Fighting child poverty: a mix of short-term policies for long-term prosperity
This is the last blog of “The Child Poverty Series”. We have discussed the issue, the reason for the increase in levels of child poverty, who is at risk of child poverty, and the consequences that poverty has in the children’s life. But for every problem that society faces, there is a solution. The same is for complex issues such as child poverty.
Looking at short-term solutions, there are three main policy interventions that can be the tools for reducing child poverty within the UK; reforming the benefit system, reforming the labour market to secure job rights for low-income workers and providing childcare support.
Reforming the benefit system
In the first blog of the series, we mentioned one of the main reasons for increase of child poverty in the last decade has been because of the interventions in the benefit system. The easiest policy intervention to decrease child poverty is to reverse those changes that increased child poverty. This is far the easiest option to decrease child poverty numbers and more effective in the short term.
The interventions that the government may want to consider is to raise the value of child-related benefits like Child Benefit and Child Tax Credit (or Universal Credit child components). In 2023, the weekly rates for Child Benefit were £24 for the first child and £15.90 for each subsequent child. These amounts have been frozen or increased only minimally over the years.
A proposed reform could be to substantially increase these weekly payments (e.g., raising them to £30 and £20, respectively). That would have as a result to lift a number of children out of poverty. As studies have revealed that £1 increase per week in child benefits lifts approximately 40,000 children out of poverty. The benefits haven’t been increased along with inflation, which has put at disadvantage low-income families. Another suggestion for reversing the increase in child poverty in the last decade is increasing child benefits every year in line with inflation or wage growth, whatever is higher.
This has been revealed to be a successful policy on reducing the child poverty numbers. Tony Blair’s government increased the child benefits according to inflation. In 1999, the weekly rate was £14.40 for the first child and £9.60 for subsequent children. By 2010, these rates had risen to £20.30 for the first child and £13.40 for additional children. As a result, the policy provided a reliable income stream for families with children, reducing financial strain. Paid a fixed amount per child, this ensured simplicity and accessibility but also reduced stigma and ensured high take-up rates.
But it hasn’t only been successful in the UK. The Canada Child Benefit (CCB) programme has led to Major Reduction in Severe Food Insecurity. CCB is increased every year according to household income levels and inflation and according to the evidence, has been successful. The Canadian government has touted the success of the CCB in reducing child poverty from 9.4% in 2019 to 4.7% in 2020 and lifting 435,000 children out of poverty since 2015. Independent studies have also found CCB effective in raising income, food expenditure, and living standards.
There are other reforms in the UK’s benefit system that could support families living a life out of poverty, such as reducing the taper rate of universal credit, so families keep more of their earnings as they transition into work or adjusting the work allowance to ensure low-income families with children benefit more.
Reforming the labour market
The second easiest policy to support children in poverty is reforming the labour market and supporting the low-income families.
One of the main tools that the government has to support low-income families and reduce child poverty is the National Minimum Wage. In a previous blog we explained that this is one of the main safeguards for low-income families, and increasing it alongside inflation will continue supporting low-income families to live out of poverty and will help to handle in-work poverty.
But as we explained in the first blog of the series, the problem is not only the pay of low-income workers but the job security and reliability of working hours. One reform that we need to do as a country is to reduce reliance on zero-hour contracts and gig work, which often provides limited financial stability. For that, we need a combination of regulatory changes, incentives for employers, and support for workers.
Some examples are below:
Strengthen Employment Legislation
Set Minimum Hour Requirements
Mandate guaranteed minimum hours for all employment contracts, ensuring workers have predictable income.
Introduce "banded hours contracts" where workers are entitled to a minimum range of hours based on their usual work patterns.
Ensure Fair Scheduling
Require employers to provide schedules with sufficient notice (e.g. two weeks) to reduce uncertainty for workers.
Compensate workers for last-minute schedule changes or cancellations.
Provide Equal Rights for Gig Workers
Redefine employment statuses to include gig workers as employees or workers, giving them access to basic rights like sick pay, holiday pay, and minimum wage protections.
Offer Incentives for Stable Employment
Tax Benefits for Secure Jobs
Provide tax breaks or subsidies to employers who offer permanent, stable contracts with predictable hours.
Reduce Costs for Small Businesses
Help small businesses transition to stable employment models by offering financial support for hiring permanent staff.
Regulate the Gig Economy
Introduce Platform Accountability
Require gig economy platforms to classify workers as employees or grant equivalent rights (e.g. health insurance, pension contributions).
Create legal frameworks to hold platforms accountable for worker protections.
Fair Payment Models
Mandate that gig workers earn at least the national minimum wage after expenses and working hours are considered.
The above will protect the low income families by providing
Income Stability: Workers will have more predictable and adequate incomes to meet basic needs and plan for the future.
Reduction in Exploitation: Employers will be motivated to treat workers fairly, reducing abuses common in precarious roles.
Economic Security: Stable jobs contribute to overall economic resilience, reducing reliance on public welfare programs.
Reform Childcare
We mentioned in the first blog of the series that the cost of childcare in the UK is very high. It is one reason that drives families into poverty as they cannot afford childcare, so individuals are losing income for not being in employment to take care of their children.
The current situation is that in England, 15-30 hours of free childcare is available for children aged 3-4, with limited provision for disadvantaged 2-year-olds. That gives limited support to families with young kids and couples that are working full time.
Extending free childcare to all children aged 9 months to 4 years, regardless of parental income or employment status and increasing the number of free hours to 40 per week for working parents, covering full-time needs, will have as a result to support families with childcare.
An interesting policy is introducing a maximum childcare cost cap based on household income (e.g. no more than 7% of income), similar to the Scandinavian model. Norway applies the principle that no family should pay more than 6 percent of their total income to childcare. Additionally, low-income families are eligible to receive 20 hours / week of free childcare.
As a result the fee cap system manages childcare costs for parents–this contributes to Norway’s notably high maternal employment rates. And the introduction of the free entitlement in 2015 was found to increase the uptake of childcare by minority language children, whose language and numeracy skills were improved. Supporting education at an early stage and boosting numeracy and language skills will support kids from disadvantaged backgrounds and will give them the tools for a more successful life journey than described previously.
Conclusion
The above is only a short list for supporting children in poverty, a mix of policies that tackle the root of the issue that increased child poverty in the last 10 years. A combination of increasing benefits in cash and in kind, in coordination with a reform to the labour market, could lift children out of poverty.
But this is only a short list of policies that may have an immediate effect. Any attempt to tackle child poverty needs to be coordinated with a reform policy that decreases inequalities within the UK. One of the main issues has been the increased housing costs that we pay in the UK that contribute to squeezing the income of low-income families. A reform to the education system that supports disadvantaged children to reach similar skills with more fortunate children will provide more equal opportunities. Access to health is another issue that we need to rethink. Providing more health services and thinking of the costs of accessing these health services will give more support to disadvantaged children by providing them with a healthy start in their life.
Yes, I will not disagree. All the policies I suggested above will have a hit on finances, and supporting people to get out of poverty always will have a short term hit on finances. It is a policy mix and a cost that we have to pay in the short term, but the benefits in the long term will not only be a more equal society, but a more productive and healthy society that will allow us to thrive.