Investing in children is both a social imperative and a smart economic choice. Children who grow up in poverty or socio‑economic disadvantage are more likely to experience poorer health, lower educational achievement and weaker labour market outcomes throughout life. These disadvantages generate long-term costs for society through reduced productivity, lower tax revenues and higher public spending. At the same time, OECD countries face increasing fiscal pressures from population ageing, rising healthcare costs and slower economic growth. The challenge is therefore not only how much governments spend, but how resources can be allocated to improve child well-being while containing future expenditure pressures.
Over the past two decades, public social expenditure across the OECD has increased from around 20% to 25% of GDP, largely due to rising health and old-age spending, while spending on families with children remains below 10% of the total. Yet many children continue to face disadvantage. In 2023, 12.5% lived in income poverty, and around one in seven children in OECD European countries experienced severe material and social deprivation in 2024, often despite living above poverty thresholds. Educational and health outcomes are also concerning. The share of 15‑year‑olds performing below baseline proficiency in the PISA assessment increased from 31% in 2009 to 43% in 2025, while more than one in five adolescents report fair or poor health.
This report applies a value‑for-money framework to examine how the level, allocation and design of social spending influence child poverty, material deprivation, educational achievement and health, while also considering implications for long-term public expenditure. The analysis shows that no single policy instrument is sufficient. And while spending more can make a difference, the gains can be substantially greater when additional resources are directed towards a coherent mix of policies. The strongest outcomes are achieved through balanced policy packages combining employment-oriented policies, adequate income support and accessible, high-quality public services.
Early childhood education and care (ECEC) is one of the most effective areas of investment. Higher spending and enrolment among children aged 3 to 5 is associated with lower child poverty, better educational outcomes and improved health later in life. These benefits arise because high-quality ECEC, adapted to families’ work-care responsibilities, supports parental employment while also promoting children’s development. However, participation among children under age three remains highly unequal across socio‑economic groups, limiting the potential benefits of ECEC systems in many countries.
Reducing these participation gaps is central to improving value for money. 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 policies (ALMPs) can also deliver substantial benefits by improving parents’ employment prospects and earnings, particularly when programmes are compatible with caregiving responsibilities. 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.
Cash transfers remain a cornerstone of child policy. They provide immediate protection against income loss and improve living standards, especially for families that cannot rely on employment alone. Their effectiveness depends not only on spending levels but also on how support is targeted and delivered. Income support is most effective when it reaches families with the greatest needs, including low-income households, single‑parent families and large families, while recognising that many materially deprived children live above conventional poverty thresholds.
Increasing the share of social expenditure devoted to direct income support for families could raise the impact of social spending on reducing relative child poverty by an estimated 27% over the next decade and contribute to improved educational and health outcomes. However, greater reliance on cash transfers alone is associated with weaker performance in reducing severe material deprivation and may increase long-term spending pressures. This underlines the importance of combining adequate income support with accessible services that address broader drivers of disadvantage, including poor housing, unmet healthcare needs and limited access to essential resources. Investments in healthcare, housing and other in-kind services can therefore provide particularly strong value for money. Preventive healthcare is especially promising, improving child health while helping moderate future expenditure pressures.
Finally, the findings highlight the importance of sustained investment throughout childhood. Early childhood is a critical period for preventing disadvantage, but continued support during middle and late childhood remains essential for strengthening educational achievement, promoting good health and supporting upward social mobility.