Who benefits from benefits?

Around the world, 333 million children live in extreme poverty. Children are twice as likely to live in extreme poverty than adults. The climate crisis, conflict, and inflation continue to drive increases in poverty in much of the world, including in Europe and Central Asia.

One of the most effective solutions to alleviating child poverty is also the most concrete: providing cash benefits to children and their families. How exactly child benefits work can vary, ranging from universal cash benefits, provided to every single child regardless of economic means, to those that are targeted to specific categories of children, such as children with special needs or those whose families earn under a certain threshold.

All, however, help to reduce child poverty.

In OECD countries, for example, universal or near-universal child benefits have been found to reduce income poverty by five percentage points in households with children. In middle-income countries, child benefits that are equivalent to 1 per cent of GDP decreased the number of children living in poverty by up to 32 per cent.

Lifting children out of poverty is critical in its own right. But it has also been shown to have effects on children's short- and long-term wellbeing, as well as to improve outcomes for the economy, education system, healthcare system and society at large – positive effects far outweighing the costs of the benefits themselves.

Here are some of the ways in which everyone, including children, benefits from benefits.

When children receive benefits, they benefit (including into adulthood).

Child poverty goes beyond a lack of income. Research shows that, when children grow up in poverty, they are far likelier to experience a variety of negative consequences for the rest of their lives. These includes developmental delays, poorer cognitive development, lower academic achievement, mental health issues and other short- and long-term health problems. Experiencing poverty as a child also comes with a higher risk of unemployment, encounters with the criminal justice system, and living in poverty as an adult.

Because poverty often comes hand-in-hand with other dimensions, such as living in more polluted industrial neighbourhoods or experiencing interfamily violence, the long-term risks to children's health and wellbeing are often compounded.

Yet while children are more vulnerable to poverty than other population groups, they also have the least ability to get themselves out, given that they rely on the adults and systems around them to protect them and ensure that they thrive.

Given that all children, everywhere, are entitled to the fulfilment of rights such as being well-nourished, educated and receiving healthcare, this means that growing up in poverty contradicts their basic human rights.

When children receive benefits, the economy – including job-seekers, employees, and business owners – benefits.

While it is easy to focus just on the initial 'costs' of benefits, multiple analyses have found that when benefits are introduced, both local and national economies improve – reaping rewards that far outweigh the immediate cost of financial assistance.

One analysis found that if 1 per cent of GDP went to universal child benefits, the overall poverty of the entire population would fall by up to 20 per cent.

Other modelling has found that universal cash transfers have a benefit to local communities that can be several times the impact of the transfer itself. For every dollar of benefit given, shopkeepers or service providers might earn 2.50 dollars, as was found in Ethiopia. Another study found that recipients of benefits invested 26 per cent of the transfers, which then raised their long-term consumption.

Benefits also are consistently found to generate jobs, boost consumption, increase GDP and limit the fall-out of economic downturns, with benefits to the economy far outweighing the cost of the cash transfers themselves. One analysis on childhood poverty in the United States, for example, found that every dollar spent on reducing poverty saved seven dollars in economic costs.

When children receive benefits, the education system – including teachers, other students, and the taxpayers who contribute to schools – benefits.

The chronic stress and other deprivations associated with poverty can rewire children's brain development, impacting the parts of the brain that are crucial for memory, cognitive processing and emotional regulation. This is part of why child poverty is consistently linked to poorer skills on cognitive assessments and lower levels of academic achievement.

This also has a long-term impact on earnings. In the United Kingdom, for example, it has been estimated that the lost earnings that result from childhood poverty's consequences for later employment opportunities are equivalent to at a loss of 12 billion GDP per year – almost 1 per cent of GDP.

When children receive benefits, the healthcare system – including healthcare professionals and other patients – benefits.

Even temporary periods of poverty are associated with poorer health and development outcomes in children, including into adulthood. In lower- and middle-income countries, for example, some 43 per cent of children under age five are at risk of not reaching their developmental potential as a result of poverty. That is 250 million children in those countries alone.

Other health issues are also much more likely when children experience poverty. These include cardiovascular disease, diabetes, obesity, asthma, hypertension, and mental health disorders. When mothers live in poverty, they are at a higher risk of giving birth to premature or underweight babies. Infant mortality also is higher.

Aside from the very human cost of disease and death, these risks also come with financial costs. In the United States, for example, it has been estimated that childhood poverty costs the country $970.3 billion every year – equivalent to 5.4 per cent of GDP. One of the greatest contributors to this expense are the healthcare costs due to childhood poverty – which add up to about $192.1 billion per year.

When children receive benefits, society benefits.

Reducing child poverty can make societies more cohesive, stable, fair and equitable. They can even make societies safer, as links have been found between experiencing poverty in childhood and encountering the criminal justice system later on.

Research has found that benefits, in particular, can even promote the extent to which citizens engage with the state and how willing they are to pay taxes.

One of the biggest impacts is in reducing inequality: direct taxes and transfers have been found in 11 OECD countries to contribute to an average 30 per cent reduction in income inequality. The less inequality in a society, the more socially cohesive and stable they have been found to be.