The Generational Conflict Reconsidered

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http://esp.sagepub.com/ Journal of European Social Policy

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DOI: 10.1177/0952872002012001560

2002 12: 5Journal of European Social Policy Gösta Esping-Andersen and Sebastian SarasaThe generational conflict reconsidered

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Introduction

The eclipse of the 20th century appears tocoincide with the waning of the old industrialclass divide. It remains an open questionwhether an alternative class-based stratifica-

tion system is evolving but, in the meantime,both sociologists and economists have begunto identify new cleavage patterns. One whichhas sparked considerable attention is the pos-sibility that chronos will become a battle-ground of conflicting interests (Preston,

The generational conflict reconsidered

Gösta Esping-Andersen* and Sebastian Sarasa,Universitat Pompeu Fabra, Spain

Article

Journal of European Social Policy 0958-9287 (200202)12:1 Copyright © 2002 SAGE Publications, London, Thousand

Oaks and New Delhi, Vol 12 (1): 5–21; 021560

Summary The deteriorating trend in theincomes of families with young children is of increasing concern to both academics andpoliticians. Since the well-being of the elderlyhas improved concomitantly, many see anemerging generational clash. We argue thatthis zero-sum distributional trade-off view is

largely premised on an overly static analysisand prefer, as an alternative, to examine theage-distribution of well-being through the lensof cohort dynamics. The aim of this article isvery policy applied, an attempt to identify awin-win policy model that simultaneouslyensures child and elderly welfare. We arguethat social investments in children now willhave strong and positive secondary effects interms of helping maintain welfare guaranteesfor the elderly in the future. The key lies inminimizing child poverty, and we evaluate

which policy mix may prove most effective forthis end. We conclude that, in most countries,the elimination of poverty in families withchildren would be surprisingly affordable.

Key words families with children, familybenefits, mothers’ employment, poverty,sustaining the welfare of the elderly

Résumé La tendance à une détérioration desrevenus des familles avec de jeunes enfantsconstitue une inquiétude croissante tant dansles milieux académiques que politiques. Dansle même temps le bien-être des personnes âgéess’est amélioré, et beaucoup y voit la possibilitéd’un clash générationnel. Nous arguons que

cette approche d’un échange distributionnel àsomme nulle est largement basée sur une ana-lyse complètement statique. Nous préféronsadopter comme approche alternative la distri-bution du bien être par âge à la lumière desdynamiques par cohorte. L’objectif de cet articleest résolument policy oriented et constitue unetentative d’identifier un modèle politiquegagnant/gagnant qui assure en même temps lebien être des enfants et des personnes âgées.Notre argument principal est que des investisse-ments sociaux en faveur des enfants maintenant

auront des effets secondaires importants et posi-tifs aidant à maintenir les garanties pour lespersonnes âgées dans le futur. L’élément clé estde réduire la pauvreté des enfants et nous éva-luons quel policy-mix peut être le plus efficacepour rencontrer cet objectif. Nous concluonsque dans la plupart des pays l’élimination de lapauvreté des familles avec enfants pourrait êtrede manière étonnante relativement peu chère.

* Author to whom correspondence should be sent: Prof. G. Esping-Andersen, Department of Political andSocial Sciences, Universtat Pompeu Fabra, 08005, Barcelona, Spain. [email: [email protected]]


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1984). The argument is that the welfareclaims of the elderly (ever more numerous andelectorally powerful) will be met at the

expense of youth (ever more the opposite).Echoing this view, some see the emergence of a new ‘chronos politics’ (Hernes, 1987).

The generational-clash scenario is notembraced by all (Mirowsky and Ross, 1999).An early empirical reply to Preston (Palmer etal., 1988) gives only very partial support tothe view, and this support is primarily limitedto the United States (where, indeed, publicsupport for families is unusually residual). InPampel’s (1994) important comparative workan even more sanguine view emerges. He findsthat the capacity of the elderly to yield exces-sive distributional power depends on acountry’s political system. Hence, it is notageing as much as political decision systemsthat drive spending allocations.

This article adheres to the sanguine view,but offers a different argument, namely that theyouth–elderly divide becomes far less zero-sumwhen viewed through the lens of cohort dyna-mics. The well-being of tomorrow’s elderly willdepend very much on the welfare of tomor-

row’s labour force. And since future workersare today’s children, it is not difficult to see thatsocial investment in children and youth mayconstitute positive-sum politics. There is, inaddition, strong evidence in favour of Pampel’sargument that if there is a trade-off , it isprobably more nation-specific than universal.

The notion of a generational clash may bespurious insofar as it rests on a far too staticanalysis. We need to approach the issue interms of cohort-specific dynamics. Adopting astatic, snapshot view of the world, today’s

elderly undoubtedly appear well off. This isperhaps less because their share of the welfarestate cake is unfairly large, and perhaps morebecause they, as a cohort, are the beneficiariesof historical fortune. Likewise, today’s youngfamilies often fare poorly. In part, some coun-tries no doubt underinvest in youth program-mes but, in part, today’s young families carrythe burden of historical misfortune. Easterlin’s(1987) observation that period-cohort effects

conspire interactively is a good point of depar-ture for analysis. If we focus on trends, wecannot disconnect the well-being of the elderly

tomorrow from the well-being of today’s chil-dren.

Virtually all prognoses and simulationmodels show that the problems of demographicdependency and financial sustainability willculminate some 30 years ahead (OECD, 1996;1998; Storesletter, 2000). This implies thatfuture pensioner welfare is doubly conditionalon the life chances of children now: first, theirfuture productivity is an important precondi-tion for financing the coming pension burden;second, the better their lives, the better willalso be their welfare when, one day, they toobecome elderly. From a policy-making per-spective, then, solid investments in childrennow enhance the welfare of future retirees.

This is the basic argument of the article. Yetit does not automatically refute the ‘genera-tional clash’ perspective. For one thing, gener-ational interdependencies may be arguedtheoretically, but they may not necessarily beperceived in political practice. For another,our interdependence scenario is linked to

long-term dynamics. Between now and, say,2030 lie 30 years in which a distributionalcleavage may very well assert itself. Theempirical case for the chronos conflict viewmust therefore be examined more closely.

The chronos conflict scenario

The hypothesis of a looming chronos clash iscertainly not lacking empirical support.Examining national social expenditure alloca-

tions, there is an evident bias in favour of theelderly in some countries. But the variance isconsiderable. If we exclude health expendi-tures (which are difficult to allocate by age),the aged/non-aged spending ratio averages 1.7in Continental Europe (ranging from 3.5 inItaly to 1.2 in Belgium) and 1.2 in theAnglo–Saxon countries (ranging from 0.7 inAustralia to 2.5 in the US). As a group,Scandinavia is unusually youth-friendly with a

6 Esping-Andersen and Sarasa

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homogenous spending ratio around 0.8.1

More tellingly, the aged-bias is growing insome countries – notably in the United States,Italy and Japan; less so in Belgium and France.At the same time, it is falling in Australia,New Zealand, the UK and Scandinavia.

Of course, some of these differences are dueto changing population distributions. But evena very rough correction suggests that theseexplain little. For example, the two extremes(Italy and Denmark) have an almost identicalaged-ratio. Or take the United States, anunusually youthful OECD country, with anaged/youth spending ratio almost 3 times theNordic. Evidently some of the bias comesfrom non-demographic forces. The medianvoter is ageing, and one consequence may bethat governments ‘overspend’ on pensions atthe expense of the young and children. But theelectorate ages everywhere. Pampel (1994)illuminates how the distributional clash variesby national institutional arrangements. Incountries, like those in Scandinavia, with com-prehensive interest organizations, the socialpartners internalize distributive consequencesand, hence, are better at neutralizing the max-

imization strategies of special interests. In con-trast, uncoordinated political economies suchas the US permit special-interest lobbies tohold sway. In some cases interest organiza-tions paralyse the national economy at anyhint of pension reform; in others, pensionadjustments flow from broad social accords.

The same conclusion obtains if we shiftfrom individual countries to a broader welfareregime approach. Regressing the aged-bias of expenditures (the aged/non-aged ratio for themid-1990s) on three ‘regime’ dummies sepa-

rately, the simple bi-variate coefficient is weakand insignificant for the liberal regime (B =–.044; t= –.26; R2 = .004). It is strongly (andsignificantly) negative for the social demo-cratic regime (B = –.407; t = –2.68; R2 = .310).And for Continental Europe, the effect turnspositive (and significant) with (B = .317; t =2.44; R2 = .272). In other words, the aged-bias is especially pronounced in Continental(and especially Southern) European welfare

states. Scandinavian social democracies are, if anything, youth-biased.

Lobbying power or not, part of the rising

pension dominance simply reflects policyresponses from a bygone era when povertyamong the elderly was indeed severe.Historically, most advanced countries intro-duced mandatory retirement without backingthis up with adequate pension guarantees. Inresponse to the ‘poverty crisis’ in the 1960s,almost all countries launched sweeping pen-sions reforms, leading to broader coverage,defined benefit guarantees with pay-as-you-gofinancing and, hence, accelerated pensionspending. Soon after began the era of earlyretirement. If the goal was to eradicatepoverty, the reforms were a success. To illus-trate, US elderly male poverty dropped by afactor of 5 from 1949 to 1980 (Smolensky etal., 1988: Table 3.1). In some nations, povertyin retired households has been virtually eradi-cated (< 5 percent in Canada, the Netherlands,and Sweden). It remains fairly high in the UKand the US (15–20 percent), about half that inFrance, Germany, Italy, and Spain.2 In manycountries, most pension-age households are

homeowners, and the average elderly house-hold in Europe enjoys a disposable incomeequivalent to 80 percent of the national mean(OECD, 1998). Most of Europe’s remainingelderly poor are widows or workers withproblematic careers, who end up dependingmainly on residual assistance pensions.

Those who warn against an impending gen-erational clash can marshal additional facts intheir favour. There is, no doubt, some occa-sional pension ‘overshooting’ (Italy is an oft-cited case). Generous pensions must, in

addition, be gauged against the fact thatretired households typically possess assetsequal to 3–4 times their annual income stream(OECD, 1998). As a result, the elderly oftencommand an income surplus that is, per-versely, recycled in the form of intrafamilialredistribution (Kohli, 1999; Esping-Andersen,2000).

The comparatively modest outlays on youthand families with children in many welfare

The generational conflict reconsidered 7





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states are, similarly, an echo of past policyassumptions. In the postwar decades, egalitar-ian policy for young people centred primarily

on educational expansion in the belief thathuman capital and universal education werethe great levellers of class inequalities.Additionally, spending on families was modestbecause it was assumed that families were self-reliant: marriages were stable, and the malebreadwinner typically enjoyed excellentlabour market prospects. Low employmentamong mothers was offset by husbands’income security and by the general practice of a family wage (or marriage bonus) whichadded roughly 5 or 10 percent to men’s wages(Montanari, 2000). Child allowances andother family transfers mainly addressed theincome problems of very large households (3+children was typical until the 1960s). As fertil-ity declined, so too did many welfare states’support for families (Wennemo, 1994;Gauthier, 1996; Kamerman and Kahn, 1997).The problem is that stagnant (in some coun-tries, eroding) social benefits now coincidewith an accelerating deterioration in younghouseholds’ income position. Nonetheless,

during the 1990s we began to see a policyreversal. Population-size adjusted spending onchild families has increased notably inAustralia and Scandinavia and also, if moremodestly, in Canada and the UK. But thistrend is far from convergent and ‘youth-spending’ continued to decrease in some coun-tries (Germany in particular).

This spending shift coincides with somedecline in population-adjusted transfers to theaged. Yet the relative disposable income of theaged continues to rise in virtually all OECD

countries. If we take a long-term historicalview, the improved economic status of theelderly looks spectacular simply because thepoint of departure was problematic. As the USexample indicates, postwar retirement cohortswere extremely vulnerable due to their life his-tories. Those who retired in the 1950s beganworking before the First World War. Theirpension entitlements – if they were covered atall – were often contribution-defined or

modest flat-rate benefits, and their careersspanned a lifetime of war and economic crisis.But when we move forward to the 1980s and

beyond, every single welfare parameterchanges. The recent retirement cohorts are thetriple beneficiaries of circumstance. Theyspent most of their active life in periods of rapid real-wage growth, full employment, andrising job security with concomitant experi-ence-based salary gains. In great part, theybecame privileged ‘insider’ workers. Theywere also the chief beneficiaries of pensionupgrading during the 1960s, and when wagegrowth began to stagnate in the 1980s theycame to benefit from rising returns to capital(Thompson, 1998; Myles and Pierson, 2001).

The basic point is that the well-being of theelderly is not solely due to generous publicbenefits. Their relative disposable income isequally high in countries with generous andungenerous public pensions (OECD, 1998).Public pensions account for 85–100 percent of total disposable retirement income in coun-tries like Belgium, France and Sweden, butonly 40–50 percent in the Anglo–Saxon coun-tries. So, the relative reliance on public or

private income sources matters little fortoday’s average retirees, but it does matter forequality and poverty. The more dominant arepublic pensions in the income mix, the loweris the aged poverty rate.3 In brief, the agedtoday are generally well-off because of histori-cal circumstance. Indeed, if their well-beingappears immune to worsening economic con-ditions such as high unemployment, stagnantreal wages, or even to slight reductions intransfers, this is not true for younger house-holds.4

Poverty in today’s families is rarely due tolarge numbers of children. The underlyingproblem is that the risk structure has changed,shifting down the life cycle to young adultsand families with children. On the one hand,this is driven by family change: new house-hold forms (especially lone parents) and moreunstable marriages generate heightened risksof child poverty, even when children are few.On the other hand, changes in labour markets






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generate inequalities and potential exclusionthat, in most countries, affect younger house-holds most severely. The school-to-work tran-sition has become much more tormented,unemployment often concentrates among theyoung (and in couples), and wage decline

affects younger, low-skilled, and inexperi-enced workers the most. The share of childrenwho live in a no-work household hasincreased by 32 percent in the EU since themid-1980s (Micklewright and Stewart, 2000:Table A4). Hence, the pervasive rise innational income inequalities correlates posi-tively with worsening conditions amongyounger households with children.5

Generations and welfare state

redistributionInternational differences in generational well-being are clearly the product of historicallyspecific economic circumstances (some cohortsare historically lucky, others less so) but alsoof nation-specific policy choices. Some welfarestates are evidently better equipped to smoothperiod–cohort interaction effects. The Scandi-navian youth-bias in spending is clearly not

bought at the expense of pensioners, whosepoverty rates are internationally very low andwhose average disposable income parallels theOECD norm of roughly 80 percent of themedian (OECD, 1998). Its youth-friendlyprofile includes generous and universal child

allowances but, arguably, the real thrustcomes from huge investments in family serv-ices and active labour market policies whichsimultaneously ensure that virtually allmothers work and that costly early retirementspending is comparatively lower. The policymix appears successful if measured against theinternationally very low and falling childpoverty rates (the average is 2.6 percent, seeTable 1). The combination of basically univer-sal, well-paid female employment (upheld byday-care provision) with generous subsidies to

households with children surely accounts forthe outcome.This mix obtains nowhere else. In the

Anglo–Saxon nations, family benefits –increasingly work-conditional – are income-tested and serve in great part to offset lowwages. The Australian (and Canadian) pro-grammes are more generous and comprehen-sive and this may explain why child povertyhas declined far more than in the UK and the



Table 1 Poverty rates and trends in families with children, 1980–95

Poverty Extreme poverty

Rate Trend Rate Trend mid-90s 1980–90s mid-90s 1980–90s

Denmark (1992) 2.9 –0.2 1.3 –0.1Finland 2.1 +0.1 0.8 –0.1Norway 3.4 –0.7 1.6 +0.2Sweden 2.2 –1.6 0.9 +0.4France 7.1 –0.9 1.3 –1.9Germany 9.4 +7.1 4.0 +3.3Italy 17.2 +7.4 9.4 +6.0Netherlands 8.1 +5.0 4.7 +4.1Spain (1990) 9.5 –0.9 3.5 –0.3UK 15.5 +7.0 4.7 +2.7US 19.3 +2.5 8.8 +1.1

Notes: Estimates refer to households with head aged 25–55 only. Poverty = 50 (extreme poverty = 33)percent of median income of all households with children. Estimates based on the new OECD equiva-lence scale (ε = .5).Source: LIS.




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US. The poverty trap inherent in British (anduntil recently US) aid to lone mothers addi-

tionally promotes sustained child poverty inlone-parent households: in the UK, 16 percentin 1995, an increase of 8 percentage pointssince 1980; in the US, 19 percent, an increaseof 2.5 percentage points (LIS data estimates).Since day care is basically private, the implicit‘tax’ on low-income mothers’ work may bevery high. The worrisome increase in childpoverty in some Continental European coun-tries – with an often alarming rise in ‘extremepoverty’ – must, likewise, be linked to thecombination of parental labour supply and

social policy characteristics. With a few excep-tions, child allowances are ungenerous andpublic child-care subsidies virtually non-existent. Worse, social insurance systems arepoorly equipped to offer more than residualassistance benefits to needy households. Andnowhere is the youth concentration of unem-ployment as severe as in Continental andSouthern Europe. Families remain far morestable, but new market inequalities nonetheless

generate poverty in families with children, andemployment rates among mothers remain

quite low. An overview of poverty rates andtrends is presented in Table 1.6

Working-age household poverty is princi-pally a question of unemployment, laboursupply, and earnings power. All three havecontributed to the observable increase inincome inequalities over the past decades.And, clearly, this affects the resources of fami-lies with children. As we noted earlier, childpoverty rises 1.1 percentage points for every 1point increase in the Gini coefficient of income distribution. This suggests that (with

some exceptions) welfare states do notmanage to fully stem the tide of inequality. Asshown in Table 2, Denmark and Australia areexceptional in that significant increases inearnings inequality do not result in more finalincome inequality. In Denmark, the mainthrust comes from transfers; in Australia,from the ‘negative income tax’ policy.

To summarize, families with children facedeteriorating economic conditions while



Table 2 Working-age population (1985–95). Trends in inequality of disposable income (Gini), and therelative impact of trends in earnings and government redistribution

∆due to% ∆Gini earnings ∆due to ∆due to

(disposable income) inequality transfersa taxationb

Australia –1.6 +4.6 –0.3 –7.6Canada +0.1 +1.0 –0.3 –5.0UK +3.1 –4.4 +0.4 +1.4USA +0.6 +3.6 +0.3 –0.7Denmark –0.8 +2.9 –1.4 –0.1Finland +3.0 –4.2 –1.3 +0.1Norway +2.1 +4.2 –0.3 +3.7Sweden +2.3 +3.6 –0.4 –5.9France +1.0 +3.0 –0.9 –2.4Germany +2.4 –2.1 –1.7 +1.3

Italy +3.7 –2.3 +0.7 –2.1Netherlands +2.1 +4.2 –0.3 +3.7

Notes:a This includes all types of public cash transfer benefits.b This includes also the value of deductions for tax purposes and tax credits.Income from capital and self-employment excluded. (Equivalence scale = 0.5.)The row data do not sum up due to the omission of incomes from self-employment and capital.Source: OECD data from Oxley et al. (1999).




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pensioners continue to do well. But there isvery little evidence that the twain are interre-lated; that families with children are poorbecause the welfare state devotes too much tothe elderly. The fallacy behind the generationalclash argument is, in part, due to the use of unwarranted cross-national means. Somenations may provide overly generous pensions,but most do not. And, some of the very samecountries which guarantee high levels of pen-sioner income security (like Scandinavia) alsogive strong distributional priority to familieswith children. Likewise, other countries, suchas the UK and the US, manifest high povertyrates among the aged and children alike.Additionally, a sometimes huge burden of pension expenditure goes to early retirement(30 percent of the total in Italy). The risingexpenditure allocations in favour of the ‘aged’may therefore simply mirror problematiclabour reduction policies. It is symptomaticthat early retirement is modest in Scandinaviaand extraordinarily high in Italy. Finally, thecross-national correlation between aged andyouth poverty trends (.486) is positive, imply-ing that adverse (or favourable) poverty trends

among children are shared by the aged.

The case for abolishing child poverty

From any angle, the issue of rising childpoverty is an acute problem. Since the 1980sit has risen in 6 out of the 10 countries weexamine, most sharply in the UK, Germany,and in Italy (by about 7 percentage points). Inpart, this is undoubtedly due to unemploy-ment and declining parental earnings; in part

due to the especially precarious position of (growing) numbers of one-parent families. Inseveral nations it is also due simply to erodingsocial benefits for families with children (hereGermany and Italy stand out). And lone-mother poverty is everywhere substantiallyhigher: quite modest in Scandinavia (5–7percent) and extremely high in Europeancountries like Italy and the UK (32 percent)and Spain (23 percent); in the United States

(with 45 percent), lone-parent poverty appearsalmost inevitable (estimated from mid-1990swave of LIS data).

The demographic and labour marketinduced risks of poverty among families withchildren can be offset by increased householdlabour supply (mainly by mothers). Thus,with two incomes the risk of child povertydeclines by a factor of 2 or 3 in comparisonwith one-earner families, and lone-motherpoverty declines to half if the mother works(Esping-Andersen, 1999). But for motherswith small children, labour supply is generallyconditional upon affordable day care. Hencewelfare state servicing may be crucial.

Child poverty, like all poverty, means hard-ship. But unlike aged poverty, it has strong,long-term negative consequences for bothindividuals’ life chances and for society atlarge. We know from American research thatchildhood poverty is strongly associated withless schooling (on average, 2 years less), crimi-nal behaviour, various psychological patholo-gies, and with lower earnings in adulthood(on average, 30 percent less than children whowere not poor). Children of poor families are

also much more likely to become poor them-selves and, thus, to reproduce the poverty syn-drome across generations (Haveman andWolfe, 1994; 1995; Duncan et al., 1998).European research (Gregg and Machin, 2001)comes to similar, if somewhat less dramatic,conclusions.7

The collective problem of childhoodpoverty is its negative externalities. If it trans-lates into less educational attainment and cog-nitive skills, the second-order effect is a massof low-productivity and low-paid workers,

highly vulnerable to unemployment and lowpay, who will yield less revenue to tax authori-ties. This effect is bound to intensify in knowl-edge-intensive economies.

Child poverty (and, generally, incomeinequalities) is, in fact, strongly correlatedwith cognitive inequalities (Gregg and Machin,2001). Regression estimates suggest that a 10percent rise in child poverty may imply an 8.5percent increase in the share of adults who fall






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into the lowest (basically dysfunctional) levelof cognitive abilities.8 In turn, low cognitiveabilities, such as low educational attainment,

are powerful predictors of unemployment.With very little cross-national variation, theunemployment risk doubles among low-cogni-tive adults (OECD, 2000).

It follows that investing in the minimizationof child poverty now will yield better earningsprospects, improved productivity, superiorabilities for lifelong learning and retraining inthe future. This will diminish the risks of old-age poverty 30 or 40 years hence (and possi-bly also the need for early retirement), andthis will strengthen the financial sustainabilityof pension systems between now and2030–40. In other words, it is possible that apolicy of abolishing child poverty may consti-tute a productive investment that is not onlyefficiency optimal in Paretian, but also inRawlsian terms.

How to minimize child poverty

Income alone is a narrow measure of depriva-

tion. Children may do very well even if theygrow up in a low-income household (BillClinton and Rockefeller grew up poor), and if the family can compensate with strong cul-tural and social capital, the potential damagemay prove nil. Yet it is the only reliable com-parative statistic available, and its predictivepower has been very well proven.

Poverty in families with children may bebrief and sporadic, or it may be lasting.9 It mayhit when children are young (and parents’earning power is weak), or later (due to

divorce, unemployment, or to wage decline).Research is still too undeveloped to give usclear answers as to when and how childhoodpoverty is most damaging, but there is strongevidence that deprivation in early childhood isthe most problematic. The context in whichincome poverty occurs may also be influential.It is by now well established that lone-motherpoverty may have substantially worse conse-quences than poverty within stable two-parent

families (Duncan et al., 1998). However, chil-dren’s well-being improves dramatically when(and if) lone mothers remarry or cohabit – in

either case, the transition almost doubleshousehold income (Morrison and Ritualo,2000). The important point here is that weneed to make sharp distinctions by householdtype.

Undoubtedly, the growth of women’semployment is mainly driven by higher educa-tional attainment, better earnings prospects,and by desires for economic independence.But it is surely also motivated by (young)males’ eroding labour market fortunes andtheir weakened ability to guarantee adequateliving standards. Today, as always, employ-ment income remains the single most powerfulbulwark against poverty. But at the lower endof the earnings scale and especially whenhouseholds are excluded from employment,transfer dependency is intensifying. This wesee among the growing number of lone-parentand ‘no-work’ households. Yet transferdependency can and is being effectivelyreduced in some countries by the provision of child-care services. Unaffordable care can be a

very powerful poverty trap for low-incomefamilies. If, as is typical across much of Continental Europe (and North America), thecost of full-time, quality care per child exceedsa third of mothers’ expected earnings, theresulting real tax on her employment becomesprohibitive (Meyers and Gornick, 2001). Theresulting outcome may be perverse: high-income women will be able to afford care,low-income women will not, notwithstandingthat the urgency of affordable care is greateramong the latter. Marital homogamy (mar-

riage between a man and woman of similarsocial status and background) obviously rein-forces such inequalities.

Let us, for analytical purposes, boil theissue down to two basic factors: the earningscapacity of households with children (which,in turn, may be directly related to access toaffordable day care); and the level of socialbenefits to which they are entitled (which mayhelp defray the cost of children). In order to






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isolate the relative salience of either, we analyse

two-parent (in Table 3) and lone-parent (inTable 4) households separately. Tables 3 and 4both present logistic regression estimates of the risk of poverty, conditional upon parentalemployment status (a simple dummy of employed or not) and the size of public incometransfers, controlling for number of children.Since we are concerned with the poverty riskin terms of final disposable income, we preferto conduct two sets of estimations: one for allfamilies with children, and one specifically forsuch families who are poor before transfers. In

the first, we identify the relative importance of fathers’ and mothers’ employment, controllingfor social transfers and number of children. Itstands to reason that the poverty-reductioneffect of social transfers will be weaker inhouseholds where parents work, basicallybecause they are unlikely to be poor to beginwith. The second set of estimations, limited topre-transfer poor households (with presum-ably very low work incomes), is more directly

aimed at identifying the ability of social trans-

fers to combat poverty.10

Simply put, the toppart of the table tests the ‘parental employ-ment’ effect; the lower part, the ‘social trans-fer’ effect.

We follow the now typical regime-compari-son approach (Esping-Andersen, 1999). Toalso capture intra-regime variation, we matchtwo countries from each of 4 distinct welfareregimes: the liberal Anglo–Saxon (UK and theUS), with its tradition of targeted assistance;the social democratic (Denmark and Sweden),with its comprehensive, universalistic and

‘women-friendly’ approach; the traditionalcore ‘conservative’ Continental model (Franceand Germany) in which social benefits arestrongly tied to regular employment; and thefar more rudimentary and residual variant inSouthern Europe (Italy and Spain), wherefamily policy is unusually undeveloped.

The results are partly predictable, partlysurprising. As one would anticipate, the num-ber of children is positively related to poverty



Table 3 Logistic regressions of poverty in families with children. Two-parent households only(mid-1990s)

Denmark Sweden USA UK France Germany Italy Spain1992 1995 1997 1995 1994 1994 1995 1990

All families with childrenNumber of children 2.08c 1.46b 1.32c 1.19 0.96 1.48c 1.74c 1.77c

Father no work 2.25c 4.24c 1.34c 8.84c 8.27c 12.01c 9.09c 6.16c

Mother no work 2.96c 20.28c 3.08c 2.13c 4.05c 3.03c 5.51c 3.02c

Log-transfers 0.72c 0.35c 1.68c 0.83c 0.93b 0.98 0.90c 1.00N = 2,653 3,975 13,802 1,801 3,617 1,811 2,461 8,892Chi2 36.81 145.26 3,168.72 174.69 216.11 139.67 391.68 658.20

Pre-transfer poor onlyNumber of children 1.93b 1.04 1.07 0.99 0.86 1.05 1.73a 1.14Father no work 2.36 2.04 1.54c 21.96c 6.42c 4.32c 5.89c 4.49c

Mother no work 3.01 6.29c

1.94c

1.41 1.19 1.28 4.02 1.82b

Log-transfers 0.07c 0.05c 0.42c 0.07c 0.18c 0.23c 0.05c 0.12c

N = 463 904 2,780 384 701 256 465 1,382Chi2 191.72 251.13 289.89 159.75 202.89 68.59 290.92 876.50

Notes: Dependent variable : ‘poor’ (less than 50% median equivalent disposable income). All missingvalues and also households with negative final disposable income have been eliminated. Note also thatdeclared zero transfer income has been altered to 1 (e.g. pta1, or $1) so as to permit log transforma-tions of the transfer income amounts. For measurement details, see Note 2.a p = < 0.1; b p = < 0.05; c p = < 0.001Source: LIS databases.




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in countries where the family benefit packageis ungenerous (countries which rank below themean in generosity using the Ditch et al. (1998)measure). It might seem more surprising thatthe number of children matters much lessamong pre-transfer poor families. Yet in thiscase, income support – whether targeted or

universal – is usually more generous and morein tune with the size of the household in mostcountries.11

Furthermore, as a large feminist literatureshows, there are important national differ-ences in the degree of male-breadwinnerdependency (O’Connor, 1996). This comesout in a comparison of the odds-ratios forfathers’ and mothers’ employment effect onpoverty. If we begin with the ‘all families withchildren’ estimations, the male-breadwinnerbias is noticeable in France, Germany, Italy,

Spain and the UK, while it is basically theopposite in Denmark, Sweden and the UnitedStates. A singularly spectacular case isSweden, where the odds of poverty increaseby a factor of 20 if mothers do not work. But,more generally, there is no country in whichmother’s employment would not reduce thepoverty risk substantially. When we limit ourfocus to households that would have beenpoor without transfers, the relative importance

of parental employment remains – the onemajor exception being that mothers’ employ-ment status becomes insignificant in countrieslike France, Germany and Italy.12 In thisrespect, the confrontation between Sweden onthe one hand, and Continental Europe on theother hand, is quite telling. Sweden secures

minimal child poverty by a combined strategyof generous transfers and support to workingmothers. In Continental Europe (and the UK)families depend far more on the conventionalmale breadwinner.

Regardless, the principal interest of the pre-transfer poor families analyses is that theyenable us to gauge better the effectiveness of the transfer system. Concentrating on pre-poor families means examining householdswhere work income, to begin with, is modest.Scanning the odds-ratios for transfers within

the ‘pre-poor’ subsample, it is evident that thefamily benefit package is quite effective in justabout all countries. In some, like Denmark,Italy, Sweden and the UK, it is very effectiveindeed (odds-ratios lower than 0.1, implyingthat the odds of poverty are reduced by afactor of 9+). It is somewhat less effective inFrance, Germany and Spain and, as is widelyknown, quite ineffective in the United States(an odds-ratio of 0.42).13



Table 4 Logistic regressions of poverty in families with children. Lone-parent households only (mid-1990s)

Denmark Sweden USA UK France Germany Italy Spain1992 1995 1997 1995 1994 1994 1995 1990

All lone-parent familiesNumber of children 1.30 1.41 1.53c 1.48b 1.08 1.57 2.37b 1.36a

Parent no work 7.80c 117.56c 4.58c 6.64c 7.55c 2.33a 4.56c 3.32c

Log-transfers 0.60b 0.09c 1.36c 0.63c 0.96 0.94 0.95 0.96N = 541 498 3,982 470 422 180 150 471Chi2 28.76 72.11 1,131.45 63.17 62.63 9.11 22.03 23.66

Only pre-transfer/tax poor familiesNumber of children 1.00 1.02 1.43c 1.29 1.19 1.05 0.48 0.70Parent no work 18.81c 23.85c 4.76c 24.28c 13.96c 1.09 2.86 4.23b

Log-transfers 0.03c 0.02c 0.37c 0.01c 0.07c 0.29c 0.09b 0.15c

N = 289 267 2,307 371 219 90 72 214Chi2 77.12 93.52 301.07 165.79 77.27 21.50 42.91 93.67

Notes and sources: see Table 3.




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For obvious reasons the combination of social transfers and work income functionsvery differently in one-parent families. Since

the vast majority consist of lone mothers,transfer dependency will generally be stronger,and the ability to work in the first place isconditional upon access to day care, schoolhours and, often, on the availability of part-time jobs. In Table 4 we present analogouslogistic regression analyses for lone-parenthouseholds.

As we now turn to lone parents (i.e. mainlylone mothers), we must first note two circum-stances which influence interpretation. One,the sample size is smaller, especially for Italyand Germany. This augments statistical uncer-tainty. Two, the confrontation of ‘all lone-parent families’ with ‘pre-transfer/tax poorfamilies’ is influenced by the fact that theshare of all who are poor is quite high(roughly half in most countries, two-thirds inthe UK) to begin with.

In any case, the results from the one-parentanalyses are by and large in line with thosefrom Table 3. In some countries – Italy, theUK and the US – the number of children

noticeably increases poverty risks and inothers (like Scandinavia), not at all. Parentalwork is evidently also crucial, much more sowhere mothers’ employment is the norm.Among the ‘pre-poor’ households one notesthe absence of a significant effect of employ-ment in Germany and Italy.

For lone-parent families, the poverty reduc-tion effect of social transfers is generallygreater than for two-parent families (and,again, somewhat weaker in the case of ‘all’families). Furthermore, the US and Germany

continue to stand out in terms of the interna-tionally weaker ability of the family transferpackage to combat poverty.14

The overall lesson that emerges is quiteclear, namely that the most effective ways toreduce child poverty combine adequate incomesupport with, especially, mothers’ employ-ment. Where the two go together, as is espe-cially the case in Scandinavia, child povertyalmost evaporates; where neither obtains (as

in Italy and, to a degree, Germany), it remainshigh. On the one hand, the main culprit maybe ungenerous social benefits (as in the US,

Italy and Spain) and, on the other hand, theculprit may be obstacles to mothers working(as in Germany).

The costs of eradicating child poverty

A policy paradox of our times is that the asso-ciated costs of child poverty can be very high,both to individuals and to society, and yet thecosts of eliminating the problem turn out tobe very modest indeed.

As a thought-experiment, let us for themoment abstract from fathers’ contribution tothe welfare of families with children. Thismakes sense since it tends to be rather fixed:fathers are usually the ones working (or col-lecting unemployment or pension benefits) intwo-parent households. They are usually absentin one-parent units. In contrast, mothers’employment and the generosity of social trans-fers are far more variable, and are theoreticallymore responsive to policy. Which policy (or

policy combination) might then most effec-tively and cheaply ensure zero child poverty inany country – regardless of the number of children?

Continuing our thought-experiment, if wehold all other factors constant, we mightinterpret the results in Table 3 as follows:child poverty would decline to half in the UK(and to about a third in the US, Germany andSpain) if all mothers were employed.15

Universalizing mothers’ employment wouldnot fully eradicate poverty, but it would result

in a substantial drop (to 3–4 percent inGermany and Spain, and to 7–8 percent in theUK and the US). To be sure, the mother-employment strategy would inevitably requirealternative public expenditure, such as subsi-dized child care and, arguably, a ‘women-friendly’ welfare package of paid maternityand parental leave. A second policy strategywould be to focus on family transfers, raisingthem to the rate necessary to bring families






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above the poverty line. A third approach, of course, would be to include both strategies.

If we were to rely entirely on public transfersto attain a zero-poverty rate (given existingparental employment patterns), the cost calcu-lus would be a simple arithmetic function of[(no. poor households × poverty gap)/GDP].

The cost of bringing all families with childrenabove the existing 50 percent of equivalentmedian income would, in most countries, becheap.16 Since Nordic poverty rates arealready close to zero, obviously the additionalcost would be minute. At the other extreme,high poverty rates combined with largepoverty gaps (as in the US) require more sub-stantial spending requirements (see Table 5).

Returning to the ‘mothers-employment’strategy, this would also require additionalpublic expenditure, mainly in the form of

ensuring affordable day care. Here we need toestablish some reasonable benchmark of affordability. An obvious choice would beDanish standards, considering that virtuallyall Danish mothers with small children(including lone mothers) are employed, andgiven that Denmark boasts the world’s mostcomprehensive day-care coverage. The currentDanish parental copayment norm is 30percent of total cost per child, but lone

parents and assistance recipients are exemptfrom payment (Meyers and Gornick, 2001:Table 5). With this benchmark, what wouldbe the comparable public outlay elsewhere?Across Europe, private day-care costs appearsurprisingly similar. For licensed urban day-care centres (ages 0–3), the annual, full-time

cost per child is roughly L.9–10m in Italy,pta460,000 in Spain, and £4,000 in the UK.17

This would, with little variation, eat up aboutone-third of a mother’s expected net earningsin all three countries (assuming an averagewage income). Child care is, in other words, ahuge implicit tax penalty on (and, hence, neg-ative incentive for) average women’s employ-ment. To reach the Danish cost-benchmark,the Italian government would need to furnishsubsidies equivalent to L.6–7m annually perchild, the British equivalent to £2,700, and

the Spanish roughly pta310,000. A roughnational accounts calculation, based onSpanish data, suggests an additional treasuryoutlay of pta3.5–4b, or a little less than 1percent of GDP per year, assuming 2 childrenon average per mother. For other countrieswhich like Spain rely almost exclusively onprivate care provision, the added treasury costis likely to be rather similar.

The ‘servicing strategy’ in favour of maternal



Table 5 The cost of eliminating child povert (national accounting estimates, 1990s)a

Cost baseAdditional spending required to reach zero poverty

Number of poor families Poverty gap Extra spending needed with children (000s) (in local currency) (% of GDP)

Denmark (1992) 19 31,554 0.07Sweden (1995) 25 33,108 0.05France (1994) 315 9,268 0.04Italy (1995) 1,033 3,871b 0.23Spain (1990) 531 125,153 0.13UK (1995) 1,210 1,256 0.22US (1997) 6,665 3,613 0.30

Notes:a Estimates are based on the objective of bringing poor families with children above 50% of the

median-adjusted disposable income line. We ignore the fact that doing this would alter the overall dis-tribution and, thus, also the median.b Thousand lire.Source: LIS databases and OECD National Accounts.




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employment will no doubt prove more costlythan the ‘transfer strategy’. Leaving aside thecomplexities of a combined dual strategy, the

two policies also represent two distinctphilosophies with distinct secondary effects.Our transfer strategy is clearly targeted exclu-sively to households with less than 50 percentof median disposable income. Such targetingcould in principle be premised on a negativeincome tax method or, as in Scandinavia, onuniversal and equal family benefits. Our verymodest additional transfer-cost estimateswould obviously rise considerably if a univer-sal child allowance scheme were adopted: inItaly, the additional expenditures for a univer-sal plan would amount to 2.4 percent of GDP,and in Spain to 1.4 percent. If government isconcerned with re-distribution in favour of theneediest households, family benefits might betaxable.

The servicing strategy, in contrast, is univer-salistic, providing similar and equal benefits torich and poor alike. Again, government mightprefer to allocate child-care subsidies on a tar-geted basis, and this would certainly lowerpublic outlays.18 Besides the standard reper-

toire of externalities and moral hazards asso-ciated with targeting, there is actually a strong‘actuarial’ case to be made in favour of uni-versal day-care policy, namely that workingmothers will quite likely reimburse the subsidyvia higher tax payments throughout theirworking life. If day care minimizes women’semployment interruptions, their cumulativelifetime earnings increase substantially, imply-ing augmented future tax revenue.19

Yet actuarial justifications for a universalchild-care policy are hardly necessary for

those EU member countries that fall far shortof the new Lisbon guideline of a 60 percentfemale employment rate by 2010. In the caseof Italy and Spain this means a 23–5 percent-age point growth over the next 10 years.Regression simulation suggests that each 10percentage point increase in day-care provi-sion raises mothers’ employment rate byroughly 5 percentage points (controlling forfamily transfers and fertility) (Esping-Andersen,

1999). Hence, and all else being equal, Italyand Spain might reach the 60 percent goal byexpanding day-care coverage to 43 percent

(compared to their current coverage rate of 3–5 percent). When we consider that Danishday-care coverage is 57 percent, this mayappear possible. But considering that it tookDenmark 30 years to reach this level, coun-tries like Italy and Spain would need toproduce annual growth rates three times ashigh as did Denmark.

Conclusions

We have deliberately pitched the analysis interms of applied policy relevance. We startfrom one indisputable stylized fact, namelythe precarious economic situation of contem-porary families with children in many coun-tries. Since the worsening welfare of childrenseems to coincide with steady improvementsamong the elderly, and given perceived budg-etary limits and little room for additional tax-ation, it is tempting to see the problem interms of an impending zero-sum distributive

clash between young and old.This is a false trade-off if governmentalefforts to minimize child poverty constitute apositive-sum, or ‘win-win’, policy that benefitsthe aged too. There are two key argumentsbehind this view. First, within a dynamic per-spective, the welfare of today’s children willdictate their life chances as adults and, furtherahead, the resources they command when theyreach retirement age. The long-term sustain-ability of pensions can be better secured byraising the productivity and labour supply of

the working-age population. All in all, socialexpenditures that alleviate child poverty todayarguably constitute a productive investment inour future. Second, the additional expendi-tures required may prove surprisingly modest.Targeted income maintenance to eliminatechild poverty would everywhere be verycheap. While the universalistic alternative isfar more costly, the value of child allowanceswill also help defray part of the cost of child






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care. Likewise, universal day-care subsidieswould be quite costly but the additional spend-ing requirement will decline when existing tax

deduction schemes are (logically) abolished,and a large part of the necessary outlays willbe recovered dynamically through the addedtax payments that lifetime female employmentengenders.

A purely transfer-based strategy – while thecheapest – may not be the most efficientoption. Our analyses confirm how importantis mothers’ ability to work, particularly inlone-mother households. In fact, it is wellestablished that the recent rise in children’spoverty is closely linked to the growth of ‘no-work’ households. In countries with lowfemale employment, the odds of child povertyfall by a factor of 3–5 when mothers work. If,as we have seen, the poverty gap in mostcountries is quite small it is likely that the‘mothers’-employment’ strategy will prove amore effective one against poverty because,for most families, mothers’ additional workincome, even via part-time employment,would easily close the poverty gap.

Recent academic work highlights the huge

variability in nations’ family policy (Gornicket al., 1997; Ditch et al., 1998; Bradshaw, 1999;2000). The renewed interest in family welfareis, perhaps, first and foremost stimulated bythe apparently worsening conditions that fam-ilies face. But we believe there is, additionally,a more generic ongoing change occurring,namely that the family is no longer, as it wasonce, prepared to fully internalize the full costof children. As long as the one-earner familywas the norm, the cost was a simple matter of the additional consumption outlays associated

with yet another member. As women abandonhousewifery, the calculus must also include theopportunity cost of having children in the firstplace. And, if males’ earning power is declin-ing, then clearly the importance of women’searnings increases for household living stan-dards. In brief, the real challenge to 21st-century family policy lies in the changingparameters which define the social and individ-ual benefits and costs of children. And it is

very possible that the way we distribute thecosts of children today will affect our ability toshoulder the financial costs of ageing tomorrow.

Notes

1 Calculated from OECD’s social expendituredatabase. The main items in ‘aged’ spending areold age and widows’ pensions and services tothe elderly. ‘Youth’ spending includes familytransfers and services, unemployment, workaccident and sickness benefits, active labourmarket programme spending, and maternity-parental leave benefits as the main items.

2 Based on LIS-data estimates for the mid-1990swaves (except for Spain, which refers to 1990).The poverty measure used here (and through-out the article) is less than 50% of equivalentmedian income, using the new OECD equiva-lence scale of ε = 0.5.

3 The bi-variate correlation between the relativesize of private pension incomes and retiredhousehold poverty rates is r = .595 (based onLIS data, n = 12. Sweden was excluded).

4 In fact, the population Gini coefficient has risenin most OECD countries and so has the relativedisposable income of aged households.Mirowsky and Ross’s (1999) US study showsthat the odds-ratio of economic hardship is 4times higher in households under 40 years of age than in retired households.

5 The bi-variate correlation between ∆Gini and∆child poverty (1985–95) is + .691 for 15OECD countries. In OLS regressions, every onepoint increase in Gini raises child poverty by1.1 points (regression estimates based onOECD data from Oxley et al., 1999).

6 In Spain, however, child poverty has remainedbasically stable at 10–12% between 1980 and1990. Note that our estimates (from LIS data)refer only to households with head aged 25–55.

7 American data show that children (aged 16–24)from the poorest quintile are 3 times as likely todrop out of highschool (Cornia and Danziger,1997: 201). Buchel et al.’s (2001) data forGermany suggest that children from the bottomtwo quintiles (i.e. poor families) are half aslikely to go to Gymnasium as the mean. ForBritain, Gregg and Machin (2001) find thatpoor economic conditions in childhood are 5%more likely to lead to unemployment or toprovoke problems with the police (if men) and9% more (if women). Also in their study thenegative impact of childhood poverty onschooling is the key mechanism.

8 OECD’s literacy studies distinguish 5 cognitivelevels. The lowest (1) must be considered inher-






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ently dysfunctional, reflecting a level so poorthat people are inherently untrainable and ableto perform only the most routine unskilled

work. T-statistic in estimation = 4.38, and R2

=.635 (n = 12). A similar equation predicting lowcognitive abilities with overall inequality (Ginicoefficient for the working-age population)yields even stronger elasticities: for each Gini-point increase, the percentage in cognitive level1 increases by 1.3 points (T = 5.81, and R2 =.772). The regression estimates are based onOECD data from OECD (2000).

9 The duration of child poverty is clearly detri-mental to the dynamics of welfare. From therather limited studies available on comparativepoverty dynamics, there are pretty clear indica-tions that persistence is positively related tooverall poverty levels. The likelihood of remain-

ing poor in 3 out of 3 years (and 5 out of 5years) is substantially higher in the US than inEurope (Duncan et al., 1997; 1998; Bradbury etal., 1999). Correspondingly, the likelihood of exiting poverty is lower in any given year in theUS than in Europe.

10 Here, as elsewhere, we measure poverty as 50%of adjusted median income (using the newOECD equivalence scale of .5). Note that wealso adjust social transfer benefits in the samemanner. The social transfers are logarithmicallytransformed.

11 Bradshaw’s (2000) data show that even in Italy(one of Europe’s least ‘child-friendly’ transfer

systems) social assistance benefits to large fami-lies with children assume a standard that iscomparable to France or the UK

12 And in Denmark, both fathers’ and mothers’work becomes insignificant, suggesting thathere social transfers are overwhelmingly effec-tive in diminishing poverty. Ideally, the best testof the parental work-effect on lifting poor fami-lies out of poverty would be based on paneldata. Unfortunately, the LIS database does notpermit transition analyses.

13 The dramatic change in the US odds-ratio fortransfers (1.68 for all families and 0.42 for the‘pre-poor’) testifies to the highly targeted natureof US family policy. Three cases would appear

anomalous to many poverty experts. Italy iswell known for its comparatively very weakfamily benefit system, so it may appear oddthat, nonetheless, transfers are so effective. Yet,as noted earlier, Italian social assistance to largefamilies with children approaches NorthernEuropean standards. Also, it is very likely thatthe transfer-effect includes alternative benefitcategories (in particular benefits from CassaIntegrazione, a type of unemployment support,and pension transfers, which often go to

working-age adults). In both cases, benefits tendto be very generous. The relatively modest per-formance of the French transfer system may

also come as a surprise, but here one must con-sider that child allowances are not granted tothe first child. Since international post-redistri-bution poverty statistics routinely place the UKat the high end, it may come as a surprise thatthe effect of transfers is so strong. But here wemust note the concomitant fact that this is inthe context of father’s employment (with anodds-ratio of almost 22!).

14 Indeed, in the US transfers are significantly andpositively related to poverty (in the ‘all’ familiescase). Here, possibly, the data are influenced byselection bias, i.e. access to benefits is condi-tional on being poor.

15 To exemplify, the UK poverty rate would drop

from 15.5% to about 8% and the Germanwould drop from 9% to about 3%. We wish tostress that this is a thought-experiment whichignores ‘all else’ and which may, very likely, besubject to selection bias (the roughly 30% of Spanish and 60% of British mothers who dowork are undoubtedly very different from thosewho do not).

16 Of course, by doing so we will have altered thewhole distribution, including the median usedfor our calculations.

17 Costs based on telephone interviews with day-care centres in one or two larger cities in eachcountry. Women’s expected earnings are calcu-

lated from OECD (1999).18 Although in this case administrative costs arehigh, fraud possibly widespread and, worse of all, it may create poverty traps. A targeted serv-icing strategy also runs the risk of reinforcingclass dualisms among families. One very strongargument in favour of universal day-caresystems is that they help neutralize unequalsocial capital among children.

19 An attempt to cash out this effect for Denmarksuggests that the treasury obtains a (small) netrevenue gain in the long run (Esping-Andersen,2000).

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Documents

The Generational Conflict Reconsidered