ILO Press release
4 February 2004

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.
http://www.ilo.org/public/english/standards/ipec/publ/download/2003_12_i...
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