We must act now to defuse Europe's child poverty timebomb

We tend to associate child poverty with developing countries, but it’s a misconception we must abandon. Child poverty is a sad reality in the European Union, with Eurostat now warning that one in four children is at risk of poverty or social exclusion. That’s also the proportion of children who live with parents whose income is below their country’s financial poverty threshold or who hardly participate in the labour market and are materially severely deprived. To qualify for this latter condition, they must be deprived of at least four of the following nine conditions: the ability to (1) pay the rent, mortgage or utility bills; (2) keep the home warm enough; (3) face unexpected expenses; (4) regularly eat meat or protein; (5) go on holiday; (6) buy a television, (7) a washing machine, (8) a car, and (9) a telephone.

A household with children that’s deprived of four or more of these is deemed not to attain the essentials of a decent life in modern society. In 2010, about 10% of children in Europe suffered severe material deprivation, and by 2012 that had risen to 12%. In human terms, that meant 9.3m people under the age of 18 in 2010, increasing by nearly two million to 11.1m in 2012.

Poverty is about much more than living on a low income, as the NGO Eurochild has explained time and again. Although money is crucial, child poverty is also about being denied decent housing, good education and adequate healthcare. It is about children being denied opportunities to develop and participate as equals in their own country, and it’s also about children not having their voices heard. It is about families struggling against all odds to provide a decent environment for their children.

In a number of European countries, the long-running economic crisis has had a huge impact on families with children. Consider Spain; before the crisis, about 440,000 Spanish children suffered severe material deprivation, which is in itself a huge number. By 2012, that number was above 630,000. The general decline in incomes explains this spectacular increase; but income inequality among Spanish families also increased. Inequality increased within countries, but also between countries. There is a huge disparity in child poverty across Europe. In 2011, the poverty rate was 34% in Romania, compared to 10% in Denmark. In the eurozone, this disparity between north and south is just as striking as in the EU at large: child poverty has now reached 29.5% in Spain.

Since 2008 and the outbreak of the crisis, much attention has been paid to ‘excessive macro-economic imbalances’ in the eurozone. But we must also recognise that Europe is also being gravely affected by ‘excessive social imbalances’. This is important not only because of children’s’ hardships, but because poverty entails huge social and economic costs. It is now well-known that child poverty correlates with low educational achievement and poor health. Investing in young children is the most effective strategy for preventing school drop-outs, youth unemployment and long-term health problems. Our use of the word ‘investment’ is not by chance, for what is at stake is a just society and the development of our human capital. High levels of child poverty signal an investment deficit that’s a vicious circle of cause and effect creating underperforming labour markets, inadequate child care, poor education systems and ineffective transfer systems. We need to study child poverty statistics as ‘leading indicators’ that forecast long-term social and economic problems that have huge costs attached to them.

The only real way to fight child poverty is by tackling its root causes. Employment is key: If one or both parents are without work, households generally are at much greater poverty risk, and it’s why single parents so often experience poverty. In many countries it is difficult for single parents to find a decent job because of the limited availability of childcare. To create employment opportunities for single parents, universally accessible and affordable child care is essential, along with well-targeted activation of the unemployed through their integration into the labour market. But even when a single parent is fully employed, with two or three children and a job that’s not well-paid, their income will be lower than the poverty threshold. Decent minimum wages are important, but cannot in themselves solve the problems of single parents. Adequate child benefits and affordable housing, healthcare and education are crucial if we are to lift single parents and their children above the poverty threshold.

In those EU countries where child poverty is high, early childhood care is typically underdeveloped and social services are in general of poor quality. Income support in these countries for families without work is almost always inadequate. And although these countries tend to spend a lot on pensions, they devote less to cash transfers and services for families, and these are often inefficiently managed. Italy and Greece are telling examples, which suggests that tackling child poverty may entail a comprehensive programme of structural change in welfare states.

To make a serious assault on child poverty in Europe, there is now a composite picture consisting of alarming data, sound analysis and good policy advice. The European Commission and the European Social Protection Committee have developed a wide-ranging set of analyses and policy recommendations to fight child poverty. In February 2013, the Commission issued a Recommendation called ‘Investing in children: breaking the cycle of disadvantage’. It is a well-crafted, comprehensive recommendation, which covers all the relevant challenges. It urges EU member states to support parents’ participation in the labour market and provide adequate living standards through an optimal combination of cash and benefits in-kind. Governments should reduce inequality at a young age by investing in early childhood education and care, and they should improve their education systems’ impact on equal opportunities. They also should raise the responsiveness of health systems to address the needs of disadvantaged children. And they should enhance family support and the quality of alternative care. The Commission’s Recommendation is part of the outgoing Social Affairs Commissioner Laszlo Andor’s ‘Social Investment Package’, which has itself been a timely call for more social investment in support of the social, education and employment goals of the EU’s Europe 2020 strategy.

The sad truth is, though, that on poverty and social exclusion, those goals are now further out of reach than when the strategy was launched. The situation of many of Europe’s children continues to deteriorate. That’s not to say that the Commission’s recommendations have made no impact at all. The tool for achieving the Europe 2020 goals is to be found in the Country-Specific Recommendations (CSR). Overall, the 2013 CSR show some modest improvements from 2012 for child poverty and well-being. Fourteen member states received child specific recommendations, often related to essential elements of the ‘Investing in Children’ recommendation, although only three explicitly mentioned child poverty. But an assessment by Eurochild says in most CSRs the attention given to tackling child poverty still falls far short of the Commission’s recommendations. This illustrates the broader and more fundamental problem that in terms of the EU’s economic and budgetary governance, there is no clear link between economic and budgetary surveillance and the budgetary priorities member states themselves choose with the social investment goals of Europe 2020. When EU countries set their budgetary priorities, the EU’s social investment objectives seem far away.

Now it’s time for a bolder approach. My colleagues on the Scientific Board of Progressive Economy, an S&D initiative that aims to generate debate on economic policy, and I recently proposed a European Child Equal Opportunity Programme to tackle child poverty in a forceful way. Social investment in children should be brought back up to its pre-crisis levels, especially in countries hit hardest by the crisis. EU states should receive dedicated fiscal assistance under strict surveillance to prevent diversion of funds for other purposes. There should be regular measurement of the effectiveness of targeted social investment and of supporting policies for increasing equal opportunity and upward social mobility. Quantitative country-by-country targets should be established, and developing early-age and high quality childcare coverage with a focus on children at risk should be a central feature of an EU-wide programme.

These are policies that would strengthen the development of children’s human capital regardless of their social background. They would specifically help single mothers to be in a position to go out and work, which would obviously help reduce family poverty. It’s an approach that would in principle fit in well with the idea of ‘contracts’ proposed by the European Council’s president Herman Van Rompuy, and by the European Commission. Its essence is that the EU should organise tangible solidarity in support of the structural reform in welfare states that’s needed in a number of member states because improving investment in children is a welfare state reform priority.

The big picture is that child poverty is now a leading indicator of the problems building up for the future in many parts of Europe, all of which will involve huge costs. It is no exaggeration to say that we’re looking at a time bomb that threatens social cohesion inside member states and between them. Instead of waiting for it to explode, there’s still time to defuse it.