SOKA UNIVERSITY OF AMERICA

An Analysis of OECD Countries‟ Policy Responses to Rising Child Poverty in the Wake of

Deindustrialization

Social Sub-Theme

Christopher E Larkin

March 2012

International Studies Department

Registration Number: 111230190856941

Abstract:

This paper explores the policy responses to child poverty in OECD countries in the wake of

deindustrialization. Beginning in the late 1970s and increasing into the 1980s, heavy industries

moved away from OECD countries to developing markets; as a skills deficit plagued developed

countries wide-spread unemployment resulted. Child poverty rose significantly in the U.S.,

Western Europe, Australia and New Zealand. What resulted was an unofficial policy agreement

between OECD countries. While there was no official accord on how to address child poverty,

the approaches of different countries bear striking similarities. As an exemplary case study, this

paper explores the evolution of the UK‟s child poverty policy under the [Conservative]

governments of Margaret Thatcher and John Major (1979 – 1997), and under the successive

[New Labour] governments of Tony Blair and Gordon Brown, drawing correlation with other

policy approaches in OECD countries. This paper delineates the relative success of the policy

agendas, and also explicates the normative values foundational to the policy-development

process. It addresses the questions: who is primarily responsible for the well-being of children -

the state or the family? How are children framed in policy agendas – as actors or subjects? And

how is this framing complemented or negated by the neoliberal laissez faire economic agenda of

the period? The paper concludes with a discussion of the major trends in current policy agendas,

and offers proposals for future policy development.

I. Introduction:

The concern held by governments for children living in poverty requires little justification.

Children are the future of a society and thus it is paramount they receive the best possible start in

life. There are strong normative assumptions about child dependency, and their relative

blamelessness for the circumstances in which they are born. Children are viewed as vulnerable,

and in need of adult protection. Humans feel an inherent responsibility to protect children, and in

developed nations this manifests as a supportive welfare state. Numerous studies have been

conducted focusing on child poverty. The research points in one direction, showing that growing

up in an impoverished family adversely affects child physiological health (Aber and Bennett

1997), intellectual development (Guo and Harris 2000), emotional development (Eamon 2001),

educational attainment level and propensity to be involved in criminal activity (Reynolds et al

2001). While this recognition is universal, the methods adopted by different governments are not.

Each policy-set assumes certain normative values about the condition of child poverty, and about

children more generally, and is shaped by the assumptions held by policy-makers. Furthermore,

policy-makers are always contending with different political agendas. Perhaps, an incumbent

government, as part of an electoral strategy, decides to focus on supporting a specific vision of

family life, or the role women play in the labour force; perhaps the focus lies in redistribution of

income; or boosting the wage packet to reduce demands on wage inflation (Bradshaw et al,

1993). This paper seeks to deconstruct the policies of the UK government, in comparison with

other OECD countries, from the late 1970s through to the modern day.

It is beyond the scope of this paper to explore the policies of all 34 OECD member states,

so I instead focus my comparison on the U.S.A., Italy, Japan and Australia. The paper covers the

most overt period of deindustrialization, exploring how it affected child poverty and how the

countries under study responded. I begin by introducing the historical context of child poverty in

the OECD, from the mid 1980s through to the mid 2000s, before beginning the comparative

analysis of the UK case. I start with the Conservative premierships of Margaret Thatcher and

John Major (1979 – 1997), and continue on to the Labour premierships of Tony Blair and

Gordon Brown (1997 – 2010), interweaving comparative analysis throughout the paper. I will

seek to explore the direct and indirect effects of these policies and how effectively they worked

to reduce child poverty. I will analyse how said policies frame and perceive the states

relationship to the family and child, and assumptions made about the relative dependency of and

societal responsibility towards children. In the final part of this paper, I will offer proposals for

how child poverty policy should be carried forward.

II. OECD Historical Context

Deindustrialization is defined by a shift away from manufacturing and towards service providing.

Manufacturing employment [as a share of civil employment] in developed countries has

continually decreased since the beginning of the 1970s through to present day. For the original

20 member states of the OECD (categorized as the „industrial countries‟ by the International

Monetary Fund [IMF], see Appendix 1) “the share of manufacturing employment declined from

about 28% in 1970 to about 18% in 1994” (IMF Working Paper 1997, p. 7). This resulted in a

sharp increase in poverty, with children being disproportionately affected in most OECD

countries (Cornia 2001, see Appendix 2). In this environment of slow economic growth, and

high unemployment, industrialized countries faced the similar challenges of increased “divorce

and lone parenthood, fertility, and out-of-wedlock child-bearing” (Cornia and Danziger 1997, p.

3) as well as a higher proportion of female work-force participants. These changes in family

structure necessitated a new approach to addressing child poverty, yet “a general absence of new

approaches – beyond the traditional ones advanced by the conservative right” (Cornia and

Danziger 1997, p. 3) pervaded the policy circles of industrialized nations. As a result, child

poverty increased dramatically.

Between the mid 1980s and the mid 2000s the annual average change in child poverty in

OECD countries was a growth of 1%, and in the late 2000s the percentage of children living with

less than 50% of median equivalised household income was 11.1% (OECD Social Indicators,

2011). These figures are despite the growth in real average annual change in household income

sitting at 1.8% for the OECD (2011). During the boom years from the end of WWII up to the

early 1970s, social spending increased across the spectrum and child poverty decreased. As the

effects of changing economic and family structures began to set in more heavily, social spending

decreased in most OECD countries. Resultantly, child poverty rose. It was in this climate that

Margaret Thatcher won a landslide election for the Conservative Party in the UK, becoming

Prime Minister in 1979.

III. Thatcher and Major Era Policies

“In the 1980s the Conservative government did not believe that specific policies were needed to

combat poverty beyond the well-established provision of social security benefits” (Alcock, May

and Wright 2012, p. 181). According to the absolute poverty level employed by the

conservatives, child poverty was practically non-existent. However, in just under twenty years of

conservative rule, the UK had the highest poverty levels in Europe (Hills 1998) with

approximately 35% of children living below the poverty line according to the OECD measure of

less than 50% of median equivalised income. The three principal policies of this government

affecting impoverished children were: Child Benefit; The Social Security Act 1986 [SSA]; and

the Child Support Act [SCA]. How the New Right viewed children as societal actors is important

for understanding the assumptions that helped shape the policies they implemented.

Children are, by all extents, viewed across the political spectrum as dependents.

Thatcher‟s government epitomized the New Right of Great Britain, which emphasized the

importance of the nuclear patriarchal family as one of the most fundamental institutions of the

country. Thatcher‟s famous declaration that, “There is no such thing as „society‟. There are men.

And there are women. And there are families” by point of omission silences children; indeed, it

removes them from the picture all together as autonomous individuals. Children only exist, in the

political discourse of the 80s and 90s, as components of the nuclear family (Parton 1995).

The opinion of the New Right in the 80s was that the culture of benefit claiming was

ultimately self-defeating, and that instead of alleviating, it actually created poverty by promoting

state dependence. The Child Benefit is a direct payment made to the mother, which in 1979 stood

at £4.00 per child per week. It is the “only financial support in the tax and benefit system which

is directed towards all children” (Oppenheim and Lister 1996, p. 118). While it was passed into

law from 1977 through 1979 with cross-party support, it repeatedly came under the spotlight

throughout the 80s, with proposed, but unsuccessful, revisions of adding means-testing and

taxation clauses. In the 1987 Conservative Party Manifesto, it was stated that “Child benefit will

continue to be paid as now, and direct to the mother” (Conservative Party 1987). However, the

reality was that the benefit was soon „paused‟ for three years so as to explore means-testing

benefits provision. Throughout the Thatcher and Major governments, the argument continued as

to whether child benefits should be universal or means-tested. This is telling in and of itself,

demonstrating how difficult it was to firmly establish the right to universal benefits for all

children.

Within the New Right there is the traditional conservative emphasis on the central

importance of family, yet at the same time the neoliberal laissez faire emphasis on the central

importance of the individual [as a market participant]. Thus, in terms of the neoliberal

perspective, children are seen as „humans-in-the-making‟ as they are not yet independent

economic actors. There is an ideological tension between financially supporting the family and

promoting independence from the state.

The Family credit is the main prong of the SSA 1987, which affected low-income

families with children. The Family credit, a means-tested form of income support for families

with low wages, replaced the family income supplement. Initially, it was proposed that the credit

be paid through wages, and thus, meant that the majority of the time it would be paid to men.

This indicates the actual motivating force behind the clause. It was not so much a credit designed

to specifically address child poverty as it was a way to increase wages and thus decrease wage

demands amongst the poor – it‟s important to remember that the minimum wage did not yet exist.

Another significant change in the SSA is the withdrawal of entitlement for 16 and 17-year olds to

income support. By increasing the age of economic adulthood, the state was encouraging parents

to continue looking after their adult children, and creating greater poverty as burdens increased.

Ultimately, the SSA, while seeking to redirect funds to needs-based initiatives, was largely

unsuccessful in doing so (Evans, Pichaurd and Sutherland 1994).

IV. Select OECD Comparative Policies from 1979 to mid 1990s

In Italy, Japan, Australia and the USA, child poverty rose in every case from 1979 – the mid

1990s (see Appendix 3 for ethnic differentials in the US). The poverty rate in the late 1970s: in

Italy was 8.3% overall, but with huge variation between the different regions, with 20.6% for the

southern region but only between 4.5 – 4.7% for the other three provinces (Saraceno 1997); in

Japan was 11% (see Appendix 4 for differentials before and after taxes and transfers, and

comparison with OECD average); in Australia was 13% (Social Policy Research Center 2003);

and in the USA was 16.2% (National Center for Children in Poverty 2000).

The specific policies these countries chose to adopt to combat child poverty are revealing

of how child poverty was perceived, and also show striking similarity to the UK approach. In this

period, means-tested benefits were on the rise in all of the selected countries. In Italy spending

on tax credits and family allowances declined sharply (Saraceno 1997), and the means-tested

family allowances have been criticized for being “an antipoverty subsidy rather than a

contribution to child-rearing costs” (Saraceno 1997, p. 268). In 1981, 15.7 million family

allowances were paid out, but in 1989 this figure was only 3 million despite the increase in child

poverty. By the mid 1990s Italy‟s child poverty rate had increased to 20.5% (Jäntti and Bradbury

2003).

In Japan, while child poverty did not change drastically throughout this period, some

interesting anomalies are worth noting. Unlike in the other countries, childhood poverty in Japan

decreased faster than poverty amongst the elderly. However, this was not the case in female-

headed households - despite the increase of female labour-force participation in this period.

Japan offered several forms of child allowance on a means-tested basis, and several other forms

of child-supporting benefits universally (Ozawa and Kono 1997). By the mid 1990s Japan‟s child

poverty rate had stayed around the same as it was in 1979 at 12.2% (Jäntti and Bradbury 2003).

While Japan has fared well in preventing the rise of income poverty amongst children, new

forms of poverty as a result of changing demographic factors are on the rise. Children are far

more likely to be single-children, and have far less time to play due to increasing pressures to

study (Ozawa and Kono 1997).

In Australia and the USA, policies were similar to that of Japan and the UK. They can be

characterized in general by low levels of support (cash or other), largely means-tested, and a

push towards the privatisation of childcare services (Gauthier 2002). Australia saw a small

increase in child poverty throughout this period, and in the mid 1990s it was 12.6%. While the

U.S. saw a big increase, jumping to 22.4% (Jäntti and Bradbury 2003).

Throughout this period child poverty was either not recognized as a serious problem, as

in the cases of the UK, Australia, and Japan, or it was viewed solely as an economic issue, as in

the cases of the U.S.A. and Italy. What we see in the next period of analysis is a broadening of

the understanding of what child poverty is and how it should be addressed, resulting in more

holistic and more successful policy approaches.

V. Blair and Brown Era Policies

In crafting policy, New Labour was not constrained by the ideological preoccupation of reducing

dependency on the state. Although this was still a strong component of their agenda, it was

featured more as a result of economic good sense, rather than ideological bias. When Blair took

office he set a target to eliminate child poverty by 2020, and reduce it by 25% come 2004 (Blair

1999). This commitment led to a rapid succession of policy implementation in New Labour‟s

first few years of office. This caused an increase in household income among poor families with

children – with incomes rising faster than the national average. Accordingly, the number of

children living in poverty declined.

The holistic approach New Labour took in understanding the causes of child poverty was

reflected in their approach at reducing it. In this section of the paper, I list all the major policies

affecting children living below the poverty line, but will focus on the most relevant in

exemplifying the general policy direction of this government. The policies New Labour

implemented included: the National Minimum Wage (starting at £3.50 in April 1999, rising to

£5.93 by Oct 2010); Child and Working Families Tax Credits; National Childcare Strategy;

improved maternity and family leave provision; New Deals for Lone Parents and Partners of the

Unemployed; and, benefit increases (through Child Support and Income Support).

Throughout New Labour‟s terms in office, UK child poverty rates halved (Gregg 2011).

Their successes can be attributed to the broad array of policies aimed specifically at reducing

child poverty, in contrast to the Conservative government‟s previous attempts, which aimed

more at redistributing income. It is well known that child poverty rates are strongly affected by

such causes as “growing up in a jobless household, growing up in care, teenage pregnancy, illicit

substance abuse, a broken home and a bad truancy record at school” (Saunders and Evans 2009).

New Labour‟s approach sought to directly address many of these underlying causes of child

poverty, and thus reaped more fruitful results.

The economic aspect of Labour‟s child poverty strategy rested on „making work pay‟.

The reform to Child Benefit was significant in that they increased the amount given to mothers

for the first child. In 2007, £17.45 per week was paid for the first child and £11.70 for

subsequent children. The average weekly benefit for a lone-parent household in 2001 was £17.57.

This is reflected in percentage as the poorest fifth of children seeing their household income

increase by 12%, whereas the richest decile gained less than 1% (Brewer, Clark and Goodman

2002). This reflects the marked dynamism of Labour‟s economic policy directed towards

addressing child poverty. Yet, their benefit and tax policies were just one component of their

broad strategy. More interestingly, and more effectively, Labour introduced many measures to

address child poverty more holistically through increased public services.

This shift in perspective meant that government priorities were to direct resources away

from social security and into initiatives like the New Deal and The National Childcare Strategy

(NCS). In sum, this aspect of Labour‟s approach is called their Early Years Agenda. The NCS

provided subsidised childcare places for working parents. From 1997 – 2006, 1,150,000

childcare places were created. Families receiving the Working Families Tax Credit received

childcare tax credit up to 70% of the cost of childcare. This initiative focused on getting parents

back into work, and making it worth their while to do so. There was also a huge expansion in

nursery places for 3 – 4 year olds. In 2004, all children in this age range were guaranteed a

nursery place. This was funded through supply-side subsidies of nursery school providers. There

was definitely an emphasis on reducing state dependency, but it is worthwhile to note that the

benefits being paid went directly to the children.

Another significant policy of the Early Years Agenda was the Sure Start programme. It

was specifically targeted so as to benefit those children living in the most deprived communities.

By 2004, it reached 400,000 children, around 1/3 of the poorest children in the country (Stewart

2005). Each programme was designed locally with a participatory approach that included the

parents and local planners; yet, each programme still contained five essential provisions. These

are summed up by Stewart as: “outreach and home visiting; parenting support; support for good

quality play, learning and childcare experiences; primary healthcare and advice; and support for

children and parents with special needs” (2005 p. 147). By 2008, the UK child poverty rate was

at 12.5%, just under the average for all OECD countries which sat at 12.6% (OECD Family

Database 2011, see Appendix 5). This was a huge decline in the incidence of child poverty, from

35% in 1997.

VI. Select OECD Comparative Policies from the mid 1990s to late 2000s

In the selected countries we observe a revealing divergence in child poverty rates throughout the

period from the mid 1990s to the late 2000s. Those countries that focused on a more holistic

policy approach achieved greater results, whereas those that continued with the economic

approach saw increasing child poverty.

Throughout this period, child benefits in Italy were paid on condition of employment,

leaving those with no work little opportunity to access state support. Financial provisions for

families were relatively low in comparison to other EU countries. Rachel Henneck points out

that the value of all child tax-breaks and child benefits were “less than half the value of French

benefits” (Henneck 2003, p. 31). Despite the low level of financial support for children in Italy,

throughout this period Italy developed an internationally-renowned outstanding childhood

education programme across the country, run by local authorities with input from parents (New

2000). By 2008, the child poverty rate in Italy was 15.3% (down 5.2% from the mid 1990s)

(OECD Family Database 2011).

In Japan, social spending as a whole is low in comparison to other developed countries,

but for the purposes of this essay it is worth noting that the majority of child policy was (and

largely still is in 2012) aimed at solving the economic problems associated with child poverty

(Tokoro 2003). Families in Japan received one lump sum upon the birth of each child, fixed

regardless of income or number of children, as well as access to means-tested child benefit of

$50 a month for the first and second child, and $100 a month for all successive children up to six

(Henneck 2003). In 2002, legislation was passed to reduce the low-income requirement for this

benefit and make it accessible to more families. Childcare provision in this period was

practically non-existent, with the majority of family policy focusing on maintaining

family/private support structures. In the early 2000s, we saw the emergence of some policies

aimed at sub-contracting childcare centre provision to private companies (Appelbaum et al 2002).

By 2008, the child poverty rate in Japan was 14.2% (up 2% from the mid 1990s) (OECD Family

Database 2011).

In Australia, the economic approach was adopted for the majority of this period, but in

the early 2000s a consensus emerged amongst academics and government officials that a more

holistic approach was necessary (McDonald 2009; Ridge 2003; National Association of

Community Based Children‟s Services 2003; Department of Education, Employment and

Workplace Relations 2009). In 2000, Australia restructured its overly complicated child benefit

system, synthesizing seven different schemes into two: a Family Tax Benefit and a Child Care

Benefit (International Reform Monitor 2000). This was largely a successful reform in widening

access to the financial benefit, but little was done to promote a broader approach to child poverty

until the late 2000s. By 2008, the child poverty rate in Australia was 14% (up 1.4% from the mid

1990s despite increased social spending) (OECD Family Database 2011).

Throughout this period, the U.S. had no system of public childcare and “only about 10%

of families receive childcare subsidy” (New 2003, p. 8). The U.S. continues to provide several

tax benefits for low-income families in a means-tested fashion, but these exclude those who

don‟t earn enough to pay taxes or those who don‟t file. In the late 1990s, the U.S. started

investing in childcare, providing federal grants to be distributed by state governments. However,

the demand for the childcare services quickly outpaced the supply, until in 2000 the federal

government estimated that only about 10% of those who needed access to the service were

getting it (Greenberg, Lombardi and Schumacher 2000). By 2008, the U.S. child poverty rate

was 21.6% (down 1% from the mid 1990s) (OECD Family Database 2011).

VII. Concluding Remarks and Policy Suggestions

Throughout the period from the late 1970s to the mid 1990s, absent from the policy landscape

was both political will and a holistic approach in addressing the causes and effects of child

poverty. As we moved into the late 1990s and early 2000s we saw the rise of a broader policy

approach, including child care centres and education programmes. In the cases where child

poverty was addressed more holistically, the results were always superior to a strictly economic

approach. While means-testing can be an effective targeting tool to help the poorest, there is also

a need for universal child benefit in partnership with means-testing. The consensus on viewing

children as subjects, and often within the neoliberal tradition, as adults-in-the-making, was

strikingly prevalent throughout much of the period under analysis in this paper – however,

recently we have started to see an acceptance of viewing children as autonomous beings who

“embody their own identity” (McDonald 2009, p. 11). The above analysis shows that financial

assistance schemes are important but that they should be used in conjunction with other policies

which address the less tangible aspects of child poverty. Moving forward, we can learn from the

example of the Blair government and from Italy, in the case of the education centres, in

involving children in the policy development process. It is the author‟s opinion that policy

convergence is ultimately a positive phenomenon, being prompted by the ease in accessing

information of other country‟s policies, as well as the solidifying of basic standards of living. As

we move further into the 21st century, I envision still greater policy convergence, especially

amongst the EU member states, and I believe that this will lead to an evening out of policy

approaches and ultimately, a continuing reduction in child poverty.

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Appendices:

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Employment by Sector as a Share of Total Civilian Population (percent):

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Appendix 2:

Changes in Child Poverty Rates in Selected Market Economies, 1967 – 1991:

Source: Cornia, Giovanni Andrea., and Danziger, Sheldon. (1997). Common Themes,

Methodological Approach, and Main Findings.

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Number of U.S. Children Living in Poverty, by Race and Ethnicity, 1976 – 2010 (in millions):

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http://www.census.gov/hhes/www/poverty/data/incpovhlth/2010/index.html

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Trends in Child Poverty Rates between Japan and the OECD Average, 1980s – 2000 (percent):

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Appendix 5:

Percentage of Children living in Poverty in relation to Total Population:

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http://www.oecd.org/dataoecd/52/43/41929552.pdf