Reducing child poverty in Serbia: cash transfers or work incentives?

High levels of child poverty in Serbia

Poverty, particularly child poverty, poses a significant problem in Serbia with rates (24.6% and 30% respectively) significantly higher than the European Union (EU) average child poverty rate of 19%.

Poverty during childhood has been shown to have long-lasting negative effects on child development and considerably increases the risk of poverty not only for the rest of that person’s life but also that of their children. Parents raised in poverty are more likely to raise their children in poverty (Harper et al., 2003).

The high child poverty rates in Serbia are not only the consequence of low spending on child related benefits, but also the consequence of poorly designed major benefit programs. Weak coverage and targeting of child allowance has meant that 60% of poor children do not receive child allowance, while more than half that do receive the allowance do not live in poor families. This is also due to 42% of households receiving child allowance also receiving income from informal employment.

High levels of unemployment and informality, coupled with low labor force participation, also contribute to the high child poverty rate, meanwhile the structure of non-contributory benefits has been ineffective at reducing poverty. Despite several reforms, spending on means-tested benefits remains low, approximately 0.6% of GDP; significantly lower than the EU average of 1.1% of GDP.

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Policy Brief EN