the life-course by
transferring income to people during their childrearing years. Other transfers
are targeted more specifically towards low-income families, aiming to combat
child poverty and more specifically to prevent children from being damaged by

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496 donald hirsch
physical hardship and social exclusion related to low family income (Battle and
Mendelson, 2001;OECD,2011).
In a number of countries, the objectives of family assistance programmes
targeted at low-income groups have become more ambitious in recent years.
Governments have taken on the twin objectives of reducing relative poverty
among families with children and maintaining work incentives. This has required
substantial aid to working families with low earnings as well as to those where
nobody works. This expanded role for the state has been influenced by changes
both in families and in the labour market that have undermined the degree to
which families can rely on a ‘breadwinner’ to make ends meet. A growth in lone
parenthood has left families economically vulnerable, both in terms of having
no earner in the family for lengthy periods of time and in terms of having low
family earnings where a lone parent is working for limited hours on low wages
exacerbated by the expense of childcare. An increase in wage inequalities and in
part-time and unstable employment has exacerbated these risks and also affected
couples where a single earner on low pay cannot provide adequately for a family,
or where a low-paid working couple faces high childcare costs.
The more wide-ranging forms of means-tested transfers to families that have
resulted create a very different context of support than either a benefits safety
net intended to see families through temporary periods of unemployment or
a universal contribution to family income intended to ease the cost of raising
children but not to take on a high proportion of this cost. Where the state
now pays high income-dependent transfers to working as well as non-working
families, the level of these transfers can do more to determine children’s living
standards than has been the case in the past. This is partly because parents in
low-wage occupations never escape this dependency’, whether they work or not
and partly because high rates of withdrawal with rising income can mean that
even people with somewhat modest but not very low earnings are unable to raise
their net incomes much above a minimum guaranteed level.
In this context, the adequacy of state support has a closer relationship
with family living standards than it has had previously. Yet political and public
consensus over the acceptable level of support is hampered partly by limitations
of the measurement of income adequacy (summarised for example in Bradshaw
et al., 2008: 12). Relative poverty benchmarks set arbitrary percentages of average
household income, adjusted for household composition using equivalence scales
that are also arbitrary or based on theoretical inferences about equivalent utility
based on spending patterns. Among the public, there is no clearly defined
consensus about what poverty means in a developed country (Park et al., 2007).
Consensual methods for identifying deprivation, which consider how many items
considered as necessities by the majority of the population cannot be afforded
by certain households, do provide valuable measures of the extent of poverty
that are grounded in public views (Mack and Lansley, 1985;Gordonet al., 2000).

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paying for children: the state’s role and income adequacy 497
However, they do not in themselves produce ‘adequate income’ thresholds, since
no one level of overall income determines whether families can or cannot afford
the selected items classified as necessities.
However, in recent years, the development of budget standards, which add
up the cost of items that families actually need to be able afford, has provided
such benchmarks. Moreover, a new technique, the Minimum Income Standard
(MIS), applied in several countries, anchors such a benchmark in social consensus
about what comprises a minimum acceptable standard of living. This paper uses
MIS results to assess the cost of a child in the United Kingdom and thereby to
investigate the adequacy of state support for low-income families with children.
First, however, it considers more specifically how current policies for supporting
children raise issues about income adequacy.
The policy context: supporting families and income adequacy
Modern welfare states have traditionally protected families from destitution
through social insurance and social assistance programmes designed to provide
replacement income for those (with and without children) who are temporarily
out of work. In recent years, a number of countries have found such programmes
an insufficient form of family protection and have complemented and, in
some cases, integrated them with income-tested transfers for families who have
earnings from work.
This has proven necessary largely because, without such transfers, many low-
earning families would have poor levels of family income, creating risks both of
work disincentives and of child poverty. These related risks arise where market
earnings are too low to provide income significantly higher than out-of-work
benefits received by families with children. Lowering or restricting such benefits
to improve work incentives would increase child poverty. Paying transfers instead
to working families on low incomes can help restore work incentives, while cutting
poverty among children whose parents do work.
Allowances or tax credits supporting working families with low incomes
in and out of work were pioneered in several English-speaking countries where
growth in lone parenthood and in earnings inequalities have tended to be greatest
(OECD, 2001: 35, 67). As early as the 1970s, Canada, the United Kingdom and
the United States introduced means-tested transfers for low-income working
families, but set them at very modest levels. By the late 1990s, these three countries
and Australia were using more substantial in-work transfers as part of prominent
policies to address work incentives and child poverty (Battle and Mendelson,
2001; Milligan and Stabile, 2008;MikolandR
´
emy, 2009).
In many European countries, such benefits targeted at low-income working
households have been less important, partly because relatively generous child-
related benefits and tax allowances have been available more widely. These are

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References
More filters
Book
01 Jan 2000
TL;DR: The most comprehensive survey of poverty and social exclusion ever undertaken in Britain was conducted by researchers at four universities and the fieldwork was conducted during 1999 by the Office for National Statistics as mentioned in this paper.
Abstract: This report presents the initial findings from the most comprehensive survey of poverty and social exclusion ever undertaken in Britain. The study was undertaken by researchers at four universities and the fieldwork was conducted during 1999 by the Office for National Statistics. The main part of the fieldwork, conducted during September/October 1999, was a follow-up survey of a sub-sample of respondents to the 1998/99 General Household Survey. It is particularly important at this time to create a base line understanding of the nature of poverty and social exclusion. On any measure, poverty at the turn of the new millennium remains one of the greatest social problems challenging Britain, and reducing social exclusion is at the heart of Government policy.

723 citations


"Paying for children: the state's ch..." refers background or methods in this paper

  • ...Consensual methods for identifying deprivation, which consider how many items considered as necessities by the majority of the population cannot be afforded by certain households, do provide valuable measures of the extent of poverty that are grounded in public views (Mack and Lansley, 1985; Gordon et al., 2000)....

    [...]

  • ...…for identifying deprivation, which consider how many items considered as necessities by the majority of the population cannot be afforded by certain households, do provide valuable measures of the extent of poverty that are grounded in public views (Mack and Lansley, 1985; Gordon et al., 2000)....

    [...]

Book
01 Jan 2010

324 citations


"Paying for children: the state's ch..." refers background in this paper

  • ...Such changes are largely driven by fiscal austerity, but they are also influenced by a de-emphasising of support for incomes as an anti-poverty strategy (see, for example, Field, 2010)....

    [...]

01 Jan 2008
TL;DR: This paper proposed a minimum income standard for Britain based on what members of the public said, and showed the cost of covering basic goods and services for different household types, which reconciles the views of experts with those of ordinary people.
Abstract: A minimum income standard, based on what people said is needed to achieve an acceptable standard of living in Britain today. While politicians from all parties are committed to tackling relative poverty, the debates lack a robust definition of a minimum income standard (MIS), below which people’s incomes should not fall. This study devised a minimum income standard for Britain based on what members of the public said, and shows the cost of covering basic goods and services for different household types. The project blends the best elements of the two main methods that have been used to develop budget standards in Britain in recent years. It reconciles the views of experts with those of ordinary people, allowing budgets based on social consensus to be tested against expert knowledge and research. As such, the MIS represents a new and important tool for informing social policy in order to promote fairness and well-being in Britain.

154 citations


"Paying for children: the state's ch..." refers background or methods in this paper

  • ...Van Mechelen and Bradshaw (2012: 94) compare such benefits for a lone parent with two children on the minimum wage in twenty-six countries, and show that in the United Kingdom they make up about half of family income, much more than in any other country....

    [...]

  • ...More recent OECD figures using the same basis show that for a non-working lone parent, children’s additions as a percentage of average earnings are nearly twice as high (27 per cent) for Australia than for France (15 per cent), with the United Kingdom closer to the Australia (24 per cent) figure (author calculations based on OECD, 2012)....

    [...]

  • ...The United Kingdom is also the only one of these countries where benefits and wages for such low-earning lone parents combine to bring net income significantly above the poverty line....

    [...]

  • ...Moreover, in the United Kingdom and in Ireland, repeated MIS studies have provided stable results that suggest that the method is internally robust (Davis et al., 2012; Collins et al., 2012)....

    [...]

  • ...In the United Kingdom, greater integration of in- and out-of-work transfers has come in phases....

    [...]

01 Jan 2017
TL;DR: In this article, the authors present an annual update on what members of the public think people need to achieve a socially acceptable standard of living, based on changes in prices, in the context of changing taxes, benefits and wages.
Abstract: This report is an annual update on what members of the public think people need to achieve a socially acceptable standard of living. This year’s update is based on changes in prices, in the context of changing taxes, benefits and wages.

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TL;DR: In this paper, a possible methodology based on the use of qualitative techniques, which would first explore consensus on the definition of poverty and then, if appropriate, seek directly to determine a socially approved budget standard, was proposed.
Abstract: ‘Consensual’ methods, which seek to establish poverty lines by reference to the views of society as a whole, are an important recent development. Three variants are recognised: those which require the public to estimate an adequate minimum income; those which ask people to specify a list of necessary items and those which ask what level of benefits the public is prepared to fund. This paper suggests that attempts to operationalise the consensual approach have been frustrated by their reliance on survey methodology. Some thoughts are offered on a possible methodology, based on the use of qualitative techniques, which would first explore consensus on the definition of poverty and then, if appropriate, seek directly to determine a socially approved budget standard.

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"Paying for children: the state's ch..." refers background in this paper

  • ...MIS realises an ambition first set out in a seminal article in the Journal for Social Policy in 1987 by Robert Walker and developed over the following years (Walker, 1987; Middleton, 2000): the creation of an income standard informed by consensus among members of the public....

    [...]

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Using evidence from the Minimum Income Standard for the United Kingdom, this paper considers the extent to which the UK state covers the additional cost of having children for non-working and low-earning families respectively. The paper concludes by considering advantages and pitfalls for countries of adopting targeted forms of support for children focused on income adequacy.