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The costs of child poverty
Project summary: Estimating the tangible costs and social impacts of child poverty in the UK.
| Deadline: | 2pm, 19 February 2008 |
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| JRF Committee: | Poverty and Disadvantage Committee |
| Timescale: | 5 months |
| Budget: | £60,000 overall |
| Key contacts: |
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| Supporting documents: |
Summary
Child poverty brings not only hardship to those affected but also wider costs to society. These are wide-ranging and not always easy to measure, but improved understanding of their nature and size would shed light on the returns to investment in measures to reduce child poverty. Following research on this theme in the United States, this project will aim to:
- estimate the financial cost of child poverty to the Exchequer caused by extra spending on services;
- estimate the long-term effect on GDP associated with reduced labour market potential of those who have grown up in poverty and
- describe wider social impacts related to the effects on the functioning of social relationships and social institutions, which cannot be readily quantified in financial terms.
These three strands could be bid for separately or together. The work will need to be tailored to meet a short deadline to report by summer 2008.
Background / context
There is a growing feeling that the “missing piece in the jigsaw” of current analysis of child poverty is an assessment of what overall child poverty is costing our society. This kind of assessment would indicate both to the government and to the public how far measures that tackle child poverty would bring social returns.
In 2006, the Joseph Rowntree Foundation brought together a range of evidence on different aspects of child poverty, including modelling work that estimated it would cost £4 billion a year to halve child poverty by 2010 in line with the Government’s target (see www.jrf.org.uk/child-poverty). As part of this research, JRF published a preliminary paper on the costs of allowing child poverty to continue, demonstrating what kinds of costs are being incurred but not attempting to produce a single estimate (Hirsch, 2006).
Subsequent research in the United States attempted to estimate the cost of child poverty there (Holzer et al, 2007). A seminar of charities and analysts convened by Barnardo’s in October 2007 concluded that there is an urgent need for an estimate of the cost of child poverty in the UK. The US work attempted to quantify a very wide range of costs, ranging from the value of years of life lost due to childhood poverty’s effects on health to the imputed victim costs of those suffering from higher crime resulting from effects on offending rates. It was agreed at the seminar that in the UK there was a need to identify a range of different costs, but with some caution in producing a “total cost” figure. This led to the differentiated approach suggested in this call for proposals.
A differentiated approach
The key requirement of this project is to demonstrate the costs of child poverty in terms of its effect on the economy, the social side-effects and the extra cost in services. The idea is therefore not to reiterate the extent to which children and families in poverty suffer from its effects but to add to this an assessment of the “third-party” or “social” costs.
Within such social costs, we distinguish between (a) tangible costs – how much less money do we have available as a result of child poverty – and (b) wider effects on social well-being.
The tangible effect on economic potential
In terms of tangible costs, the objective of the project is to produce as robust as possible an estimate of how much child poverty reduces our economic potential, by (i) diverting government spending to deal with its consequences and (ii) restricting GDP growth, due to the lower earnings and employment expectations of people who have grown up in poverty. (Although the latter is not in the first instance a “third party” cost, it is in fact costly to us all, as a result both of knock-on fiscal consequences and of reduced aggregate demand in the economy.)
Wider social costs
An assessment of wider social costs will involve a less precise assessment of the range of ways that child poverty harms our social fabric and detracts from the well-being of everyone in society, not just those who are living in poverty. This includes things that we might be able to put some kind of value on, but not direct financial losses to individuals, the government or the economy.
Therefore, in total there are three strands to this project:
- Impact on public spending
- Impact on GDP
- Wider social costs
We will consider tenders for individual strands or combinations. If projects are conducted by separate research teams, there will need to be some co-ordination. We envisage that strands 1 and 2 on tangible costs will be published in a single volume including a figure for the combined cost. Moreover, some evidence on the effects of child poverty, for example on the incidence of poor health or offending, will be relevant for both strands 1 and 3, so some pooling of information will be desirable.
Strand 1 – Impact on public spending
Aims
The aim is to estimate how much the government is spending on services such as health, education, social services and law and order that it would not have to spend if there were no child poverty. (Note that spending on income transfers should not be included in this fiscal cost estimate, since benefits and tax credits are not only a cost of the failure of market incomes to lift people out of poverty but also part of the potential “solution” in ensuring that nobody lives on a very low income.)
Methods
There are different approaches that one might take to producing such an estimate. The obvious starting point would be to do a literature review of evidence on linkages between poverty and incidence of crime, poor health, etc. and then map the results onto actual spending on these problems. In doing such a two-stage analysis, one would need to take care about how they are joined together. The US study, for example, looked at the rate at which people in poverty suffer bad health, based on surveys, and then at the rate at which people with ill health receive treatment, based on other surveys. However, it appeared not to take account of the fact that people in poverty with a given health level have less spent on them in health care than people on average with that health level. The present study should stay focused on spending, and not stray onto quantifying need.
Another possibility may be to take an area-based approach. By looking at how much is actually spent on various services in small areas where more children live in poverty, one might estimate the cost per child in poverty spent on such services.
Note that the fixed time and budget for this research will make it important to focus on the central objectives of producing a best estimate of the overall cost. The aim is not to break new ground in analysis of the impact of poverty. Insofar as present evidence is limited, it will be necessary to produce a conservative estimate, rather than to speculate on effects for which evidence is weak.
Strand 2 – Impact on GDP
Aims
The principal objective is to estimate the macro-level effect on GDP growth of children growing up in poverty and as a result having lower employment rates and lower earnings in adulthood. Godfrey et al. (2002) estimated the future costs specifically of NEETs. The US estimate of this element considered how much less than average people who grew up in poverty earn, and assumed the cost of poverty as being the difference. This implied a problematic assumption that all of the jobs being done by people who grow up in poverty would be replaced by ones on the average wage if poverty disappeared. The present project will need to state a rationale for its assumptions about the extent to which the long-term supply-side improvements in the labour market resulting from less child poverty feed through into additional GDP.
Proposers might want to argue for the long-term labour market effects of children growing up in poverty to be measured as a fiscal cost rather than a GDP cost, whether on conceptual grounds or for ease of measurement.
Methods
This strand will need to draw both on evidence about links between poverty and educational outcomes and on labour market analysis on returns to qualifications. Because its aim is to estimate gains for the whole economy of improved outcomes for individuals, it will also have to consider the macro effects of supply-side improvements. The fixed time and budget for this exercise would clearly limit the sophistication of modelling possible, and the project may need to draw heavily on prior evidence of macro effects.
Strand 3 – Wider social impacts
Aims
The aim of this strand is to assemble evidence on costs to society of child poverty, in terms of how it harms the social fabric and affects the well-being of third parties. It should also bring this evidence together into a convincing analysis that contributes to public awareness of the wider costs of poverty.
These are some of the impacts that could be assessed:
- Psychological well-being associated with growing up in a society where poverty exists.
- Phenomena associated with living in such societies, such as levels of conflict in schools and families, suicide, divorce, neighbourhood conflict etc.
- Evidence on the operation of social institutions such as the school system in ways that can be associated with the existence of poverty, and in particular the extent to which patterns of service use are distorted (e.g. through the exercise of school choice).
- Associations between poverty and crime/ anti-social behaviour or other behaviours costly to society such as problem substance use. On this kind of issue, there may be potential for pooling of evidence with the public spending costs project, but here the focus would be on non-financial aspects of the outcomes, including for example psychological impacts such as fear of crime and their wider impact on social functioning.
- Public health impacts.
- Any social or environmental impact of families living in poor quality housing, or of concentrations of families in poverty living on particular estates.
- Impacts of concentrations of poverty on communities – for example, the wider consequences on social well-being of the existence of large housing estates.
- Externalities of the behaviours of children living on low incomes – i.e., how they affect wider behaviours and attitudes, and particularly cause conflict within communities. (The UNICEF indicators suggested that children growing up in the UK had a much more conflictual relationship with each other and with adults than elsewhere.)
Methods
This study is likely to be based mainly on a literature review, synthesising evidence from a wide range of sources, and drawing it into a coherent analytical framework. It should primarily seek to identify evidence of the ways in which the existence of poverty within local communities and society as a whole brings negative consequences of the kind identified above. It has been argued, for example by Richard Wilkinson (2005), that the extent of national income inequality is associated with many negative features of British children’s experiences as they are growing up, and this may also apply to the existence of relative poverty. However, it would not be enough to show such associations: the study should also be concerned with specific qualitative evidence of processes that explain the negative impacts of poverty for people not experiencing poverty.
Expected outputs
This research should produce short, accessible reports setting out the main findings. The report for each strand should not exceed 10,000 words. The reports for strands 1 and 2 will be combined in a single publication with a short overview chapter on the total monetary cost. (If these strands are produced by different teams, the Foundation will produce the overview). The way in which these reports are framed will be important. It is not just a matter of stating the findings, but of presenting them in a way that is credible, stating their limitations and considering their wider impacts.
An important consideration will be the way in which the outcomes of poverty are described. There is a risk that it could be presented in a way that “problematises” families living in poverty, for example as sources of social ills such as crime. Of course, it is not possible to state the costs of child poverty via, for example, higher law enforcement spending without making such connections. However, as far as possible this issue should be addressed in terms of lost potential and therefore the positive outcomes that could result from reductions in poverty, rather than from a negative viewpoint.
Submitting a full proposal
It is essential that you read the How to apply for funding section of our website before submitting your proposal, together with the Application guidelines containing the necessary forms for completing your application. There are also details available on what makes a good proposal and projects the Foundation does not support, which proposers should read, as well as some other useful information.
Three unbound, hard copies of all documents are required. Please also e-mail a Word version of the complete proposal, summary and budget forms to Louise Ross by the deadline below.
Proposals should be submitted to:
Louise Ross
Joseph Rowntree Foundation
The Homestead, 40 Water End
YORK YO30 6WP
Timetable
Proposals should be submitted by 2.00pm on Tuesday 19 February 2008. Unfortunately, late submissions cannot be accepted. JRF staff, advisers and external experts will review proposals. The Foundation will aim to inform successful candidates by 26 February 2008.
The research should be completed by early summer 2008. Ideally, the first draft of research reports should be delivered to the Foundation by 16 June, with the aim of agreeing final drafts by 14 July. The purpose of this tight timetable is to ensure that the reports are launched in early autumn 2008, in advance of the pre-budget report, which is likely to take a crucial decision on making money available to help meet the 2010 child poverty target.
Budget
The maximum budget for this call overall is £60,000.
How we make funding decisions
The following criteria will be used in coming to a decision:
- How far the work will offer new insights or developments.
- The soundness and appropriateness of how the work will be done (i.e. design, methods and analysis).
- Whether partnerships with relevant other organisations are in place, where these are important.
- The ability of the proposers to carry out the work and complete on time.
- An understanding of the policy and practice dimensions.
- A thorough approach to dissemination.
Other issues that will be considered include: whether the proposal pays attention to diversity where appropriate (i.e. attending to gender, ethnicity, class, disability etc.) and whether it is written in accessible, lay language. A full yet accessible explanation of the proposed methods to be used is essential, as is full consideration of the ethical implications of the project and the implications for policy and practice across different nations of the UK.
Key contacts
For queries about the research, including the methods, please contact:
Chris Goulden, PAD Principal Research Manager
(01904 615942; chris.goulden@jrf.org.uk)
For queries about the application process, deadlines etc., please contact:
Louise Ross, PAD Team Administrator
(01904 615942; louise.ross@jrf.org.uk)
References
Godfrey, C. et al. (2002) Estimating the Cost of Being “Not in Education, Employment or Training” at Age 16-18, DFES Research Report no 346.
Hirsch, D. (2006) The cost of not ending child poverty: How we can think about it, how it might be measured, and some evidence, www.jrf.org.uk.
Holzer, H. et al. (2007) The economic costs of poverty, Washington, DC: Center for Economic Progress.
Wilkinson, R. (2005) The Impact of Inequality: How to Make Sick Societies Healthier, Routledge.
