Recent evaluations show that the general child cash benefit (Kindergeld), which does
not depend on household income, has a small effect in lowering income poverty of
families, relative to its substantial budgetary cost (1.1% of GDP, Bonin et al., 2013).
Families in which the parents’ income is high enough only to cover their own basic needs, but not
those of their children, are eligible to a child benefit supplement (Kinderzuschlag). Its
budgetary cost is small (less than 0.1% of GDP).
It has proven effective in lowering poverty
of families with children and has little impact on labour supply. The income tax allowances
for families with children lower the tax burden, but widen the gap in the tax wedge
between the first and the second earner, with little overall impact on labour supply or
poverty reduction. Higher investment in childcare and early childhood education facilities
as well as full-day schooling by contrast have proven the most efficient in reducing poverty.
Moreover, such investment has a high return in terms of better education outcomes and
reducing the disincentives women face when they consider supplying market labour.
EU Forecast
euf:ba18a:59/nws-01