A LITTLE BIG: THE CASE FOR CHILD ALLOWANCES Steven Pressman pressman@monmouth.edu

What are Child or Family Allowances? Payments made to families on behalf of their children Began in France in around 1870 when Val-des-Bois Works made special payments to its workers with children Problem-- firms doing this are at a competitive disadvantage Druggists in Austria tried to do this at the industry level in 1908, but the same problems arose Solution can only be a national system where the government uses tax revenues to provide a fixed payment to families for their children First national plans set up by France & Belgium after WWI

Some Family Allowance Programs Canada CA $2,950 for first child; CA $2,730 for second child, and CA $2,734 for third and subsequent children. Finland €1,200 for one child; €2,526 for two children; €4,098 for three children; €5,916 for four children; €2,064 for each subsequent child. France €117.14/month for two children; €267.21/month for three children; €417.24/month for four children; €150.08/month for each subsequent child. Supplement of €32.95 for children older than 11 and €58.57 for children older than 16. Germany €154/month for each of the first three children; €179 for each subsequent child. Luxembourg €185.60/month for one child; €440.72/month for two children; €802.74/month for three children; €1,164.48/ month for four children; €1,526.40/month for five children. There is also a €16.17/month bonus for each child aged 6 to 11 and €48.52/month for each child 12 and older. Norway NOK 11,640 for each child. Sweden SEK 1,050/child each month with supplements of SEK 100 for a second child; SEK354 for a third child; SEK 860 for a fourth child and SEK 1,050 for fifth and subsequent children. UK £17/week for the first child and £11.40/week for each additional child. US Not available.

Why a Little BIG? Has no negative employment effects Reduces the total costs of BIG & the higher marginal tax rates necessary to fund a BIG Powerful force reducing child poverty Can be financed initially by eliminating tax exemptions for children

The Costs of Child Poverty Center for American Progress estimated the cost at 4% of US GDP (Holzer et al. 2007) in terms of lost income, higher crime and greater health expenditures NIT/BI experiments found each year in poverty reduced a child’s lifetime earnings by $6,800 in 1970 (equal to $33,000 today). With 15 million poor children, this adds to 3% US GDP. Adding crime and health would bring this up to 4%.

Child Poverty & Child Allowances Country & Year Child Poverty Child Poverty Without family Allowances Poverty-Reducing Impact of Family Allowances Percentage of Poor Children Removed From Poverty Due to Family Allowances CANADA (2004) 13.2% 25.0% -11.8% 47.2% FINLAND (2004) 5.4% 13.4% -8.0% 59.7% FRANCE (2005) 24.5% 31.6% -7.1% 22.5% GERMANY (2010) 12.2% 22.7% -10.5% 46.3% LUXEMBOURG (2010) 15.0% 29.6% -14.6% 49.3% NORWAY (2004) 5.9% 10.8% -4.9% 45.4% SWEDEN (2005) 6.6% -4.2% 38.9% UK (2010) 21.0% 25.4% -4.4% 17.3% US (2010) 27.8% 0.0% AVERAGES (unweighted) 14.6% 21.9% -7.3% 36.3%

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