BRITISH SUCCESS IN CUTTING CHILD POVERTY COMPARED WITH THE UNITED STATES

Efforts to reduce child poverty have been more effective in Britain than in the United States, according to new research by Richard Dickens and David Ellwood, published in the June 2003 issue of the Economic Journal. This is because although both the Blair and Clinton governments used welfare reform to lift people out of poverty by getting them into work, the Blair approach also increased benefits for non-working families. The greater reliance on carrots rather than sticks meant that while child poverty fell by a similar amount in the two countries, it fell much faster in Britain.

Child poverty more than doubled in Britain from the late 1970s so that when the New Labour government came to power in 1997, a third of children were living in poverty and a fifth in households with no working adult. The new Chancellor of the Exchequer pledged to halve child poverty within a decade and to eradicate it completely within two. The government set about introducing a range of welfare reforms aimed at reducing child poverty. Most of these centred on getting poor families back into work but in addition, benefit rates for those out of work with children were also raised substantially. As a consequence, child poverty rates have fallen over the last few years.

In the United States, child poverty rose from the late 1970s, albeit by much less than in Britain. When the Clinton government came to power in 1992, they introduced a range of welfare reforms aimed at forcing poor families back into work. The goal was not explicitly poverty reduction but to reduce the number of people on welfare and increase the number in work. Consequently, child poverty fell over the rest of the decade.

Dickens and Ellwood investigate the reasons for these changes in child poverty, examining the role of demographic changes, wage changes, changes in work patterns and changes in government benefits.

The demographic composition of the population has changed in both Britain and the United States. More children now live in single parent households, which tend to be poorer. This played a significant role in rising poverty in the pre-Blair and Clinton periods. Increasing wage differences between the low and high paid also contributed to rising child poverty. And in Britain, where the number of households without work increased substantially, changing work patterns led to increases in child poverty. This was offset somewhat by changes to the benefit system that reduced child poverty below what it would have been.

Both the Blair and Clinton governments introduced welfare reforms that increased work incentives. The Clinton approach was to raise in-work support for the poor but to cut back aid to non-working families. The Blair approach also raised support for working poor families but benefits for non-working families were also raised. The British approach was much more reliant on carrots than sticks.

The result was a significant increase in work in both countries among disadvantaged groups. In addition, child poverty fell by a similar amount in the two countries but much faster in Britain. And the mechanism by which poverty fell was very different in each country. In the United States, some of the fall is attributable to changing demographic composition but the majority is attributable to increases in work. In Britain, work helped to reduce child poverty somewhat but the largest impact comes from increases in benefit payments to families with children.

The fact that Britain was able to achieve similar child poverty reduction over a much shorter time period suggests that the approach here is more effective. In the United States, work has risen substantially but child poverty has not fallen by perhaps as much as would be hoped, as more families are shifted from out of work to in-work poverty. In Britain, an increase in work, coupled with some fairly large increases in benefits, has resulted in a faster fall in child poverty.

These are the first significant falls in child poverty for decades. It remains to be seen whether this trend can continue to achieve the child poverty targets.

ENDS

Notes for Editors: ‘Child Poverty in Britain and the United States’ by Richard Dickens and David T Ellwood is published in the June 2003 issue of the Economic Journal.

Dickens is at the London School of Economics (LSE); Ellwood is at Harvard University.

For Further Information: contact Richard Dickens on 020-7955-7773 (email: R.Dickens@lse.ac.uk); or RES Media Consultant Romesh Vaitilingam on 0117-983-9770 or 07768-661095 (email: romesh@compuserve.com).