International analysis of child poverty – ukmod/euromod modelling

5. Discussion

The analysis in this report clarifies a number of key drivers underlying measures of child poverty reported for Scotland, and how these relate to the selected set of comparator countries.

Scottish poverty rates are found to be driven up, relative to comparator countries, by the respective distributions of original incomes. In contrast, the tax and transfer systems maintained by the respective countries tend to act to depress child poverty rates, with the transfer system seeing a greater reduction in child poverty rates for Scotland, relative to the set of comparator countries considered here.

The negative influence of tax and transfer policy on child poverty rates in Scotland, however, appears to have declined considerably between 2011 and 2024 with respect to both Croatia and Slovenia. It is this decline in relative effect of transfer policy that has seen child poverty rates in Croatia and Slovenia fall, relative to Scotland, over the considered sample period.

The emphasis on tax and benefit policy noted above is driven by a decline in the redistributive impact of tax and benefit policy in Scotland, rather than an increase in this impact in comparator countries: in 2011 the difference in child poverty rates for the full population between original and BHC disposable income was 22.6 percentage points, falling to 16.6 percentage points in 2024. This fall reflects austerity reforms implemented in the UK more generally over the sample period, even though these were partly off-set by coincident reforms implemented in Scotland.

The focus on tax and benefits policy raises interesting questions concerning the policy detail that underlies the findings reported here: What features of tax and benefit policy in Scotland help to depress child poverty rates relative to the comparator countries, and what has driven the decline in these effects relative to Croatia and Slovenia between 2011 and 2024? Understanding why this might be the case could provide useful guidance concerning associated policy reforms. These issues warrant further investigation, but remain beyond the scope of the current study.

Differences between Scotland and the comparator countries in relation to both demographic and labour market characteristics are found to underlie associated poverty rates evaluated on original incomes. More specifically, demographic and labour market characteristics are found to make broadly similar contributions as each other to the differences between child poverty rates in Scotland and the comparator countries. Much of the impact associated with demography and labour markets is identified in the form of interaction effects between these two features, which highlights the integrated nature of child poverty and the wider socio-economic context.

The role of labour market differences is found to be particularly pronounced among lone parents and families with three or more children. Basic descriptive statistics reveal that employment engagement among these population subgroups is weak in Scotland, relative to the comparator countries. Understanding what features of the respective labour markets underly such differences may consequently help to indicate useful policy reforms to mitigate child poverty in Scotland.

With respect to the general population, demographic differences are found to exacerbate child poverty measures in Scotland relative to all of the comparator countries considered here. Otherwise, demographic differences are found to have the most consistent set of effects on international differences of child poverty rates for lone parents and (to a somewhat lesser extent) families with three dependent children. That demographic variation can help to explain cross-country differences in child poverty rates within narrowly defined demographic subgroups is a notable finding.

Some features of demography that depress child poverty rates are of less policy concern than others. For example, a population that did not include any children would be free from child poverty, though not very desirable. A detailed examination of the factors underlying the measured influence of demography on international differences in child poverty rates is beyond the scope of the current study. Summary statistics reported in the study suggest a role played by educational attainment, as the Scottish samples are found to include higher proportions of lower educated people than the comparator countries. However, caution should be exercised against reading too much into this aspect of the analysis, due to uncertainty concerning comparability between data sources.

The current study has undertaken a quantitative examination of the key features underlying differences in child poverty evaluated for Scotland and a set of comparator countries, focussing explicitly on contributions made by demographic and labour market characteristics. Such a study provides a transparent, albeit partial view of the factors underlying child poverty. Taken together with the qualitative review that is the companion to this study, it is hoped that sufficient new evidence will be provided to support policy that continues to mitigate child poverty in support of the tackling child poverty delivery plan.