Simulation of an introduction of a basic security for children in Austria

Simulation der Einführung einer Kindergrundsicherung in Österreich

CONTACT

Michael Fuchs

PROJECT TEAM AT THE EUROPEAN CENTRE

Michael Fuchs, Katarina Hollan

BACKGROUND

This project analyses the effects of an introduction of a basic security for children in Austria. The rationale behind it is that monetary benefits for children should be stronger related to the material situation of the household and the (lacking) financial resources for children. While maintaining the hitherto existing level of financial support for all children almost entirely, families with low incomes and with socials disadvantages would particularly benefit from the reform.

The design of the basic security for children is as follows:

All children below 18 years residing in Austria are entitled to the basic security. Based on reference budgets the total benefit amounts up to EUR  625,- per child and month. It is paid twelve times a year. There is a universal component of EUR 200,- and a means-tested component of up to EUR 425,-. Below a taxable yearly family income of EUR 20.000,- the maximum amount of the means-tested component is paid; above a taxable yearly family income of EUR 35.000,- only the universal component is granted. In case of a taxable yearly family income between EUR 20.000,- and EUR 35.000,- the means-tested component is continuously phased-out between EUR 425,- and EUR 0.

The following monetary benefits would be replaced by the basic security:

  • familiy allowance,
  • child tax credit,
  • child tax allowance, and
  • tax deduction of childcare costs.

Note: The family bonus introduced in Austria in 2019 is not included in the baseline/reform scenario as the basic security for children represents a somewhat alternative model. Monetary benefits for children above 17 years remain the same.

METHODS

For the analysis the tax-/benefit microsimulation model EUROMOD/SORESI for the year 2018 is used based on EU-SILC 2016 data provided by Statistics Austria. The direct (monetary) consequences of the introduction of the basic security for children are analysed on three levels:

  • Fiscal consequences (simulated budgetary costs of the basic security taking into account the offsetting amount of monetary benefits to be abolished);
  • Number of children concerned, average amount of the means-tested component, share of children with maximum means-tested component, share of children without means-tested component;
  • Income distribution and risk-of-povery (household level).

FINDINGS

Beyond the final report on the simulation of the basic security for children the comparison of the distributive and fiscal outcomes of the family tax credit "Familienbonus Plus" introduced in 2019 by the Austrian government and of the basic security for children combines the findings of two research projects (the other funded by the Austrian Chamber of Labour). The family tax credit mainly relieves working parents belonging to the middle class whereas the basic security for children would benefit mainly income-poor and disadvantaged families. The comparison was presented by Michael Fuchs and Katarina Hollan at the 3rd Research Conference of ESPAnet Austria on 26 April 2019 at the University of Innsbruck and published as European Centre Policy Brief 2019/3.