This chapter synthesises the main findings of the report. It first outlines how countries have responded to rising social expenditures, notably through a shift towards a forward-looking social investment approach that places greater emphasis on prevention, investment in children and the strengthening of opportunities across the life course. It then reviews multiple channels through which policies affect children, both directly and indirectly through parental well-being, employment and living conditions, and highlights major policy trends across OECD countries. It brings together evidence on the effectiveness of social policies in reducing income poverty and material deprivation of households with children, and in improving educational and self-reported health outcomes of children. The chapter also discusses complementarities and trade‑offs across policy areas, highlighting the importance of tailoring the scope and intensity of support to the needs of disadvantaged children. Finally, it emphasises that preventing disadvantage from accumulating early in life, while sustaining support throughout childhood and adolescence, is essential both to improve educational and health outcomes and to strengthen opportunities for social mobility.
Spending Better for Children through Social Policy
Abstract
Investing in children is essential to improve their well-being today – by protecting them from poverty, supporting their physical, emotional and social development – while also strengthening their learning capacities, socialisation, and access to formative experiences that provide them with a strong start in life. Such investments are particularly important for children facing income poverty and other forms of socio‑economic disadvantage, who tend to experience poorer outcomes in childhood as well as weaker health and labour market prospects in adulthood (Box 1.1). Over time, investments in children are expected to translate into higher educational attainment, stronger social connections, better health, and greater productivity, generating both individual benefits (e.g. improved career prospects) and broader societal gains through a better-prepared workforce, stronger economic growth, and enhanced social inclusion.
At the same time, social policies face a growing tension between rising demands – driven notably by population ageing and emerging social risks, including those associated with climate change – and tightening budget constraints that limit the scope for expanding public spending. In a context of declining fertility, the number of children under age 18 in OECD countries is projected to fall from around 283 million in 2025 to below 260 million by the early 2030s and to about 250 million by 2050 (United Nations, 2024[1]). This demographic shift may ease some pressures on social expenditure associated with supporting children and families in the short term, thus creating an opportunity to increase investment per child, particularly in policy areas that remain underfunded or where evidence suggests the largest gains in child well-being can be achieved. However, declining child populations also carry the risk that children and families become less of a priority in public budgets and that future social expenditures will be directed towards programmes that do not benefit children.
Irrespective of the total level of investment, demographic change offers an opportunity to reallocate and better target resources to enhance their impact on children and families. Ultimately, spending better for children can strengthen confidence in the future, an important determinant of individual fertility decisions with broader economic and demographic benefits. Reliable, available public services and social supports – including affordable childcare, quality education, healthcare, housing support, and adequate income protection – reduce economic and social uncertainties and can strengthen parents’ confidence in their ability to have and raise children. By improving children’s development while enabling parents to participate more fully in the labour market, well-designed family policies can help address the challenges associated with persistently low fertility, population ageing and economic growth. In addition, investment in children is often the best way to prevent risks of poor outcomes in adulthood (Box 1.1), support human capital accumulation and address fiscal pressures.
These multiple returns reinforce the importance of shifting the policy debate from how much is spent to how effectively resources are allocated, placing greater emphasis on achieving value for money in social policy.
This chapter provides an overview of the main findings presented in detail throughout the report on the “value for money” of social policies, assessed from the perspective of their impact on child outcomes over the past two decades. In this context, “value for money” refers to the extent to which different types of social policies – and their design features – improve child outcomes while either containing or adding pressure on social spending. The chapter aims to inform investment decisions for children by strengthening the evidence on the effectiveness of social spending across key policy domains, including policies supporting parents’ labour market participation and economic self-sufficiency, income support for families, early childhood education and care, health, and other in-kind benefits. It examines how these policies contribute to reducing child poverty and improving educational and health outcomes, while also considering how policy design influences the evolution of social spending as countries develop economically.
The chapter begins by examining trends in social expenditure, including a shift towards a social investment approach in which investment in children plays a central role. It then unpacks the different dimensions of social policies that affect children, both directly and indirectly through their impact on parental outcomes and family living conditions and presents key trends in these policies (discussed in more detail in Chapter 2). The remainder of the chapter synthesises the main findings on the value for money of social policies in reducing child income poverty and material deprivation (Chapter 3), and in improving educational and health outcomes (Chapter 4). It places particular emphasis on identifying complementarities and trade‑offs across policy areas and outcomes, while also summarising key results for individual outcomes. Overall, the chapter reviews how the allocation of spending across policy domains, as well as specific design features, contributes to – or limits – the effectiveness of policies in improving child well-being while managing pressures on social spending.
Childhood is a critical period for the development of human and social capital, yet too many children experience poverty during these formative years, limiting their chances from the outset. Growing up in disadvantaged circumstances affects multiple dimensions of well-being – health, cognitive development, and socio‑emotional functioning – with long-lasting consequences for life trajectories (OECD, 2025[2]; 2021[3]; National Academies of Sciences, Engineering, and Medicine, 2019[4]; De Schutter et al., 2023[5]). These effects extend beyond individuals to society as a whole, through lower productivity, reduced tax revenues, and higher public spending over the life course. A key reason to address socio‑economic disadvantage early is its persistence through interconnected developmental pathways: early deficits can trigger “developmental cascades”, whereby disadvantages accumulate and reinforce one another across domains, widening gaps in health, education, and well-being over time (Masten and Cicchetti, 2010[6]; OECD, 2021[3]). As a result, the cost of inaction extends well beyond the immediate consequences of child income poverty. It encompasses not only insufficient action to address inadequate household incomes, high housing costs and broader cost-of-living pressures, but also failure to prevent the associated deterioration in children’s health, learning and socio‑emotional development. These accumulated disadvantages generate substantial long-term economic and social costs that are considerably more difficult – and more expensive – to reverse later in life.
Empirical evidence shows that children from low socio‑economic backgrounds face higher risks of adverse birth outcomes, chronic illness, obesity and mental health problems, reflecting material deprivation, exposure to stress, and limited access to preventive care. They are also more likely to experience delays in cognitive and language development, leading to lower educational attainment and weaker academic performance, alongside higher rates of behavioural difficulties, anxiety, and lower life satisfaction. These cumulative disadvantages are reflected in adolescence, where socio‑economically disadvantaged young people are consistently less likely to perform well in school, pursue tertiary education, enjoy good health, or report high well-being (Clarke and Thévenon, 2022[7]).
These early inequalities often persist into adulthood. Individuals who grew up in disadvantaged households tend to achieve lower levels of education, face weaker labour market outcomes, earn less, and experience poorer health. Estimates from European OECD countries and Canada suggest they are 3 to 6 p.p. less likely to be employed, earn around 20% less, and experience worse health – equivalent to losing about two weeks of full health per year (Clarke et al., 2022[8]). These individual disadvantages translate into substantial economic costs: in European OECD countries, they amount to around 3.4% of GDP annually when combining labour market and health effects, while estimates for the United States reach about 5.4% of GDP. Conversely, reducing child poverty could generate sizeable economic gains through higher employment, earnings and tax revenues.
More broadly, family background remains a key driver of inequality of opportunity and intergenerational mobility. Evidence from the OECD Survey of Adult Skills (PIAAC) shows that individuals with highly educated parents earn nearly 30% more, on average, than those whose parents have low levels of education (Causa, Nguyen and Tanaka, 2026[9]). Across OECD countries, inherited circumstances – including parental socio‑economic status – account for a substantial share of income inequality and shape life chances to a large extent, contributing to over 60% of inequality of opportunity in many countries. These findings underscore the importance of early and sustained policy efforts to mitigate disadvantage and promote more equal opportunities from childhood onward (OECD, 2025[2]).
Social policies face rising demands alongside tighter budget constraints, shifting the focus from how much to spend to how to spend more effectively and achieve better value for money. In response, many countries are increasingly prioritising policies aimed at strengthening individuals’ capacity for economic self-sufficiency. These include measures to support skills development, employment, adaptability and resilience, prevent disadvantage, and build human and social capital throughout the life course, both at the individual and collective levels. This so-called “social investment” approach aims to improve long-term outcomes by boosting employment, productivity, and creating conditions for lower future reliance on social assistance.
Investing in children as a cornerstone of social investment strategies
Investing in children and tackling child poverty are central components of this approach, as they help prevent early-life inequalities from translating into persistent, life‑course disadvantages (Esping-Andersen, 2002[10]). Early childhood interventions, in particular, tend to yield especially high returns: they support cognitive and socio‑emotional development, help break the intergenerational transmission of poverty, and enable parents – especially mothers – to remain in employment. Continued support throughout later childhood and adolescence is also essential, as well-designed programmes at these stages improve well-being, educational attainment, and future labour market outcomes.
Beyond child-focussed policies, policies for older age groups are also needed to address the root causes of poverty and sustain the welfare state. This includes active labour market policies, work-care reconciliation measures, lifelong learning, and active ageing initiatives, all of which support employment and contribute to a virtuous cycle of social and economic gains. Within this framework, income protection and minimum-income schemes remain essential to ensure that households – including families with children – can meet basic needs and avoid falling into poverty. Health policies also play a critical role, supporting both children’s development and adults’ capacity to participate fully in society and the labour market.
Many reforms in social policies draw inspiration from the social investment approach even when this reference is not made explicit. At the same time, it is not always clear which forms of social support should be considered part of social investment and which should not. While reform strategies vary widely, several common trends can be observed – in particular, stronger support for parents, expanded provision in the early years, and reforms to active labour market policies aimed at creating, mobilising, and preserving human skills and capabilities (Garritzmann, Häusermann and Palier, 2022[11]).
Across countries, however, policy mixes, financing models, time horizons and distributive profiles differ substantially. While in some OECD countries and regions the shift towards a social investment approach is explicit and used as a guiding framework for policy design, in others it is more implicit. Even where the approach is clearly articulated, priorities across policy levers, the range of targeted outcomes, and the time horizons used to assess returns can vary significantly.
In Europe, the European Union has played a leading role in promoting policies that prioritise early intervention, lifelong skills development, and enabling forms of social protection. EU frameworks emphasise supporting children and families, expanding access to early childhood education and care, strengthening continuous learning and active labour market policies, and designing income support and services to facilitate labour market participation rather than merely cushion risks (European Commission, 2013[12]; 2021[13]). However, countries have adopted the social investment agenda to varying degrees, clustering into “balanced” strategies with broad investment across domains, “basic” strategies focussed mainly on traditional education, and “bent” strategies placing relatively greater emphasis on early-life supports (Baiocco et al., 2022[14]).
Child poverty reduction has also been closely aligned with these social investment principles. EU initiatives promote parental employment, work-family reconciliation and expanded access to early childhood education and care as key tools to prevent the intergenerational transmission of disadvantage. Since the late 1990s, frameworks such as the European Employment Strategy have encouraged paid leave provisions, childcare targets and other supports that enable parents – particularly mothers – to participate in the labour market (Thévenon, 2004[15]; Bouget et al., 2015[16]). Together with more recent EU initiatives explicitly focussed on investing in children and combating child poverty,1 these efforts reflect a growing alignment between child poverty strategies and preventive, investment-oriented social policies (Esping-Andersen, 2002[10]; Vandenbroucke, Hemerijck and Palier, 2011[17]; Bouget et al., 2015[16]; European Commission, 2024[18]).
A major milestone in this agenda was the adoption the European Child Guarantee (ECG) in 2021, which seeks to ensure that children at risk of poverty or social exclusion have access to the most basic of rights, like healthcare and education (European Commission, 2021[19]). The ECG calls on Member States to guarantee children in need effective and free access to early childhood education and care, education and school-based activities, at least one healthy meal every school day, and healthcare. It also recommends ensuring effective access to healthy nutrition and adequate housing. Each member state must develop a national action plan to implement the European Child Guarantee (ECG) through to 2030. In line with the Recommendation, these plans should establish an integrated policy framework to effectively tackle child social exclusion. They should also address the geographic dimensions of child poverty and inequality by focussing on the specific needs of children in disadvantaged urban, rural, remote, and segregated areas through a multidisciplinary, co‑ordinated approach.
Building on this trajectory, in May 2026, the European Commission introduced a major social policy package including the EU’s first Anti-Poverty Strategy (European Commission, 2026[20]), a proposal for a Council Recommendation on fighting housing exclusion, a reinforcement of the European Child Guarantee, (European Commission, 2026[21]) and an updated disability rights strategy up to 2030. The package aims to accelerate the reduction of the number of people at risk of poverty or social exclusion by at least 15 million by 2030 (including at least 5 million children), with a strong focus on quality employment, access to services and income support, homelessness prevention, and breaking the cycle of intergenerational disadvantage.
New Zealand has adopted a particularly explicit and operational form of the social investment approach. At its core, this approach seeks to better enable people, whānau, families, and communities to achieve positive outcomes and thrive, by taking a long-term perspective across multiple dimensions of their lives (Social Investment Agency, 2026[22]). It emphasises early intervention and prevention rather than crisis response, targets investment towards those with the greatest and most complex needs, and promotes holistic, family-centred support. In practice, social investment is implemented as a data- and evidence‑driven framework for designing, funding, and delivering social services with a strong focus on long-term outcomes (Government of New Zealand, 2013[23]; 2025[24]). More broadly, the approach emphasises allocating public resources where they can generate the greatest impact and value – not only by improving service design, delivery, and cross-agency co‑ordination, but also by informing higher-level spending decisions across the system (Social Investment Agency, 2026[22]). A central feature is the use of outcomes-based contracting, whereby funding is linked to the achievement of measurable results rather than prescribed activities. This enables service providers to innovate and tailor support to the needs of individuals and families, while maintaining a strong focus on improving long-term outcomes.
Reducing child poverty is one component of this approach in New Zealand, supported by formal targets, reporting requirements, and policy planning grounded in outcome‑focussed evidence (Government of New Zealand, 2025[24]). The Child Poverty Reduction Act of 2018 introduced mandatory three‑ and ten‑year targets across multiple indicators, including income poverty (before and after housing costs) and material hardship. Building on this framework, the Child and Youth Strategy 2024‑2027 (Government of New Zealand, 2024[25]) sets out three priorities for children and families: i) supporting children and their families and whānau in the first 2 000 days; ii) reducing child material hardship by increasing household incomes, supporting access to stable housing, lowering essential living costs and addressing long-term disadvantage, with a focus on increasing household incomes; and iii) preventing harm against children.
Canada provides an example of a sustained commitment to reducing child poverty, illustrating the importance of a comprehensive policy strategy that brings together multiple elements consistent with a social investment approach, even if not explicitly framed as such. Successive governments have progressively expanded support for low- and modest-income families and strengthened co‑ordination across federal, provincial and territorial levels, notably through the 2018 Opportunity for All – Canada’s First Poverty Reduction Strategy (ESDC, 2018[26]). Through its Poverty Reduction Strategy, which aligns with the United Nations Sustainable Development Goal of eradicating poverty (SDG 1), Canada has implemented a range of policy measures aimed at reducing poverty and enhancing the social safety net. Notably, these measures include increased targeted income support for families, strengthened income security in retirement, and enhanced earning supplements for low-income workers to support their labour market participation and upward mobility. In addition to immediate income supports, the Government of Canada has made strategic, longer-term investments in areas such as housing, clean water, health, transportation, early learning and childcare, and employment, intended to help address the multiple dimensions of poverty. In recent years, Canada has also established the National School Food Program and launched a Dental Care Plan, aimed at improving affordability and access to nutritious food and essential healthcare.
A cornerstone of Canada’s child poverty efforts is the Canada Child Benefit, which was designed to simplify the delivery of income support by providing a single monthly payment that is exempt from taxation. This benefit enhances progressivity by directing more substantial financial assistance to low- and middle‑income families, thereby effectively helping reducing child poverty (Thévenon, Clarke and Simard-Duplain, 2024[27]).
Trends in social spending and policies affecting children
Beyond the explicit investment strategies for children discussed above, Chapter 2 of this report shows that many developments in social policy over the past two decades have increasingly aligned with the principles of social investment, reshaping how policies influence outcomes for children and families. Chapter 2 situates these changes within the broader context of demographic shifts and the successive pressures faced by welfare systems. It then reviews key policy trends across OECD countries in detail, including the expansion of in-kind spending, stronger support for families with children, increased efforts to support working parents, and a weakening redistributive impact of income support.
The analysis shows that social spending in OECD countries has risen substantially over the past two decades, increasing from about 20% to 25% of GDP and by nearly two‑thirds in per capita terms. This growth has been driven mainly by population ageing and rising healthcare costs. Per capita public spending on health increased by around 70%, while spending on older people rose by approximately 60%. Together, these two categories accounted for nearly two‑thirds of total public social expenditure in 2021. Spending on active labour market programmes and unemployment benefits also increased markedly (by 68% and 85%) – particularly in the aftermath of the COVID‑19 pandemic – but together, they still represented less than 8% of total public social spending in 2021. By contrast, expenditure on families with children remained comparatively modest, accounting for 9% of total public social expenditure throughout. As the number of children declined over the same period, this nevertheless resulted in an increase in public spending per child.
The chapter also shows the changes in the underlying structure of policies and public and (voluntary and mandatory) private social expenditures2 affecting children:
First, there has been a shift towards activation and support for working parents, with expanded provision of paid parental leave entitlements and of early childhood education and care services. For instance, the inflation-adjusted increase in spending on ECEC services as a share of the total population was 100% over the past two decades, nearly twice the relative increase observed for per capita social expenditure overall. However, access remains unequal: in Europe, around 49% of children under three in the highest income group were enrolled in formal childcare in 2024, compared with 33% in the lowest income group.
Second, there is greater reliance on in-kind services, which accounted for about 64% of total social spending in 2021, up from 58% in the early 2000s. Health services absorb nearly three‑quarters of this spending, with family-related services forming the second largest category.
Third, investment in families and early childhood has increased, driven by both higher cash transfers and – more markedly – the expansion of in-kind services. Per capita spending on in-kind family support has more than doubled in real terms since 2001, with early childhood education and care accounting for around two‑thirds of this total. However, when combined with overall education spending for school-aged children, per-child expenditure in early childhood often remains lower than at later ages, as a result of the higher levels of spending devoted to formal schooling.
Fourth, cash benefits continue to play a central role in supporting families, typically combining universal and targeted elements, although their design and size vary widely across countries. As of 2024, all OECD countries provide at least one family benefit, most offer several, and around half apply means testing. Many systems include supplements for single‑parent families, while some countries – including Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Norway, the Slovak Republic, Sweden and Switzerland – operate alimony-advance schemes. Several countries also provide school-related allowances to help cover the costs of supplies, clothing, and materials, or to reduce or eliminate ancillary school fees for low-income students. In addition, some countries – such as France, Italy and Norway – offer means-tested benefits specifically targeted at families with young children. Finally, a number of OECD countries link parts of family support to parents’ labour market status, for example through in-work tax credits or childcare allowances, as seen in Belgium, Czechia, Finland, Korea and Norway.
Income support generally increases with family size: on average, low-income families with two children receive about 1.9 times the net support of otherwise similar one‑child families and those with three children over three times as much, although cross-country variation is large. In some countries families (notably in Hungary and Slovenia), support for two‑child families is significantly more than double that for one‑child, and in in Estonia, Latvia, Hungary, Slovenia and Spain, the ratio for three‑child families exceeds four.
Fifth, despite some improvements, significant challenges remain regarding redistribution and the adequacy of income support. While minimum wages now provide better protection against poverty than two decades ago – rising on average from just over 42% of median income in the early 2000s to around 55% in 2023 – this progress has not been universal. Combined with lower work intensity among families with children than in childless households, this means that labour income alone is frequently insufficient to protect families from in-work poverty.
Tax and benefit systems reduce child poverty by about one‑third on average across the OECD – equivalent to roughly 7 p.p. – but their impact varies widely across countries.
Despite the important role of income transfers in reducing poverty, the redistributive impact of tax-benefit systems towards low-income households has weakened in many OECD countries over the past two decades. While some countries maintain strongly targeted systems in which more than half of social benefits accrue to households in the bottom 30% of the income distribution, the contribution of net transfers to disposable income and the redistributive design of tax-benefit policies for low- and middle‑income families with children has generally declined since the early 2000s, with only a limited number of countries strengthening support for low-income families.
Horizontal redistribution towards families with children has also weakened in many OECD countries over time. Although larger families continue to receive substantially higher net transfers than smaller ones, support for families with children of all sizes substantially declined in many countries, despite some notable increases in support for families with children in a small group of countries (including Estonia, Greece, Korea, Latvia, Lithuania, Japan and Poland).
Investing in children requires governments to make strategic decisions about how future public resources should be allocated to boost improvements in child well-being. This involves deciding not only how much to spend, but also how to distribute social budgets across policy areas, forms of support and target groups in ways that most effectively reduce child poverty and strengthen children’s health, education and long-term opportunities. This question differs from identifying where expenditure should be reduced or reallocated within a fixed budget. Instead, it concerns how additional resources generated through sustained economic development can be invested most effectively to achieve greatest returns for children.
In many OECD countries, continued economic development may create scope to expand social spending. At the same time, however, population ageing and other emerging social risks are increasing demands on public budgets, making public expenditures increasingly constrained. In this context, policy decisions need to consider not only the effectiveness of social spending in improving child outcomes, but also its implications for the future trajectory and sustainability of public expenditure.
Assessing the “value for money” of social policies therefore requires understanding how social expenditure across cash and in-kind forms of support, and the way that support is distributed across households and families, influence both child outcomes and trajectories of social spending over time. It also requires recognising that many areas of social policy – not only those explicitly targeted at children and families – can have important consequences for children’s well-being.
Six social policy areas shaping child outcomes
This work identifies six broad categories of social policy that can substantially contribute to improving children’s outcomes3 (Figure 1.1 and Box 1.1), therefore contributing to prevent the transmission of disadvantage from one generation to the next and to reduce its long-term social and economic costs (De Schutter et al., 2023[5]; Clarke et al., 2024[28]):
Work-family reconciliation and Active labour market policies (ALMPs) support parents’ access to employment, increase work intensity, and improve household living conditions – all key factors in reducing family poverty and strengthening financial security. Work-family reconciliation measures include paid parental leave entitlements, flexible working arrangements, and access to affordable early childhood education and care, all of which help reconcile employment and caregiving responsibilities. ALMPs include all social expenditure (other than education) which is aimed at the improvement of the beneficiaries’ prospect of finding gainful employment or to otherwise increase their earnings capacity. They encompass job-search assistance, training, and targeted support to overcome barriers to employment. While not exclusively targeted at parents, these policies address many of their specific needs and are also important for prospective parents seeking to establish stable employment. They influence child outcomes through multiple channels – by promoting parental employment, strengthening income stability, and improving working conditions – thereby fostering environments more conducive to parental well-being, quality parenting, and investment in children, although these effects are largely indirect and may take time to materialise.
Income support and minimum-income policies increase the resources available to low-income families – whether in or out of work – and help secure an adequate standard of living. Unlike ALMPs, whose effects depend on improvements in employment and may take time to emerge, income support can translate more immediately into improved living conditions. These policies include a wide range of cash transfers targeted by income, household composition, employment status, or specific circumstances.
Family benefits and support services combine financial and in-kind support to address the costs and risks associated with raising children. These include cash benefits and tax reductions to help cover child-related expenses, care needs, or family-related risks such as separation. They also encompass earmarked or “near-cash” instruments (e.g. vouchers for food or essential services) that directly reduce children’s exposure to material deprivation, as well as family support services that provide tailored assistance to households facing complex or multiple disadvantages. Their effectiveness varies by design: sustained and predictable transfers tend to have a stronger impact than one‑off payments, as they can be incorporated into household budgeting and longer-term decisions. Some transfers are conditional on the use of education, childcare, or health services, and support can also be delivered through the tax system, for example via tax credits or allowances for families with children.
Housing and social services play a crucial role in reducing material deprivation and improving living conditions. By lowering housing costs and ensuring stable accommodation, they can provide a physical home environment that is safe and healthy, free up resources for children’s needs and support parents’ access to employment. Social services also help address social issues (e.g. social isolation, administrative barriers, substance use or exposure to violence) that may hinder stable work and family well-being.
Health policies affect child outcomes through multiple channels. These include preventive and curative services targeted directly at children (e.g. health checks, paediatric care), as well as services that support parents’ physical and mental health. By improving parental well-being, health policies enhance caregiving capacity, strengthen parent-child relationships, and support labour market participation. It is important to note, however, that data limitations make it difficult to isolate spending specifically devoted to children’s healthcare services from broader health expenditure benefiting the population as a whole.
Education policies are central to improving children’s learning outcomes, particularly for those from disadvantaged backgrounds. Beyond academic achievement, they shape school environments and climates – key components of children’s well-being – and play an important role in identifying and addressing difficulties children may face in their lives.
Broad categories of policies with potential impacts on child outcomes
Note: The figure suggests that each policy area primarily affects outcomes that are most directly related to it, but can also generate indirect effects on more distant outcomes. These broader effects may arise because policies that influence poverty and material living conditions can have spillover effects across a wide range of child outcomes (as illustrated by the circled arrow), and because different dimensions of child well-being interact with one another. For example, social assistance and minimum income schemes, as well as family benefits, primarily affect households’ material living conditions and poverty risks, but they can also influence children’s learning and health outcomes both through reductions in poverty and through the use of additional household resources to meet children’s developmental needs.
The extent to which countries allocate public resources across these policy areas reflects national policy priorities, but there are clear common patterns showing that both the level and composition of social spending are closely linked to economic development (see Annex 1.A). Countries with higher GDP per capita devote substantially more resources to social policies and tend to allocate relatively larger shares of spending to families with children notably through greater spending on cash benefits, and active labour market programmes. By contrast, the share of social spending devoted to healthcare generally declines as countries become wealthier, while the share allocated to early childhood education and care remains comparatively stable across different levels of development. Higher levels of economic development are also associated with higher maternal employment, lower joblessness, wider participation in early childhood education and care, and substantially lower rates of child poverty and severe material deprivation. Taken together, these findings underscore the importance of economic development and sustained social investment in improving children’s living conditions, while highlighting the need to understand not only how much countries spend, but also how the design and allocation of social spending influence the outcomes achieved with increases in social expenditures.
What does “value for money” mean and how is it assessed?
The analysis conducted in this report examines how spending on social policies can deliver greater value for money for children, understood as their ability to improve child outcomes while, where possible, containing long-term pressures on public social expenditure. The approach adopts a forward-looking perspective, focussing on how social spending can be structured, allocated and designed to maximise its impact on children’s well-being while supporting the long-term sustainability of social budgets. It builds on earlier OECD work assessing efficiency in health and education systems (Lorenzoni et al., 2018[29]; Égert, Botev and Turner, 2020[30]), adapting these approaches to social policies targeting child outcomes.
Assessing the value for money of social policies for children of policies requires considering two closely related dimensions:
Policy effectiveness measures the extent to which particular policy features enhance or weaken the impact of social spending on children’s outcomes, relative to a counterfactual in which social expenditure increases but the policy mix remains unchanged. The analysis examines whether differences in the allocation of social spending across policy areas, the balance between cash transfers and in-kind services, and the design and targeting of income support are associated with stronger improvements in child outcomes for a given level of expenditure increase. Outcomes considered include child poverty and material deprivation, educational achievement, health and emotional well-being. These outcomes are modelled as a function of overall social spending, policy features and relevant structural characteristics affecting children’s living conditions, such as household composition, the prevalence of single‑parent families, adolescent fertility and pre‑transfer poverty. Chapters 3 and 4 describe the empirical methodology in detail.
Spending implications assess whether alternative policy designs amplify or moderate the long-term growth of social expenditure. Specifically, the analysis examines whether differences in expenditure allocation, the balance between cash and services, or the targeting of support are associated with higher or lower levels of social spending over time than would be expected given a country’s underlying economic and demographic conditions. Social expenditure is first modelled as a function of GDP per capita – which captures a country’s fiscal capacity to spend – and key demographic factors, including life expectancy and the dependency ratio, which shape countries spending needs. Policy design features are then introduced to explain why countries with similar levels of economic development and demographic pressures may nevertheless experience different spending trajectories. The estimated effects are expressed as the percentage change in social expenditure associated with an incremental change in a given policy feature, relative to a counterfactual in which the policy mix remains unchanged. Depending on the policy, these effects may indicate either moderation4 or amplification of long-term spending pressures.
Combining these two dimensions provides an assessment of the value for money of different policy configurations. Policies are considered to deliver greater value for money when they achieve stronger improvements in children’s outcomes without adding pressures on long-term social expenditure. Value for money is therefore greatest for policy configurations that strengthen outcomes across multiple dimensions – such as reducing child poverty and improving educational achievement, health and socio‑emotional well-being – while moderating the long-term relationship between economic development, demographic change and social expenditure.
The proposed framework adopts a long-run perspective in which social expenditure evolves with countries’ economic development and demographic change. As such, it is designed to assess how alternative policy configurations influence the effectiveness and sustainability of social spending over time, rather than to evaluate budget-neutral short-run reallocations in which increases in spending in one policy area are exactly offset by reductions elsewhere. Nevertheless, the findings also provide insights into the potential effects of sustained reductions in social expenditure. By identifying the policy configurations that generate weaker changes in child outcomes for a given change in social spending, the analysis highlights policy options that are likely to preserve children’s well-being most effectively in the event of a permanent tightening of public social budgets.
Key policy features
The analysis considers several key dimensions of social policy design that shape the way governments support families and children:
The composition of social expenditure across policy areas, including spending on early childhood education and care (ECEC), family cash benefits, healthcare, active labour market programmes and other in-kind services. The distribution of resources across these policy areas reflects the overall orientation of the social protection system and, as discussed in the previous section, can influence the extent to which policies reduce childhood socio‑economic disadvantage and improve children’s outcomes.
Employment-oriented measures such as expenditure on active labour market programmes and the strength of financial work incentives, which aim to promote labour market participation and strengthen families’ earning capacity.
The provision of in-kind services, including early childhood education and care, healthcare, housing and other social services, which directly support children’s development and family well-being while complementing household income.
The design of income support systems, including both the size and targeting of cash transfers. This encompasses the extent to which transfers are directed towards lower-income households, as well as how support varies according to family characteristics, such as the number of children, family structure and household income.
Together, these policy dimensions capture the main levers through which governments shape social policy systems. They reflect decisions about how resources are allocated across policy areas, the balance between cash transfers and service provision, the emphasis placed on employment promotion versus income support, and the degree to which benefits are targeted towards different groups of households. These design choices influence children’s living conditions through multiple channels – including household income, access to essential services, parental employment, housing conditions and family well-being – and are therefore expected to affect a broad range of child outcomes, including material well-being, educational achievement and health.
The indicators used to measure these policy dimensions are mainly constructed from the OECD Social Expenditure Database (SOCX) (OECD[31]), the OECD Family Database (OECD[32]), the OECD Income Distribution Database (OECD[33]), the OECD Tax & benefit simulation model (OECD[34]) and OECD Child Well-being Data Portal (OECD[35]).
Against this background, the analysis of Chapters 3 and 4 pursues three main objectives. First, it examines how different social policy levers influence multiple dimensions of children’s outcomes, and the extent to which these outcomes can be improved individually or jointly. Second, it assesses the value for money for children of these policies – that is, their capacity to enhance child outcomes while containing pressures on social spending over time. By combining these two dimensions, the report evaluates the effectiveness of social policies from a child-centred perspective, considering their contribution to reducing child income poverty and material deprivation, improving adolescent educational performance, and enhancing self-reported health. It also investigates how overarching policy design features shape both the effectiveness of social spending in achieving these outcomes and its impact on the evolution of social expenditure. Third, the analysis explores how policies interact with one another, including whether specific combinations of interventions yield stronger results than standalone measures, and how these effects vary across countries depending on their level of economic development and the maturity of their welfare systems.
Chapter 3 assesses the “value for money” of social policies in reducing child poverty and material deprivation by examining how spending choices and policy design features affect both effectiveness and future spending pressures. Child poverty outcomes are captured using three complementary indicators:
Relative child income poverty, which measures the share of children living in households with equivalised disposable income that is below 50% of the national median. It rises with annual increases in the median income.
Deep child (income) poverty, which captures the share of children who live below the inflation-adjusted poverty threshold “anchored” in 2005. As living standards have increased over time in most OECD countries, the anchored poverty rate allows to focus on children living in deeper levels of poverty compared to all those falling under the relative poverty line.
Severe material deprivation among children refers to the EU indicator capturing the share of children living in households that experience an enforced inability to afford some items considered by most people to be desirable or even necessary to lead an adequate life, including the ability to keep the home adequately warm, afford nutritionally adequate meals, cope with unexpected expenses, and afford a one‑week annual holiday away from home.
The use of complementary measures of income poverty and material deprivation is motivated by the fact that these indicators capture different dimensions of children’s economic disadvantage. Income poverty measures are valuable for cross-country comparisons and provide an assessment of children’s risk of poverty, but they offer only limited insight into their actual living conditions. Parents may partially shield children from the consequences of low household income, and children may benefit from publicly provided in-kind services that are not reflected in conventional income‑based measures. For this reason, income poverty indicators are increasingly complemented by measures of material deprivation, which provide a more direct assessment of children’s exposure to hardship. Material deprivation measures also have limitations, however, as they rely on predefined lists of essential goods and activities and may not capture all aspects of disadvantage. Conversely, income measures remain indispensable because they reflect the financial constraints that limit families’ capacity to invest in their children’s development, even when material deprivation is not immediately observed. Taken together, the two approaches provide a more comprehensive assessment of child poverty than either measure alone.
Child poverty trends
An overview of child poverty across OECD countries reveals persistently high risks among children living in jobless, single‑parent and large families, as well as substantial levels of in-work poverty and material deprivation extending beyond conventional income poverty measures. The analysis highlights five main findings:
Around one in eight children are income poor. In 2023, 12.5% of children across the OECD lived in households with incomes below the relative poverty threshold, often at higher rates than the population as a whole. Child poverty is particularly high in countries such as Chile, Costa Rica, Israel, Mexico, Spain, Türkiye, the United Kingdom and the United States, while it is lowest in Denmark, Finland, Hungary and Slovenia, where children are less likely than adults to live in income‑poor households.
Employment substantially reduces, but does not eliminate, poverty risks. On average, around 10% of working families with children remain income poor, with much higher rates among single‑parent families. Across the OECD, around one in five employed single‑parent families lives in poverty, rising to more than one in three in countries such as Costa Rica, Spain and the United States.
Income poverty is associated with multiple forms of disadvantage. Children living in income‑poor households are more likely to experience inadequate housing, unmet healthcare needs and limited access to leisure and recreational activities. However, these disadvantages are not confined to income‑poor households, as many children living above the poverty threshold also experience similar forms of hardship.
Material deprivation extends well beyond income poverty. In 2024, around one in ten children in Europe experienced child-specific material deprivation. Although children living in income‑poor households are nearly five times more likely to be materially deprived than other children, most materially deprived children are not income poor. Approximately two‑thirds live in households with incomes above the relative poverty threshold, while around one‑third live in households with incomes above the third decile of the income distribution across OECD European countries.
Family structure remains a major determinant of child poverty. Children living in single‑parent and large families face substantially higher risks of both income poverty and material deprivation than those living in smaller two‑parent households. In particular, children in large families are more than twice as likely to experience poverty or deprivation as children living in one‑child families, reflecting the greater financial pressures associated with raising larger families relative to household income.
Enhancing the “value for money” of social policies in reducing child poverty
Applying the value‑for-money framework to child poverty shows that policy configurations emphasising employment promotion and in-kind services – particularly health, education and childcare – are generally more effective at reducing poverty and material deprivation while containing long-term growth in social expenditure. Income support remains essential for protecting families against economic shocks and providing immediate relief when household resources fall. However, while cash transfers are effective in reducing relative income poverty, they appear less successful in addressing deeper forms of hardship and tend to increase long-term spending pressures.
Overall, the analysis suggests that reducing child poverty while ensuring the sustainability of social spending requires balanced policy packages rather than reliance on any single policy instrument. The analysis highlights seven main policy implications:
No single policy instrument is sufficient
Over the past two decades, OECD countries have substantially increased social spending, contributing to an estimated reduction in child relative poverty of almost 3 p.p. – around one‑quarter of its average level in 2023. However, the analysis shows that how resources are allocated is as important as how much is spent.
The most effective strategies combine employment-oriented policies, well-designed income support and investment in in-kind services. Stable employment provides the most sustainable route out of poverty; income transfers provide immediate protection against financial hardship; and services such as childcare, health and housing help strengthen children’s long-term opportunities. Child poverty reduction is therefore most effective when these policy instruments operate in combination rather than in isolation.
Expanding access to early childhood education and care (ECEC) services is one of the most effective long-term investments to reduce child income poverty
Three main findings emerge:
First, increasing participation matters more than increasing spending alone. Higher ECEC spending is not, by itself, associated with lower child poverty. Poverty reduction occurs when additional investment translates into higher participation, particularly among children from low-income families. A one‑standard-deviation increase in enrolment among children aged 3‑5 (around 18 p.p.) alongside an increase in social spending is associated with an additional 1.5 p.p. reduction in child relative poverty – roughly doubling the poverty-reducing impact of the increase in social spending alone. An equivalent 18‑p.p. increase in participation among children aged 0‑2 is associated with a 1.8‑p.p. reduction in anchored child poverty, increasing the effectiveness of social spending by around 50%.
However, in countries with relatively low levels of social spending, expanding ECEC participation alone appears less effective at reducing deep (anchored) child poverty. One likely explanation is that the initial beneficiaries of service expansion tend to be more advantaged families, while those experiencing the greatest deprivation remain harder to reach. Maximising the poverty-reducing impact of ECEC therefore requires strong affordability measures, accessible provision and targeted outreach to disadvantaged families.
Second, fiscal returns increase as systems mature. Expanding ECEC coverage requires upfront investment and may initially increase pressures on social expenditures. As economies grow and ECEC enrolment rises, however, these costs are increasingly offset by higher parental employment and stronger labour market attachment (see Annex 1.A). In countries with more developed ECEC systems (and higher maternal employment rates), further expansion is no longer associated with additional long-term spending pressures and may even help moderate future growth in social expenditure. For example, the simulations reported in Chapter 3 suggest that, in countries with average levels of GDP per capita, allocating an additional one p.p. of total social expenditure to ECEC – sufficient to increase enrolment rates by around 14 p.p. – is associated with a 1.9% reduction in projected social spending relative to a scenario in which GDP increases without any change in the allocation of spending. This corresponds to a reduction in additional social spending of around one‑fifth after 11 years compared with the baseline projection.
Third, ECEC alone is unlikely to eliminate severe material deprivation. Although expanding participation can reduce deprivation in countries where coverage remains limited, the effects are generally modest. In more mature systems, additional investment in ECEC delivers smaller gains than spending on healthcare, housing and other services that more directly address the multiple dimensions of hardship faced by materially deprived families.
Active labour market policies (ALMPs) reduce child poverty across all measures
A larger share of social expenditure allocated to ALMPs is associated with stronger poverty reduction. Increasing the share of social expenditure allocated to ALMPs by one p.p. raises the poverty-reducing effectiveness of additional social spending by around 25% for child relative poverty, around 20% for anchored poverty, and roughly 10% for severe material deprivation after a decade.
However, marginal returns decline as overall social spending rises, suggesting that additional investment yields smaller gains for child poverty reduction in more mature welfare systems. Nevertheless, while higher ALMP expenditure may initially increase social spending pressures, these pressures diminish – and may eventually reverse – as countries become wealthier, reflecting stronger labour market attachment and potentially reduced dependence on income support.
The findings suggest that ALMPs help parents overcome barriers to employment and secure more stable earnings, although further research is needed to identify which programme designs are most effective for families with children, particularly single‑parent families.
Making work pay is equally important. Chapter 3 shows that larger financial gains from moving into full-time employment – whether from non-employment or part-time work – can be associated with lower rates of severe material deprivation. Employment support is therefore most effective when combined with tax-benefit systems that ensure work results in a meaningful improvement in living standards.
Investment in health and other in-kind services delivers substantial value for money
The share of social expenditure devoted to health has increased substantially across the OECD over the past two decades. The analysis suggests that a one‑standard-deviation increase in health spending (equivalent to around 9 p.p. of total social expenditure) is associated with a further 4.1 p.p. reduction in anchored child poverty – more than doubling the poverty-reducing effectiveness of the additional social spending relative to a scenario in which the spending mix remains unchanged – and a 3.2 p.p. reduction in severe child material deprivation, increasing spending effectiveness by around 76%. At the same time, a greater allocation of social spending to health as GDP increases is associated with an estimated 11% moderation in long-term social spending pressures after 11 years, meaning that social expenditure is projected to grow more slowly than would be expected from economic growth alone. These findings suggest that investment in health can simultaneously improve child outcomes and support the long-term sustainability of public finances.
A similar pattern emerges for housing, incapacity-related benefits and other social services. Greater investment in these areas is associated with lower child income poverty and material deprivation, although it comes with higher long-term spending pressures. A one‑standard-deviation increase in their share of social expenditure (around 3.5 p.p. of social expenditure) is linked to a 20% improvement in the effectiveness of additional social spending in reducing child relative poverty after around a decade, a 40% enhancement for anchored child poverty, and over 50% for severe child material deprivation. However, this reallocation is also associated with a 5.6% increase in long-term social spending pressures, suggesting that these services generally complement rather than replace other forms of support. These results highlight the important role that housing and other in-kind services can play in reducing hardship among disadvantaged children, while underlining the need for effective targeting to maximise impact and minimise fiscal costs.
Cash transfers remain essential, but their design can be strengthened
Cash transfers remain a core component of child poverty reduction. They provide immediate protection against income loss, support families whose earnings are insufficient to ensure an adequate standard of living, and complement employment-oriented policies whose benefits emerge more gradually.
On average across the OECD, a one‑standard-deviation increase in the average size of all cash benefits taken together (around 6 p.p. of disposable income) is associated with a 1.2 p.p. reduction in child relative poverty, increasing the poverty-reducing effectiveness of additional social spending by around 80%.
Targeting also matters. Directing a larger share of benefits towards lower-income households strengthens poverty reduction while helping contain spending pressures. For every standard-deviation increase in the average size of cash benefits, a one‑standard-deviation increase in the share of benefits received by the bottom 30% of the income distribution amplifies the poverty-reducing effect by an additional 1.1 p.p. for child relative poverty. Greater targeting towards the bottom 30% is further linked to a 3‑p.p. reduction in anchored child poverty (increasing the effectiveness of social spending in reducing deep child poverty by around 80%).
However, stronger income targeting does not appear to improve the effectiveness of transfers in reducing severe material deprivation. This likely reflects three factors. First, increased targeting of benefits towards lower-income households has not always been accompanied by higher benefit levels for those families. Second, a substantial proportion of materially deprived children live in households above conventional income‑poverty thresholds and are therefore not reached by highly targeted transfers. Third, material deprivation often reflects not only insufficient income but also limited access to affordable housing, childcare, healthcare, transport and other essential services. As a result, reducing material deprivation requires both adequately designed income support and complementary investment in accessible in-kind services.
Strengthening income support for families with children helps reduce child income poverty, but appears less effective in tackling deeper forms of poverty, suggesting there may be scope to improve benefit adequacy and coverage. Greater income support for families with children, relative to otherwise similar childless households, is associated with reductions in child relative poverty of around 1.4 to 1.8 p.p. – equivalent to increasing the poverty-reducing impact of the simulated increase in social spending by approximately 95‑120%. This relationship is particularly pronounced in countries with higher levels of social expenditure, where child-related benefits tend to be more generous. By contrast, no statistically significant association is observed with anchored child poverty. This may indicate that benefit levels remain insufficient to lift families out of persistent poverty, or that take‑up among the lowest income families is limited.
These findings point to the value of combining a universal foundation with targeted support. A proportionate universal approach could provide all children with a basic level of income security while directing additional support towards families facing greater needs because of low income, family composition or other vulnerabilities.
Effective policy implementation design matters as much as spending
Across all policy areas, effectiveness depends on whether support reaches families in a way that is aligned with their needs, accessible, adequate and predictable.
Three design principles stand out:
Align support with family needs. Benefit levels and services should reflect family size, household composition and children’s ages. This is particularly important for single‑parent and large families, which face elevated cost of children and poverty risks (Rapp and Thévenon, 2025[36]).
Improve take‑up and maintain adequacy. Administrative complexity often prevents eligible families from receiving support. Simplifying procedures, strengthening outreach and maintaining benefit values through regular indexation can substantially enhance effectiveness.
Provide timely and predictable support. Social protection systems need to respond quickly to changing family circumstances while avoiding unnecessary instability in household resources. The challenge is to balance accurate targeting with income security, administrative simplicity and ease of access. While frequent reassessments may improve targeting, they can also generate income volatility, increase administrative burdens and lead to overpayments that leave families facing repayment obligations and financial stress. Striking the right balance is therefore essential. Equally important is ensuring continuity of support throughout childhood. Predictable and sustained support helps families plan ahead, make longer-term spending and investment decisions, and provides greater stability during key stages of children’s development.
Reducing material deprivation requires a broader service‑based approach
Overall, the findings underscore that income support alone is insufficient to tackle severe material deprivation. Lasting reductions in deprivation require cash transfers to be complemented by stronger investment in healthcare, housing and other services that address the wider determinants of disadvantage.
This also highlights the importance of place‑based policies that reduce inequalities in access to essential services (OECD, 2025[37]; 2025[38]). Ensuring that childcare, healthcare, housing, transport, leisure facilities and green spaces are available, affordable and accessible in disadvantaged communities can substantially strengthen the effectiveness of anti-poverty efforts and improve children’s well-being, as also highlighted in recommendations to strengthen the implementation of the European Child Guarantee (European Commission, 2026[39]).
Where does additional social spending deliver the greatest value for money?
A final question addressed in Chapter 3 compares the effectiveness of allocating the same additional social spending across broad policy domains in reducing child poverty and material deprivation while influencing long-term spending pressures. The findings show that:
Expanding participation in early childhood education and care (ECEC) offers the greatest returns for reducing child relative income poverty, largely through its effects on parental employment and earnings: an additional one p.p. of total social expenditure allocated to ECEC to expand enrolment increases the poverty-reducing effectiveness of social spending by an additional 0.74 p.p. (around 50% more than increasing in social spending alone). However, its effectiveness in addressing deeper forms of disadvantage depends on the maturity of the welfare state. In lower-spending countries, shifting resources towards ECEC to increase enrolment may reduce the effectiveness of efforts to combat deep poverty, whereas in more developed welfare states – with more extensive childcare systems and higher parental employment – it can substantially strengthen reductions in anchored poverty.
For severe material deprivation, ECEC investment is most effective where childcare provision remains underdeveloped, but its marginal impact declines as coverage becomes widespread. By contrast, investment in active labour market programmes (ALMPs), health services, housing and other in-kind support strengthens the effectiveness of social spending in reducing both anchored child poverty and severe material deprivation. On average, a one‑p.p. increase in the share of social spending allocated to ALMPs, health and other in-kind services raises the effectiveness of social spending in reducing severe material deprivation by around 9%, 8% and 14%, respectively.
Greater investment in ECEC, health services and ALMPs can help moderate long-term spending pressures, particularly in wealthier countries. For example, directing an additional p.p. of social expenditure to expanding ECEC coverage is associated with 1.9% lower long-term social expenditure after a little more than a decade – around 20% less than the projected increase in spending associated with economic growth without changes in policy. These gains arise because higher parental employment and stronger labour market attachment increasingly offset the costs of service provision. By contrast, greater reliance on cash transfers and some other in-kind benefits in the policy mix tends to increase long-term spending pressures.
Overall, the findings indicate that investing in ECEC expansion provides the highest value for money in reducing relative income poverty, while health, housing, other in-kind services and ALMPs are more effective in tackling deeper and more persistent forms of disadvantage.
Chapter 4 assesses the value for money of social policies in improving adolescents’ academic performance and health. It begins by examining trends in educational achievement at age 15, drawing on data from the Programme for International Student Assessment (PISA) between 2009 and 2025, rates of 15‑ to 29‑year‑olds neither in employment nor education or training (NEET) and trends in adolescents’ self-reported health using data from the Health Behaviour in School-aged Children (HBSC) study. The chapter also examines the extent to which these outcomes vary according to adolescents’ socio‑economic background. It then applies the value‑for-money framework, adapted to adolescent outcomes, to estimate how the social policy levers identified earlier contribute to improving educational achievement and health while influencing long-term social spending.
Raising students’ academic performance and health while ensuring fairness is a challenge
Education is a key driver of social mobility and equality of opportunity, but its equalising potential is constrained by socio‑economic inequalities that emerge early in childhood and persist throughout adolescence. Children from disadvantaged backgrounds are more likely to enter school with weaker cognitive and socio‑emotional skills and to experience poorer academic outcomes, while more advantaged families are better able to compensate for educational setbacks through greater economic, social and cultural resources. At the same time, numerous OECD countries have experienced declining educational performance since the early 2010s, reflecting rising shares of low-performing students and, in many cases, fewer high achievers. These trends raise concerns for both social inclusion and long-term economic growth, particularly in increasingly knowledge‑ and technology-intensive economies (Hanushek and Woessmann, 2008[40]; 2015[41]; European Commission, 2020[42]). A central policy challenge is therefore to improve overall educational performance while narrowing socio‑economic disparities, by reducing low achievement and creating greater opportunities for disadvantaged students to reach high levels of academic performance.
Data from PISA assessments between 2009 and 2025 point to a deterioration in academic performance across both the lower and upper ends of the achievement distribution, with the decline being particularly pronounced among low-performing students:
Across the OECD, 43% of children performed below baseline proficiency levels in the 2025 PISA assessments, up from 31% in 2009. The increase in low performance has been especially marked in Finland, Greece, Iceland, the Netherlands and Norway. Low performers are not confined to disadvantaged groups: nearly half came from middle socio‑economic backgrounds5 in 2025.
The share of high-performing 15‑year‑olds also declined across most OECD countries, falling on average from 15.1% in 2009 to 11.9% in 2025, although levels continue to vary widely across countries. The largest declines were observed in several European countries, while only a small group of countries – including Türkiye, the United States and the United Kingdom – recorded increases. High achievement is not confined to the most advantaged groups: across the OECD, students from middle socio‑economic backgrounds account for 47% of top performers students and students with lower socio‑economic status for 9%.
Across the OECD, 13% of young people aged 15‑29 are neither in employment, education nor training (NEET). Encouragingly, NEET rates have declined over time in most countries, falling from an OECD average of 16% in 2010.
In parallel to trends in educational outcomes, similar concerns have emerged regarding child health, both in terms of deteriorating outcomes over time and the persistent influence of social determinants on health inequalities:
Across the OECD, 28% of 15‑year‑olds report being in “excellent” health, although this share varies widely across countries, from 46% in Israel to fewer than one in six adolescents in Latvia and Poland. Since 2013‑2014, the proportion reporting excellent health has declined by more than 3 p.p. on average, with particularly large decreases in Greece and Spain.
At the same time, 22% of adolescents report their health as “fair” or “poor”, ranging from less than 15% in Finland, France and Sweden to 35% or more in Hungary, Latvia and Poland. The share reporting poor health increased by around 5 p.p. on average between 2013‑2014 and 2021‑2022, with especially strong increases in Canada, Hungary, Ireland and Poland.
In 2021‑2022, more than half (53%) of 15‑year‑olds reported experiencing at least two health complaints more than once a week during the previous six months. Multiple subjective health complaints increased markedly over time in all OECD countries, particularly after 2017‑2018.
Strong socio‑economic gradients are evident in adolescents’ self-reported health. Adolescents from more affluent families are more likely to report excellent health and less likely to report fair or poor health than their peers from less affluent backgrounds.
Enhancing the “value for money” of social policies in enhancing adolescent academic performance and health
Improving adolescent educational achievement and health requires both reducing the share of young people experiencing poor outcomes and increasing the share who attain high levels of performance and well-being. These objectives are complementary: reducing disadvantage promotes equality of opportunity, while expanding excellence strengthens countries’ capacity to meet future economic and social challenges, including growing demand for highly skilled and healthy populations. Achieving both goals, however, may require different combinations of policies and investments. This is particularly important for adolescents from low- and middle‑socio‑economic status (SES) backgrounds, who remain substantially less likely than their more advantaged peers to achieve strong educational outcomes or report excellent health.
A major challenge remains in expanding opportunities for low-SES students to achieve high levels of academic performance. Across the OECD, only around 5% of 15‑year‑olds from the bottom quarter of the socio‑economic distribution are high performers, compared with 12% among students from middle socio‑economic backgrounds and 23% among those from the top quarter. These findings point to the importance of providing support across a broad range of low- and middle‑SES children, while ensuring that the intensity of support remains proportionate to levels of need and therefore stronger for the most disadvantaged children.
Against this backdrop, the value‑for-money framework is used to assess how the level, allocation and design of social spending influence the distribution of educational and health outcomes among 15‑year‑olds. Rather than focussing solely on average performance, the analysis examines which policy configurations are most effective in reducing the share of adolescents with poor outcomes while increasing the share who achieve high levels of academic performance and well-being. The framework is also applied to assess the contribution of social policies to reducing the proportion of young people who are not in employment, education or training (NEET).
A key methodological feature is that policy variables are aligned with the stage of childhood at which cohorts were exposed to them. For example, spending on early childhood education and care (ECEC) is measured 10‑15 years before outcomes are observed for 15‑year‑olds so that it reflects the policy environment experienced during early childhood. The analysis also considers spending on primary and secondary education, although it does not examine how institutional characteristics of education systems affect spending effectiveness, an issue addressed by Egert et al. (2020[30]).
Overall, the findings highlight the importance of sustained investment throughout childhood. Early-life investments appear particularly effective in preventing poor educational and health outcomes, whereas spending during middle childhood and adolescence plays a larger role in promoting high achievement and excellent health. The results also underline the importance of matching both the type and intensity of support to children’s needs, especially among those from low- and middle‑SES backgrounds.
The analysis points to six main policy implications.
Early childhood education and care is a key investment for improving long-term educational and health outcomes
ECEC emerges as one of the most effective entry points for improving children’s developmental trajectories. Allocating greater shares of social expenditure to ECEC services is linked to higher rates of PISA high performers as well as improved health outcomes across all measures (the share of adolescents reporting excellent health, low health and multiple subjective health complaints). These associations reflect ECEC spending overall, without distinguishing between investments aimed at expanding coverage and those aimed at improving service quality.
Importantly, spending and participation appear mutually reinforcing. The benefits of investment in ECEC are substantially greater when accompanied by an expansion in enrolment, suggesting that the quality of provision is as important as its coverage. Simulations indicate that jointly, both policies generate a stronger positive association with the share of high-performing students in PISA than either policy alone and, for a sufficiently large increase in enrolment, they are also associated with a reduction in the share of low-performing students when spending alone is insignificant individually.
Reaching disadvantaged children, ensuring high-quality provision, supporting transitions into compulsory schooling and maintaining continuity with later educational stages are therefore critical to maximising long-term returns. More broadly, ECEC appears most effective when embedded within a wider system of sustained support throughout childhood.
Sustained investment during the school years remains essential
The analysis suggests that different stages of educational spending contribute to different outcomes. Across countries, higher investment in primary education is associated with fewer low-performing students, while spending in primary and, more strongly, secondary education is linked to a larger share of high performers.
However, changes in education spending within countries over time are not consistently associated with measurable improvements in outcomes, indicating that spending levels alone may not be sufficient. The effectiveness of education investment is also likely to depend on broader institutional factors such as teacher quality, governance arrangements and system design. Improving the value for money of education spending therefore requires attention to both the amount invested and the way resources are used (Égert, Botev and Turner, 2020[30]).
The timing of income support to families with children matters
The effects of family cash benefits vary across childhood. Support during early and middle childhood appears particularly important for preventing poor educational and health outcomes, while sustained support throughout childhood is more strongly associated with higher shares of students with high academic achievement and excellent self-reported health at age 15. These findings mirror patterns observed for education spending, where investment in primary education is linked to fewer low performers and spending in secondary education more strongly tied to a greater share of high performers.
These findings suggest that income support can contribute to children’s development not only during the earliest years but throughout childhood, helping families meet evolving needs as children grow older and maintain home environments conducive to learning and well-being. Beyond expenditure levels, policy design also matters. Eligibility conditions and links to school attendance, preventive health checks or other forms of engagement may strengthen the effectiveness of cash transfers in improving children’s educational and health outcomes.
ECEC and family benefits help reduce socio‑economic inequalities in educational outcomes
Both preschool participation and family cash benefits play an important role in narrowing socio‑economic gaps in educational achievement. They reduce the risk of low performance among disadvantaged students while increasing opportunities for higher achievement and upward mobility.
Income support during early and middle childhood appears particularly beneficial for reducing the share of low achievers among low-SES children, suggesting that the returns to additional support may be high among the most disadvantaged groups. These findings reinforce the importance of ensuring that policies are designed to reach children facing the greatest barriers while maintaining support across a broader population.
Balancing targeting and broad-based support is key
The design of income support matters as much as the size of benefits. Higher average benefits amounts are associated with a higher likelihood that low- and middle‑SES students achieve high educational outcomes. By contrast, more narrowly targeted support concentrated on the poorest households does not necessarily improve educational outcomes and may, in some cases, be associated with a smaller share of high performers.
This may reflect the limitations of narrowly targeted approaches when support for middle‑income families is insufficient to address the financial constraints that can affect children’s development. Overall, the findings suggest that while targeting can help contain spending pressures, broader forms of support that also reach middle‑income households may be more effective in reducing material deprivation – as highlighted in the former section and discussed in more details in Chapter 3 – thereby strengthening home learning environments and supporting stronger educational outcomes.
Public expenditures on health and ALMPs seem to generate important indirect benefits
Public expenditure on preventive healthcare appears particularly important for increasing the share of adolescents reporting excellent health. While no direct association is found with educational performance, dedicating higher shares of social expenditure to health services is linked to lower rates of youth disengagement from employment, education or training (NEET), suggesting indirect benefits through improved well-being and stronger labour market attachment. Investment in preventive care may also help contain long-term social spending by preventing the need for more costly interventions later in life, although preventive services often require substantial upfront investment before savings materialise. A key limitation of the analysis, however, is the lack of detailed child-specific health expenditure data, which constrains the ability to identify which forms of health spending are most effective for improving children’s outcomes (Morgan and Mueller, 2023[43]).
Preliminary evidence also suggests that allocating a larger share of social expenditure to ALMPs is associated with fewer adolescents reporting poor health and multiple subjective health complaints and more reporting excellent health. Although children are not the direct beneficiaries of these programmes, the effects may operate through improvements in parental employment, income stability and job quality. By strengthening household living conditions, reducing financial stress and enhancing parents’ capacity to provide care and support, ALMPs may help create family environments that are more conducive to children’s health and well-being. Further research is nevertheless needed to better understand the mechanisms underlying these relationships and to identify which programme designs are most effective in generating benefits for children.
Overall, the findings suggest that raising the value for money of social policies requires moving beyond aggregate spending levels to focus on policy design, targeting, and complementarities across sectors. The main challenges lie in scaling up high-quality interventions, ensuring that disadvantaged groups are effectively reached, maintaining continuity of support across the life course, and balancing trade‑offs between efficiency, equity, and fiscal sustainability.
Where does additional social spending deliver the greatest value for money?
A final exercise in Chapter 4 assesses the impact of allocating additional social spending across policy areas on adolescent educational and health outcomes. The simulations suggest that:
Investment in ECEC services offers particularly high returns. Increasing the share of social expenditure devoted to ECEC, together with expanding enrolment towards universal coverage, is associated with the largest improvements in educational performance. An additional 1 p.p. of total social expenditure allocated to ECEC and a corresponding expansion in enrolment is associated with 1.7 p.p. fewer low-performing students and 0.4 p.p. more high-performing students in PISA assessments. This corresponds to improvements by 4% and 3% relative to the OECD averages in 2025, respectively. These gains are achieved while lowering the long-term social expenditure growth that is expected from demographic change and economic development.
The timing of family cash benefits matters. Greater support during early and middle childhood is associated with stronger educational and health outcomes, with investment directed towards children in middle childhood (ages 6‑11) appearing to have the largest impacts: an additional 1 p.p. of total social expenditure to programmes targeting this age group is associated with 1.5 p.p. fewer low-performing students and 0.8 p.p. more high-performing students in PISA assessments, as well as with 1.6 p.p. more adolescents reporting excellent health.
Preventive health and other in-kind services improve adolescent health. Greater investment in a combination of preventive healthcare, active labour market programmes (ALMPs) and other in-kind services is associated with better adolescent health outcomes. The optimal service mix depends on the size of the welfare state. However, preventive health spending stands out in all contexts as it substantially increases the share of adolescents reporting excellent health without adding long-term pressure on social expenditure, suggesting particularly strong value for money. Increasing the share of total social expenditure allocated to preventive health by one p.p. is associated with an almost 7 p.p. increase in the share of adolescents reporting excellent health on average (equivalent to an increase by 24% from 2021‑2022 levels).
The analysis shows that social policies can improve children’s well-being through multiple and complementary channels. When well designed, they can reduce child poverty through income support and services provided to children and their families. They can also be directed to strengthening parental employment, income stability, families’ health and well-being, thereby improving the home environments in which children grow and develop. Although economic growth may create opportunities to increase social spending, the value of well-designed social policies is evident even in times of tight financial constraints, helping policymakers identify interventions that deliver the greatest benefits for children relative to their cost.
Overall, the results suggest that the highest value for money is achieved through balanced policy packages that combine employment support, income protection and quality services to families. Table 1.1 brings the findings together and highlights three broad conclusions.
First, no single policy performs best across every child outcome. The pattern of results differs depending on whether the objective is to reduce income poverty, tackle severe deprivation, improve educational performance or promote adolescent health. The findings point to the value of coherent policy packages in which different interventions address different sources and dimensions of disadvantage.
Second, improving child outcomes and containing long-term spending pressures do not always go hand in hand. ECEC, healthcare and ALMPs are associated with both stronger outcomes and more moderate growth in social expenditure over time, showing therefore a particularly favourable value‑for-money profile. By contrast, family cash transfers and certain social services reduce child poverty and improve educational outcomes, but may mean greater spending pressure in the long-term. This does not imply that such policies have little value. On the contrary, some policies are essential despite being associated with greater spending pressures. Family cash transfers, for example, provide timely protection against material hardship and remain indispensable for families in which parents are unable to participate in the labour market.
Finally, combining income support, measures that promote parental employment and access to high-quality services is critical. Measures that support parental employment – particularly ECEC and ALMPs – stand out for their potential to reduce child poverty, improve children’s outcomes and contain long-term spending pressures. Family cash transfers are important for reducing relative income poverty and can also support educational outcomes, although the effects on more severe forms of material hardship appear more limited. Health, housing and other in-kind services complement income support by helping families meet essential needs, with particularly important effects on severe deprivation and health outcomes. Within health expenditure, greater emphasis on preventive care appears especially effective in promoting excellent health and moderating long-term growth of social expenditure. Importantly, combining policies with different spending implications can strengthen the overall value for money of the policy package. Policies that help moderate long-term spending pressures can create fiscal space for other essential interventions that may increase expenditure but address outcomes not sufficiently improved by the most cost-effective measures alone. This reinforces the case for assessing value for money across the policy package as a whole, rather than considering each intervention in isolation.
Direction of the estimated long-run association with child outcomes and social spending growth
Note: How to read the table: Arrows show the direction of the estimated change of a given child outcome or total spending growth associated with changes in spending allocation accompanying historical increases in social expenditure (see Chapter 3, Figure 3.10 and Chapter 4, Figure 4.7). Green indicates an improvement in outcomes or moderation in spending growth; orange indicates an adverse outcome association or faster spending growth; “–" indicates no robust association identified. This table summarises the estimated associations for countries with average levels of social expenditure and GDP per capita. As discussed in the following chapters, the strength and, in some cases, direction of these associations may vary with countries’ levels of economic development and the size of their welfare systems.
* The reduction in low performance is stronger when family support is directed towards middle childhood.
** The association with excellent health relates specifically to preventive health spending.
Four broad policy recommendations emerge:
Strengthen parental employment and ensure that work provides a sustainable route out of poverty
The evidence consistently points to parental employment as one of the most powerful mechanisms through which social policies improve child outcomes. Stable employment not only raises family income and reduces the risk of poverty and material deprivation; it can also improve parental well-being, reduce financial stress and create an environment for more supportive parenting practices and better conditions for children’s development (OECD, 2018[44]; 2021[3]). Policies that help parents enter, remain in and progress within the labour market therefore generate benefits that extend well beyond employment itself.
Delivering these outcomes requires a comprehensive “pro‑employment” policy package:
Investment in high-quality early childhood education and care (ECEC) stands out because it delivers a dual dividend: it supports parental employment while simultaneously improving children’s cognitive development, educational achievement and health. An additional p.p. of social expenditure allocated to ECEC, combined with higher enrolment, is estimated to increase the impact of social spending on reducing relative income child poverty by around 50% over the next decade. Greater investment and participation are also associated with stronger educational outcomes, including an estimated 4% reduction in the share of low PISA performers and a 3% increase in the share of high performers relative to 2025 levels.
Active labour market programmes (ALMPs) also appear to offer particularly strong value for money by helping parents overcome barriers to employment while moderating long-term spending pressures. Nevertheless, further evidence is needed to better understand the mechanisms through which ALMPs affect family outcomes and to identify the programme designs that generate the greatest benefits. Allocating an additional p.p. of social expenditure to ALMPs is estimated to increase the effectiveness of social spending in reducing child poverty by 24% and severe child material deprivation by 9%, while reducing expenditure growth by 1% over the next decade.
In addition to providing employment opportunities, helping parents reconcile work and family responsibilities through affordable childcare, parental leave, flexible work arrangements and out-of-school care remains essential (OECD, 2011[45]; 2007[46]).
Finally, ensuring that work pays is critical. Employment alone does not guarantee adequate living standards, particularly for single‑parent families and low-wage workers. Across the OECD, nearly 10% of working families with children and 20% of single‑parent families remain income poor. Therefore, ensuring that employment provides adequate living standards remains a central policy challenge (Balestra, Hirsch and Vaughan-Whitehead, 2023[47]). Tax-benefit systems, in-work supports and opportunities for skills development need to complement employment policies to ensure that work provides a genuine pathway out of poverty.
Provide adequate, equitable and predictable income support for families with children
Despite the importance of employment, labour market income alone is often insufficient to meet the costs of raising children or to protect families from economic shocks. Income support remains a cornerstone of child poverty reduction. They provide immediate financial support to families, help protect children from income shocks, and improve living conditions, particularly where parents are unable to work or where earnings alone are insufficient to secure an adequate standard of living. However, their effectiveness depends not only on the overall level of spending but also on how support is designed and distributed. The analysis shows that cash transfers are most effective when they reach the families with the greatest needs, including low-income households, single‑parent and large families.
The findings also suggest that increasing the share of social expenditure allocated to family cash benefits by one standard deviation (4.5 p.p., equivalent to around half of its average share) more than doubles the poverty-reducing effect of an increase in social spending compared to an equivalent increase in overall social expenditure without changing its allocation. Beyond reducing child poverty, providing cash benefits throughout childhood – rather than focussing predominantly on the early years – is associated with a lower risk of poor academic performance and a greater likelihood of high educational achievement. At the same time, the finding that material deprivation affects a relatively broad range of families across the income distribution supports a proportionate universalist approach, combining a universal foundation of child income protection with additional, progressively targeted support for families facing greater needs (Francis-Oliviero et al., 2020[48]). Such a system should also ensure that benefits are adequate, accessible, responsive to changing family circumstances, and delivered in a timely and predictable manner.
Complement income support with accessible, affordable and high-quality services
Cash transfers alone are not sufficient to address the wider determinants of child disadvantage. Tackling poor housing conditions, unmet healthcare needs and severe material deprivation requires complementary investment in housing, healthcare and other family and social services. These forms of in-kind support appear to offer good value for money: they contribute to reducing severe material deprivation, while investment in preventive healthcare is also associated with better health outcomes. More broadly, allocating a greater share of social spending to health and other preventive services appears to help contain long-term pressures on social expenditure, suggesting that these investments can improve both child well-being and the sustainability of social protection systems.
Health spending is especially notable because it appears to generate benefits across multiple dimensions. It is associated with lower severe material deprivation, better adolescent self-reported health and lower rates of disengagement from education, employment or training, while also helping to contain long-term spending pressures through prevention. Housing and other in-kind social services similarly play an important role in addressing material hardship by improving children’s immediate living conditions. These findings suggest that the most effective strategies are those that combine income support with direct investments in the services and environments that shape children’s daily lives. Ensuring that such services are accessible in disadvantaged communities and effectively reach vulnerable families is therefore central to improving both equity and value for money.
Combine early intervention with sustained support throughout childhood and adolescence
One of the clearest messages from the analysis is that the timing of investment matters. Early childhood is a particularly sensitive period during which interventions can generate large and lasting returns. Investments in ECEC, income support during the early years and access to key services appear especially important for preventing disadvantage from emerging and becoming entrenched.
At the same time, the evidence shows that early intervention alone is not sufficient. Different stages of childhood require different forms of support, and many of the gains associated with early investment can weaken if support is not sustained. The results suggest that investments during middle childhood and adolescence play a particularly important role in promoting higher educational achievement and self-reported health. In educational outcomes, for example, greater cash support during early and middle childhood appears especially important in reducing the risk of poor performance, whereas continued support during middle and late childhood is more strongly associated with achieving high levels of performance. Similar patterns emerge in education spending, where investment in primary education helps reduce low academic performance and later spending, in secondary education, is more strongly associated with higher achievement. This highlights the importance of viewing child well-being through a life‑course lens: policy should not only provide children with a strong start, but also accompany them through successive stages of development, responding to evolving needs and strengthening capabilities over time (OECD, 2021[3]; Hendren and Sprung-Keyser, 2020[49]; Page, 2024[50]).
Taken together, these four priorities point to a common conclusion: the greatest returns are achieved not through any single intervention, but through coherent and mutually reinforcing policy packages. Combining employment-oriented policies, adequate income protection, accessible services and sustained investment throughout childhood provides the strongest foundation for reducing poverty, promoting educational success and health, and improving children’s opportunities while maintaining the long-term sustainability of public social expenditure. In other words, value for money is not about choosing between policies, but about getting the mix right and sustaining support as children grow.
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The assessment of the value for money of social policies rests on the premise that economic development is a key determinant of the overall level of spending, and that increases in total social expenditure may be accompanied by shifts in how resources are allocated across policy areas and in the design features that shape their effectiveness in reducing child poverty. In practice, countries with higher GDP per capita tend to spend substantially more on social policies – on average six times more per capita than in lower-income contexts.
Differences in economic development and higher social spending are also reflected in distinct allocation patterns across policy domains (Annex Figure 1.A.1). Health is the only area where higher GDP and spending per capita are associated with a smaller share of social expenditure, which represents higher expenditure levels in other social policy areas in these countries rather than lower absolute spending amounts on health services. By contrast, higher levels of GDP and social expenditure are associated with larger shares of spending allocated to families with children (notably cash spending), active labour market policies, and other in-kind benefits (grouping incapacity-related, housing and other social policy areas). Notably, however, the share of social spending devoted to early childhood education and care (ECEC) shows little variation across countries, regardless of their level of GDP or overall social spending.
Share of public and private social expenditure allocated across policy categories, by level of per capita total social spending and GDP per capita
Note: The figure shows average spending shares allocated to a given policy area by logged per capita levels of GDP and social expenditure across the sample of 32 OECD countries from 2002 to 2021. Spending shares are averaged across country-year pairs that are greater than one standard deviation above the sample average, between one standard deviation above and below the sample average, and smaller than one standard deviation below the sample average of each, the log of per capita social expenditure and logged GDP per capita. Confidence intervals are indicated at the 95% level.
* Health spending is displayed on the secondary (right-hand) axis, while all other spending categories are expressed as percentages on the primary (left-hand) axis. “Other in-kind spending” refers to in-kind spending on incapacity-related, housing and other social policy areas.
Source: OECD Secretariat calculations based on (OECD[31]), Social Expenditure Database (SOCX), https://www.oecd.org/en/data/datasets/social-expenditure-database-socx.html.
Economic development also reshapes the context in which families live. In particular, higher levels of parental employment alter the conditions under which children grow up and change the nature and extent of the social support they require. As shown in Annex Figure 1.A.2, higher GDP and social spending per capita are associated with higher rates of maternal labour force participation and lower levels of joblessness, especially among single‑parent households. It is also linked to a lower incidence of low-paid employment although these differences remain relatively modest.
In addition, higher levels of GDP and social expenditure are typically associated with greater coverage of early childhood education and care (ECEC) services for children below school age, which plays an important role in enabling parental employment. Notably, the increase in coverage is more pronounced between low- and middle‑ levels of GDP per capita than between middle‑ and high-GDP per capita levels, suggesting that the expansion of these services tends to slow once a certain level of economic development is reached.
Average levels of policy indicators, by level of per capita total social spending and GDP per capita
Note: The figure shows average values of policy indicators by logged per capita levels of GDP and public and private social expenditure across the sample of 32 OECD countries from 2002 to 2021. Policy indicators are averaged across country-year pairs that are greater than one standard deviation above the sample average, between one standard deviation above and below the sample average, and smaller than one standard deviation below the sample average of each, the log of per capita social expenditure and logged GDP per capita. Confidence intervals are indicated at the 95% level.
Source: OECD Secretariat calculations based on (OECD[51]), Employment Database, https://www.oecd.org/en/data/datasets/oecd-employment-database.html, (OECD[32]) Family Database, https://www.oecd.org/en/data/datasets/oecd-family-database.html and (OECD[31]), Social Expenditure Database (SOCX), https://www.oecd.org/en/data/datasets/social-expenditure-database-socx.html.
Higher GDP and social expenditures per capita are also associated with lower levels of child poverty. Relative income poverty tends to be higher in countries with lower GDP and social spending, while variations in deeper forms of poverty – captured by anchored poverty rates – remain relatively limited (see Annex Figure 1.A.3). What stands out most, however, is the stark contrast in children’s exposure to severe material deprivation: around 35% of children under 18 experience severe material deprivation when GDP and social spending are comparatively low, against only 2% when GDP and social spending per capita reach higher levels. This highlights the strong potential of economic development combined with social spending to reduce child poverty and material deprivation. To harness this potential, the analysis presented in this report aims to contribute to a better understanding of which types of social policies are most effective in achieving such reductions.
Average levels of child poverty by level of per capita total social spending and GDP per capita
Note: The figure shows average values of child poverty outcomes by logged per capita levels of GDP and public and private social expenditure. Outcomes are averaged across country-year pairs that are greater than one standard deviation above the sample average of per capita social spending and GDP per capita, between one standard deviation above and below the sample average, and smaller than one standard deviation below the sample average of each, the log of per capita social expenditure and logged GDP per capita. Confidence intervals are indicated at the 95% level.
Relative child income poverty rates measure the share of children living in households with equivalised disposable income that is below 50% of the national median; anchored child poverty rates capture the share of children who live below the inflation-adjusted poverty threshold “anchored” in 2005. Severe material deprivation rates among children capture the share of children living in households that experience an enforced inability to afford some items considered by most people to be desirable or even necessary to lead an adequate life, including the ability to keep the home adequately warm, afford nutritionally adequate meals, cope with unexpected expenses, and afford a one‑week annual holiday away from home (as defined by Eurostat, see Annex 3.B for a full definition).
Source: OECD Secretariat calculations based on (OECD[33]), Income Distribution Database, https://www.oecd.org/en/data/datasets/income-and-wealth-distribution-database.html and (OECD[31]), Social Expenditure Database (SOCX), https://www.oecd.org/en/data/datasets/social-expenditure-database-socx.html.
← 1. Important steps at the European level to promote investment in children and foster integrated action to improve the well-being of disadvantaged children include the 2013 European Commission Recommendation Investing in Children: Breaking the Cycle of Disadvantage, which promotes an integrated social investment approach to child well-being based on three pillars: ensuring access to adequate resources, providing affordable and high-quality services such as ECEC, education and healthcare, and supporting children’s participation in social and cultural life. Another major initiative was the establishment in 2021 of the European Child Guarantee, aimed at preventing and combating child poverty and social exclusion by ensuring that children in need have effective access to key services, including early childhood education and care, education, healthcare, healthy nutrition and adequate housing.
← 2. The OECD Social Expenditure Database groups social benefits by the nature of provision into public, mandatory private and voluntary private social expenditure across nine different social policy areas (OECD, 2019[53]). The distinction between public and private social protection is made on the basis of whoever controls the relevant financial flows; public institutions or private bodies. Public social expenditure: social spending with financial flows controlled by General Government (different levels of government and social security funds), as social insurance and social assistance payments. For example, sickness benefits financed by compulsory employer and employee contributions (receipts) to social insurance funds are by convention considered public. Within the group of private social benefits, two broad categories can be distinguished: (i) Mandatory private social expenditure: social support stipulated by legislation but operated through the private sector, e.g. direct sickness payments by employers to their absent employees as legislated by public authorities, or benefits accruing from mandatory contributions to private insurance funds; (ii) Voluntary private social expenditure: benefits accruing from privately operated programmes that involve the redistribution of resources across households and include benefits provided by NGOs, and benefit accruing from tax advantaged individual plans and collective (often employment-related) support arrangements, such as for example, pensions, childcare support, and, in the United States, employment-related health plans. Spending on pensions and old age are not included in the present analysis.
← 3. It should be noted that social expenditure data do not allow for a precise identification of spending in several policy areas that are important for child well-being and central to the policy orientations of some countries, such as school meal provision, nutrition programmes, or extracurricular and leisure activities for children. These expenditures are often either not reported separately or only partially integrated into broader categories of social support, making it difficult to isolate and compare them reliably across countries.
← 4. Moderating long-term spending pressures does not necessarily mean reducing expenditure today. It means designing policies so that social spending grows more slowly over time than it otherwise would as incomes rise and populations change. By considering spending moderation alongside spending effectiveness, our analysis can identify policy configurations that generate a double dividend: better outcomes for children and less upward pressure on future social expenditure. For example, accessible childcare combined strong incentives to work and effective active labour-market policies for parents can help them enter employment or increase their earnings. This can reduce child poverty directly, lower families’ longer-term reliance on income support, and expand the tax base.
← 5. These are students with scores on the PISA index of economic, social and cultural status between the 25th and 75th percentiles.