Blog: Universalizing child benefits as a means of promoting social cohesion

Child poverty continues to be a persistent global problem. While the rates of people living in extreme poverty observed worldwide have declined significantly—the United Nations has noted 10% of the world’s population lives on less than $1.90 USD a day as of 2015, which is down from 36% in 1990—children experience poverty at twice the rate as their adult counterparts around the world. About 385 million children are still struggling to live on less than $1.90 USD a day.

A proven and effective poverty reduction tool is the implementation of child benefits, which provide direct financial relief for families in the form of cash or tax transfers. They have been demonstrated to drive down poverty rates and help children flourish, improving their overall well-being, health, education, food security, productivity, and ability to contribute to their societies and economies when they reach adulthood. Indeed, these investments to families has been something the Edmonton Social Planning Council has long been recommending in our yearly Alberta child poverty reports (you can view our most recent report here) co-published with Public Interest Alberta and the Alberta College of Social Workers.

A new report, Universal child benefits: Policy issues and options, jointly released by UNICEF and the Overseas Development Institute, makes the case for universal child benefits and provides practical recommendations and key considerations for governments embarking on policy decisions regarding benefits for children. These considerations include taking into account different policy priorities and trade-offs (e.g. child rights, costs and financing, child poverty demographics, and administrative capacity).

Child benefits can take on a number of characteristics, but a universal child benefit is typically paid on a regular basis as a cash or tax transfer to the primary caregiver for dependent children under 18 years of age and paid for a minimum of 10 years (this constitutes a meaningful period and more than half of childhood). Quasi-universal child benefits differ when they are designed to be short-term and age-limited allowances (e.g. paid to children aged 0 to 3 years), means-tested (e.g. they cover the majority of households and screen out high-income households), and/or mixed-schemes allowances that combine social insurance and social assistance schemes to achieve universal or close to universal coverage of children. These programs typically cover citizens and legal residents of their country, excluding children with refugee or undocumented status. Nevertheless, some countries like Denmark, Estonia, and Hungary extend these benefits to refugee children with a certain recognized status.

In the case of Canada, the Canada Child Benefit is considered a quasi-universal child benefit where families with the lowest incomes receive the maximum amount (which is currently an annual $6,765 per child under age 6 or $5,708 per child age 6 to 17) while those with higher incomes receive progressively less until the benefit is phased out entirely for the wealthiest households.

The report found that in 15 high-income countries, delivering universal child benefits alone led to a 5-percentage point reduction in child poverty, on average. The targeting of disadvantaged households within a universalistic system can also be highly effective in reducing poverty. When higher benefit levels were targeted towards the bottom 40% and taxed back from high earners, it was shown to have the highest poverty reduction impact. The most effective designs for benefit programs were those that achieved high population coverage, indexed for inflation, and delivered regularly had a higher impact on lowering poverty. These benefits, acting alongside the availability of quality public services (i.e. schools and health care) and complementary programming, were critical in ensuring that cash transfers lead to improvements in non-monetary outcomes such as education, health status, and nutrition.

Policy coverage of children remains comparatively low. It is estimated that around 35% of these benefits reach children and families on a global scale, and the coverage varies considerably across regions. While almost 90% of citizens in Europe and Central Asia receive child benefits, only 16% in Africa receive them.

Despite the importance of the Canada Child Benefit as a poverty reduction tool, the program still leaves out vulnerable Canadians. Since receiving benefits is contingent upon filing a tax return every year, around 10% of eligible households do not receive these benefits as they are unable to file their income taxes. This is especially the case for those living in remote areas or on First Nations reserves. In addition, Canada’s level of investment is average when compared to other rich countries. This is a particularly pressing concern in the wake of the COVID-19 pandemic and the detrimental effects it has had on the economy. As the economic fallout threatens to roll back years of progress in reducing poverty, universal child benefits can be a lifeline, protecting vulnerable families from deepening levels of poverty and deprivation. Insuring the Canada Child Benefit is adjusted to provide sufficient relief during times of crisis is vital to the success of the initiative.

The report highlights that universalizing benefits reduces risks often associated with narrow means testing where some families in need are left without financial support. The universalization of these programs also helps to remove the stigma associated with benefit schemes in general.

Overall, the report provides a comprehensive roadmap and guidance for policy planners all over the world seeking to overhaul existing child benefit programs or develop new schemes in order to achieve universal child benefits. It takes into account the financial situations of individual countries along with various trade-offs and priorities to consider and balance.

When supported by comprehensive social protection systems and quality social services, universal child benefits are integral to promoting social cohesion and public support for social protection.