This article was originally published in February 2017.
The $3000 Baby Bonus given to all parents of newborn children in Australia between July 2004 and June 2006 was found to be ineffective in boosting the learning, socio-emotional and physical health outcomes of the average pre-school child according to the latest LCC Working Paper.
The paper Bonus Skills: Examining the effect of an unconditional cash transfer on child human capital formation studied the effects of governmental cash transfers on the skill development of young children and whether these payments promote the early development of skills.
As household income greatly influences the choices around investments into goods and services that encourage child development, which implies that income support payments could accelerate children’s skill development. However, the results suggest that the Baby Bonus was not effective in boosting child skill development, and also failed to impact parental well-being, parental behaviour and mothers’ labour supply.
These findings contrast with the findings in other countries, including the United States and Mexico, where income-support schemes for new parents impacted positively on both cognitive and non-cognitive child outcomes. Differences in how funds were distributed may explain these outcome discrepancies. Australia provided a one-off, cash payment to all parents, whereas the schemes in other countries targeted low-income households and were disbursed iteratively over time.
These findings have important policy implications. With universal cash injections proving to be inefficient and ineffective, interventions to improve child outcomes and alleviate the financial burden of childbirth should be deployed through schemes with higher returns, such as by targeting disadvantaged families or child care and other services proven to improve child outcomes.