OECD countries could achieve substantially greater improvements in children’s lives by directing additional social spending towards early childhood education and care, employment and income support, and essential services, according to a new OECD report.
Spending Better for Children through Social Policy applies a value-for-money framework to examine how childhood poverty, material deprivation, educational achievement and health are affected by the level, allocation and design of social spending. At the same time, it considers implications for long-term public expenditure.
Higher health and ageing costs have driven a rise in social spending across OECD countries in the last two decades from 20 percent to 25 percent of GDP. Spending on families with children remains below 10% of that total. Today, one in eight children across the OECD lives in income poverty, educational outcomes are deteriorating, and more than one in five adolescents report fair or poor health.
“Investing in children is one of the most important actions governments can take to build a stronger future. While spending more can make a difference, spending better can make a much bigger difference,” OECD Secretary-General Mathias Cormann said. “Investing in early childhood education and care, supporting parents into employment, providing adequate income support and ensuring access to quality services can give every child a better start in life, while also supporting stronger economies and more sustainable public finances.”
If social spending continues to grow at its historical pace, child poverty could fall by around 1.5 percentage points over the next decade.
Greater gains for children, including lower child poverty and material deprivation, better educational outcomes and improved health, can be achieved by getting the policy mix right: supporting parents into employment, providing adequate income protection and ensuring access to high-quality services, including early childhood education and care.
Investing in early childhood education and care (ECEC) can deliver particularly strong returns. Directing one additional percentage point of social spending growth towards expanding ECEC coverage could make the investment around 50% more effective at reducing child income poverty than if the allocation of the social budget remained unchanged. That is, child poverty could fall by around 2.25 percentage points, compared to the forecast of 1.5 percentage points, over the next decade. It could also reduce the share of low performers in PISA by around 4%.
Making ECEC accessible to disadvantaged children is as important as ensuring its quality. Wider ECEC coverage can enable parents to work, strengthening family incomes and reducing reliance on other forms of support. It can also help contain future spending pressures with the analysis suggesting that the additional percentage point of investment in ECEC could leave social expenditure around 2% lower over the long term than if the budget allocation remained unchanged.
Adequate income support remains essential, particularly for families most in need. Increasing the share of social spending devoted to family cash benefits by one percentage point could make future spending increases around 27% more effective at reducing relative child poverty.
Active labour market policies can also deliver substantial gains if they help parents overcome barriers to employment and secure more stable earnings. Allocating an additional percentage point of social spending to these policies could increase their effectiveness in reducing child poverty by around 24%, while reducing expenditure growth by around 1% over the next decade.
Healthcare, housing and other social services are essential to help families meet needs that additional income alone may not address. Directing one additional percentage point of social spending towards these policy areas could make future spending increases about 9% more effective at reducing severe material deprivation than if the budget allocation remained unchanged. Greater investment in healthcare can also help moderate the long-term growth of social spending.
