Family allowances ‘not key’ to tackling inequality

Family allowances are less effective than policies such as childcare and parental leave in reducing household income inequality, according to a research study of a range of developed countries.

American academics looked at how welfare state policies were related to households' relative incomes for 17, mainly European and north American, countries between 1985 and 2005. They focused on the intersection between household income, family structure and parental education level.

Key findings

• Although family allowances may reduce the risk of poverty, they tend not to alter the financial realities of households with children relative to the overall income distribution. In other words, family allowances are beneficial, but they do not dramatically alter the status quo.
• Work-family policies, such as childcare and maternity leave, do alter relative incomes – but in very different ways. The least educated lone mothers are the most affected by the availability (or non-availability) of childcare. In contrast, highly educated lone-mother households and partnered households where the father has low education are the most affected by the extent of parental leave entitlement.
• Wage co-ordination is associated with higher relative household income where the fathers have low education, but not where the mothers have low education. On the other hand, lone-mother households, regardless of the mother's education level, have higher relative incomes in countries with more centrally co-ordinated wages.

The study's authors conclude that governments seeking to limit inequality for households with children should consider mandatory paid leave as a strategy toward helping a wide variety of families. Some policies, such as wage co-ordination and public childcare, also help the most vulnerable groups, and should be added to strategies for boosting the relative incomes of some of the most vulnerable groups in society.

Source: Stephanie Moller, Joya Misra, Elizabeth Wemlinger and Eiko Strader, The Implications of Cross-National Policies for the Relative Incomes of Families with Children by Family Structure and Parental Education, Working Paper 588, Luxembourg Income Study
Link: Paper