Unemployment, social protection spending and child poverty in the European Union during the Great Recession

Abstract

The 2008 financial crisis triggered the first contraction of the world economy in the post-war era. This article investigates the effect of the Great Recession on child poverty across the EU-27 plus Iceland, Norway and Switzerland and studies the extent to which social protection spending may have softened the negative impact of the economic crisis on children. While the risks of child poverty are substantially higher in countries with higher rates of working-age unemployment, suggesting a significant impact of the Great Recession on household incomes via the labour market, the study finds evidence for social protection spending cushioning the blow of the crisis at least to some extent. Children were significantly less likely to be poor in countries with higher levels of social protection spending in 2008–2013, even after controlling for the socio-demographic structure of the population, per capita gross domestic product (GDP) and the working-age unemployment rate. The poverty-dampening contextual effect of social spending was greater for the poverty risks of children in very low work intensity families and large families. The study uses two complementary thresholds of income poverty, both based on 60 percent of the national median: a relative poverty line and a threshold anchored in 2008. Although the choice of a poverty line makes a difference to aggregate child poverty rates, individual-level risks of a child being poor associated with a range of household-level characteristics are similar for the two poverty lines.