International review of approaches to tackling child poverty: Croatia

Executive Summary

Since the Croatian War of Independence, the country has met the criteria for joining the European Union (EU), weathered the global financial crisis and grown its economy despite the impact of the Covid-19 pandemic. Moreover, Croatia has significantly reduced child poverty rates from 21.1% in 2014 to 16.1% in 2023, a drop of five percentage points in nine years.^[1] This decrease followed major socio-cultural and economic changes, including enhanced social welfare programmes and increased employment after the end of the Croatian War of Independence, as well as EU-backed measures to alleviate child poverty implemented by 2022. Croatia has been chosen as a case study because of its progress in tackling child poverty despite a backdrop of major recent social, economic and political changes.

Stakeholder interviews with poverty researchers revealed that the reduction in poverty is largely due to high economic growth, low unemployment and a social welfare system that emphasises redistributive measures. Croatia's approaches to poverty reduction and economic development have transitioned over time - shifting from post-war emergency aid in the 1990s to social safety nets and labour market reforms in the 2000s, economic resilience in the 2010s, and EU-driven social inclusion into the 2020s. The key chronological periods and specific policies that this case study focuses on are:

1. Social welfare driven policy in the post-war period (1996 – 2018)

• Guaranteed minimum benefit
• Child support
• Reformed child benefit

2. Labour market reforms to increase women’s workforce participation (2013 – 2022)

• Maternity and paternity leave
• Parental leave

3. Targeted measures following EU accession (2013 – present)

• European Child Guarantee

Towards the end of the 1990s, Croatia’s economic stabilisation - combined with investment in social programmes^[2] - drove a reduction in child poverty, which was then embedded by further market reforms^[3] that improved employment. After 2013, more robust family and child benefits, social welfare programmes and EU-backed initiatives further targeted poverty reduction. Absolute poverty reduction since 2013 has been closely related to positive labour market developments, particularly among those at the bottom of the income distribution. While not all the policies that have made a difference to child poverty were specifically implemented with that goal in mind, overall, the combined impact of these social programmes has been significant.

As of 2014, 71% of Croatia's population benefited from at least one social protection programme: 22% received family benefits such as child allowance or maternity leave. Notably, 96% of the poorest 20% of the population benefited from at least one programme. Croatia’s child benefit policy has also been key in reducing child poverty, with a further downward surge in child poverty levels since 2018 when the upper means-tested threshold was increased.^[4] This was a significant reform as it brought more families under the eligibility threshold – for instance, a four-member household with a net monthly income under €1,255 was now eligible as compared to the ceiling of €897 before the reform.^[5] As of 2023, 16.1% of children in the country are at risk of relative poverty, living in a household with equivalised income that is less than 60% of the country’s median income before housing costs. In comparison, 19.4% of children are living in relative poverty, before housing costs, in Scotland in 2023-24.^[6]

The three key lessons that can be drawn from Croatia’s experience are as follows:

1. Aside from the economic impact of the Covid-19 pandemic, Croatia has experienced notable economic growth over the past decade, accompanied by consistent wage increases. This development has been particularly advantageous for lower-income workers and has encouraged greater female participation in the labour market. While economic growth is inherently important, it is equally essential in a poverty-minimisation context that this growth benefits individuals with lower incomes and promotes gender equality outcomes. Furthermore, Croatia has introduced several reforms to parental leave policies aimed at enhancing gender equality and supporting families. These measures have played a significant role in poverty alleviation by enabling parents, especially women, to sustain their employment while managing child-raising duties. Interviews with stakeholders emphasised the importance of these reforms in driving economic growth and reducing poverty.

2. A basic income guarantee, such as Croatia’s Guaranteed Minimum Benefit (GMB), can be an effective measure to aid poverty reduction. The design and implementation of such policies greatly influence their outcomes. Analysis of the gaps in Croatia’s GMB implementation suggests that considering factors such as relative poverty within the country, inflation, consumer baskets, increase in wages and more are crucial when determining the base benefit amount. It is important that the benefit amount adjusts according to the real cost of living over time to meet its objectives.

3. Directing policies towards those with additional needs is crucial for reducing overall child poverty and addressing poverty among at-risk groups. Social security measures in Croatia specifically support families with additional needs. For instance, child benefit policies include supplements for each additional child. Furthermore, the child allowance and GMB (despite its inadequacies), provide increased financial assistance to address the additional needs of single-parent families.