The two-child benefit cap has not increased employment, despite that being its stated aim, says a new study.
There is no evidence that the two-child cap on child benefit increases employment, according to a new study.
The LSE study, Making work pay? The labour market effects of capping child benefits in larger families, finds that the labour market activity among larger families seems to be particularly ‘sticky’ in response to reductions in benefits income. It says parents in larger families tend to have strong preferences to care for their own children, particularly when their children are young. In addition, it says that when parents in larger families do want to work, they face significant barriers to entering the labour market, notably childcare costs and logistics. Health, both of parents and children, was also an issue. Moreover, the study says the policy increases financial strain and harms mental health, which can push parents further away from the labour market.
In April 2017, the UK government became the first country to cap a much larger set of families, by introducing a ‘two-child limit’ on means-tested child benefits. It claimed that capping child benefits would incentivise employment among affected families. In contrast, many countries (for example in Estonia, Belgium and Japan) provide a higher per-child benefit as the number of children in a family increases.
The study says capping child benefits at two children does not yield positive employment effects “and therefore its benefits to social welfare are unclear”. It points out that “if welfare reforms fail to initiate behavioural change, they simply increase poverty”. The study also suggests that policymakers should think about whether it is likely that the group they are targeting will be able to adjust their labour supply given caregiving commitments and barriers to paid work, such as childcare costs. In addition it fails to recognise the contribution of unpaid care work to society and to the economy. It suggests an alternative policy direction of embedding an ‘ethics of care’ into public policy, “in which social structures are designed to recognise care work and to make it possible”.