Significant Changes to Family-Related Benefits in Rich Countries During the Great Recession

Mounting pressure from the financial markets prompted most industrialized countries to engage in fiscal consolidation since 2010-2011, with social transfers among the most popular targets. To analyse the effect of the economic crisis and the ensuing fiscal stimulus and/or consolidation measures on children’s living conditions across the OECD and/or the EU, this paper investigates changes in disposable incomes of low-wage households with children since 2008, with a particular focus on family-related benefits. It uses the model family method coupled with tax-benefit simulation techniques for the period 2008-2012. The paper also summarises qualitatively significant changes to family-related benefits, some of which are too recent to have been included in the publicly available tax-benefit simulation models. Family benefits have been particularly hard hit between 2008 and 2012. Their real value declined for lone parent households (with two school-age children) earning 20% of the average wage in 20 out of 37 countries, although in nine of them, increases in housing benefits, in-work benefits or social assistance made up for it at least partially. Taking all social transfers into account, the households studied saw their net incomes fall in real terms due to benefit cuts in nine out of 37 countries: Greece, Ireland, Italy, Latvia, Portugal, Republic of Korea, Slovakia, Spain, and the UK.