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Tuesday 3 February 2004
ILO/04/04

NEW ILO STUDY SAYS ECONOMIC BENEFITS OF
ELIMINATING CHILD LABOUR WILL VASTLY OUTWEIGH COSTS


GENEVA (ILO News) - A new study by the International Labour Office (ILO) says the benefits of eliminating child labour will be nearly seven times greater than the costs, or an estimated US$ 5.1 trillion in the developing and transitional economies, where most child labourers are found.

What is more, the study*, conducted by the ILO International Programme on the Elimination of Child Labour (IPEC), says child labour - which involves one in every six children in the world - can be eliminated and replaced by universal education by the year 2020 at an estimated total cost of US$ 760 billion.

"What's good social policy is also good economic policy. Eliminating child labour will yield an enormous return on investment - and a priceless impact on the lives of children and families", says ILO Director-General Juan Somavia.

The study, entitled "Investing in Every Child, An Economic Study of the Costs and Benefits of Eliminating Child Labour", is the first integrated analysis of the economic costs and benefits of eliminating child labour to be conducted worldwide. It compares costs and benefits - not with a view to justifying action to eliminate child labour, which is already called for by the ILO in its Conventions Nos. 138 and 182 - but with the aim of understanding the economic implications of these international commitments.

The ILO estimates that some 246 million children are currently involved in child labour worldwide. Of these, 179 million - or one in every eight children worldwide - are exposed to the worst forms of child labour, which endanger their physical, mental or moral well-being.

The ILO/IPEC study applies a model to developing and transitional economies worldwide and says that globally, the economic benefits of the fight against child labour exceed costs by a ratio of 6.7 to 1. All regions of the world would experience large net gains from the elimination of child labour, although some would benefit more than others. In North Africa and the Middle East, for examples, the benefits would be the highest relative to the costs (8.4 to 1), whereas in sub-Saharan Africa they would be the lowest (5.2 to 1). In Asia, the ratio would be 7.2 to 1, in transitional countries 5.9 to 1, while in Latin America it would be 5.3 to 1. The global net economic benefits of the hypothetical programme would amount to 22.2 per cent of aggregate annual gross national income.

Calculating the costs and benefits

According to the study, eliminating child labour would be a "generational investment" and a sustained commitment to children, both today and tomorrow. In the first years, the costs would almost certainly exceed returns. However, net economic flows would turn dramatically positive as the effects of improved education and health take hold. By 2020, costs would be far outweighed by the returns, leaving annual benefits of around US$ 60 billion.

In comparison to other social costs, the average annual cost of eliminating child labour would be far less than the cost of financing debt service or the military, the study says. For example, the average annual cost of US$ 95 billion would amount to about 20 per cent of current military spending in developing and transitional countries, or 9.5 per cent of developing countries' US$ 1 trillion debt service.

The study argues that the costs are a "wise investment" as each extra year of schooling stemming from universal education to the age of 14 results in an additional 11 per cent of future earnings per year, yielding global benefits of just over US$ 5 trillion. On the cost side, the supply of education accounts for nearly two-thirds of the total costs.

Reaping the economic value of expanded education depends on countries' ability to create new jobs, take advantage of higher levels of human capital and develop economic policies to stimulate growth, the study admits. Yet even if the effect of education on future earnings was halved to 5 per cent, the study estimates that global benefits would still exceed US$ 2 trillion.

Households affected by the study's programme face another major cost. The progressive elimination of child labour over the next 20 years deprives families of the economic value of their children's labour. The study estimates that a child's contribution to family income is 20 per cent of an adult's - and that with child labour eliminated, the global opportunity cost borne by households would total US$ 246.8 billion.

To take account of this, the study factors in the costs of a global programme of income support to poor households that commit to sending their children to school. Modelled on the existing successful Bolsa Escola programme in Brazil, the study costs out a similar form of child benefit phased in over twenty years which would transfer 60 to 80 per cent of the average value of a child's labour to poor households.

The study also argues that improvements in children's health, through the elimination of child labour, will bring tangible economic benefits. Globally, this benefit is estimated at US$ 28 billion. In comparison to other benefits, this amount is small. But the health of children is vital in many ways beyond economic benefits, the study says.

The report draws on a large range of data, including detailed country data from Brazil, Senegal, Kenya, Tanzania, Ukraine, Pakistan, Nepal and the Philippines. A second tier of data consisted of 24 additional countries for whom household surveys, primarily conducted by ILO-IPEC and the World Bank, have been implemented during the past decade. For the remaining countries, the study used publicly available demographic, economic and education data as the basis for extrapolating from those with more complete information.

National and regional programmes on child labour have flourished under IPEC, which began with six participating countries in 1992 with a single donor government (Germany), and has expanded to include operations in 80 countries funded by 30 donors.


* Investing in Every Child, An Economic Study of the Costs and Benefits of Eliminating Child Labour, ILO Geneva, December 2003. ISBN 92-2-115419-X.


India Committee of the Netherlands / Landelijke India Werkgroep - 3 februari 2004