Knowledge Exchange Platform (KEP) Workshop 2 - Iceland Prosperity Act - Hrafnkell Hjörleifsson.pdf

OECD Knowledge Exchange Platform on Well-being Metrics and Policy Practice (KEP): Virtual Workshop 2, 3 October 2024

Integrating multidimensional well-being evidence and principles in policy decision-making tools

1. The Ministryof Education andChildren
October2024
Economic impact of implementing the
Prosperity Legislation in Iceland

2. ß ß ß
Wecan evaluateprosperityinterms
of deviationsfrom welfare
1
The best method of evaluating prosperity in
monetary terms is to examine deviations and
their financial consequences
It is difficulttomeasure
prosperitydirectlyon thebasisof
thedefinitionweuse
Butit is possibletoanalyse
deviations, i.e. factorswhich
preventtheindividualachieving
physical, mental, intellectual, moral
andsocialdevelopmentandhealth
Such deviations take place in
diverse ways during a lifetime...
... and they also entail financial
consequences
In childhooddeviations manifest
themselves e.g. in unhappiness
and problems with learning and
behaviourat school
They also emerge later in life, e.g.
in the form of high-risk and
unhealthy behaviours, disease,
crime, disabilityand premature
death
Inadditiontoimpairedqualityof life
for theindividual, these deviations
leadtocostsfor thegovernment
andfor societyasa whole
Byevaluatingthosecosts, it is
possibletoestimatethefinancial
gainarisingfrom improving
welfareservices

3. 2
Adverse childhood experiences are now a key
methodology for assessing children’s wellbeing
Adverse childhood experiences (ACEs) are
now the most-used methodology to assess
children’s wellbeing, both during childhood
and later in life
This methodology can be used to estimate the
costs to societyandgovernmentarising from
children who get into difficulties
A number of studiesfrom other countries have
applied this approachin order to estimate
costs and gains of changes to welfare services
Measurable benefits can be of two kinds: on the
one hand a reduction in the number of ACEs,
and on the other a reduction in the proportion
of children who progress to later stages
Adverse childhood
experiences
Negative impact on biological
development
Impaired perception and social
and emotional intelligence
Health-damaging
behaviour
Disease, disability and social
problems
Premature death
Number of individuals
Progressive consequences

4. ß
3
In order to estimate the financial impacts of the
changes, we must answer three key questions
1.Whatare thefinancialcostsarisingfrom the
deviationstoday?
2.Whatwill thebenefitsof thechangesthat thenew
Prosperitylegislationrequiresbeintermsof
reducingthosecosts?
3.Whatdoesit costtoimplementthechanges in
such a wayastoachievethedesiredresults?

5. ß
4
In order to estimate the financial impacts of the
changes, we must answer three key questions
1.Whatare thefinancialcostsarisingfrom the
deviationstoday?
2.Whatwill thebenefitsof thechangesthat thenew
Prosperitylegislationrequiresbeintermsof
reducingthosecosts?
3.Whatdoesit costtoimplementthechanges in
such a wayastoachievethedesiredresults?

6. 5
ACEs are common, and children tend to have
adverse experiences of more than one kind
40%
22%
13%
8%
17%
0 experiences1 experience 2 experiences
3 experiences4+ experiences
15%
20%
24%
29%
32%
47%
49%
52%
Imprisonment of family member
Sexual abuse
Physical abuse
Domestic violence
Mental problems in family
Drug/alcohol abuse in family
Emotional abuse
Divorce
Number and types of ACEs (% of population)
1
1 US study of adults carried out 2014-2017 (Melton et al., Sycamore Institute, 2019)

7. 0
10
20
30
40
50
Smoking Lack of excerciseSexual activity <16 yearsDrug use Alcohol abuse
01234+
6
Increased number of adverse childhood
experiences gives rise to risk-taking behaviour…
Proportion of respondents (%), categorised by number of ACEs
1
2.1x
1.4x 2.3x
3.7x
6.2x
1 Study of young people in eight European countries (M.A. Bellis, Hughes et al., 2014)

8. 0
10
20
30
40
50
Depression Anxiety Disability Suicide attempt
01234+
7
... as well as mental problems, disability and
suicide attempts later in life
Proportion of respondents (%), categorised by number of ACEs
1
2.3x
33.7x
4.1x
3.2x
1 Depression and anxiety: study of adults in Finland (Pirkola et al., 2005). Disability: study of adults in five US states (Campbell, Walker and
Egede, 2016). Suicide attempts: study of young people in eight European countries (M.A. Bellis, Hughes et al., 2014)

9. 8
Based on European research, an estimated 2,500
children in Iceland have ACEs each year
Population of Iceland by age (2019)
Sources: Statistics Iceland, Ministry of Social Affairs estimate
02.0004.0006.000
100 years
80 years
70 years
60 years
20 years
< 1 year
30 years
50 years
90 years
40 years
10 years
Number of
children
One ACE
Two or more
ACEs
Number
having ACEs
Total Annual Ratio
81,000
28,000
15,000
43,000
1,500
1,000
2,500
4,500
34%
18%
52%

10. 99
The annualcoststosocietyduetoACEsmay
amounttoaboutISK 100 billioninIceland 2022
1 Resultsof reviewstudyof researchrelatingtoadversechildhoodexperiencesinEurope (Bellis, Hughes et al., 2019)
2 Socialcostsare definedhereasthenumberof health-correctedyearsarisingfrom theprobleminquestion. Health-correctedyearsincludeboth
reducedlifeexpectancyandlost yearsduetoill-healthordisability. The annualcostsare estimatedat 2.67% of GDP inEurope, which is equivalent
toISK 100 billionbasedon GDP for 2022.
8%
28%
28%
6%
34%
19%
11%
25%
18%
12%
Diabetes
Anxiety
Depression
Obesity
Drug use
Respiratory disease
Cancer
Alcohol abuse
Smoking
Cardiovascular disease
100
2
2
4
5
6
6
15
17
20
23
Health problem
Percentage
attributable to ACEs
1
Social costs attributable to ACEs
(ISK billion/year)
1,2
Total

11. 10
Costs to public funds consists of expenditure and
disbursements, plus lower tax revenue
Hospitals, medications, medical care and rehabilitation
Compulsory schooling, special needs teaching
Municipal social services, welfare administration
Law enforcement, judiciary and prisons
Disbursements to individuals due to disabilities
Social, unemployment and housing benefits
Income tax, municipal tax and VAT
Increased burden
Increased burden
Increased burden
Increased burden
Increased transfers
Increased transfers
Lower tax revenue
Type Category Description Impact of ACEs
Impact of adverse childhood experiences on public finance
Education
Health
Criminal justice system
Disability benefits
Tax revenue
Expenditure
Transfers
Other social benefits
Revenue
Social services

12. ß
11
In order to estimate the financial impacts of the
changes, we must answer three key questions
1.Whatare thefinancialcostsarisingfrom the
deviationstoday?
2.Whatwill thebenefitsof thechangesthat thenew
Prosperitylegislationrequiresbeintermsof
reducingthosecosts?
3.Whatdoesit costtoimplementthechanges in
such a wayastoachievethedesiredresults?

13. 12
Two approaches are possible in order to reduce
costs due to adverse childhood experiences
ß
Fewer adverse experiences
The best results are achieved by
proactively preventing ACEs
By preventing ACEs, the burden
on welfare services is reduced, as
fewer children have adverse
experiences and the average
number of such experiences drops
Preventive measuresandearly
interventionhave yielded the best
results in other countries
ß
Greater resilience
Resilience is defined as the
individual’s capacity to deal with
and work through ACEs
Resilience reduces the probability
of adverse experiences leading to
problems later in life
Robust and integrated welfare
serviceshave yielded good results
in increasing resilience in other
countries

14. 13
Positive childhood experiences increase the
individual’s resilience
Incidence of problems in individuals who had at least three ACEs
0
25
50
My family
stood by me
Support from
friends
Happy at
school
Thrived in the
community
YesNo
0
25
50
0
25
50
0
25
50
SmokingPoor healthDepression Obesity
-35%
-29%
-26%
-26%
Experience Proportion of respondents Reduction
The child’senvironmentand
positiveexperiencesare
importantfor resilience
Children whoexperience
supportivenessand
wellbeinginthehome,
amongfriends, at schoolorin
thecommunityingeneral
displayfar greaterresilience
The authoritiescan thus also
enhancechildren’sresilience
byincreasingtheir positive
experiences, bothinthe
educationalsystemandinthe
communityingeneral
Heimild: Sege o.fl. (2017): „Balancing Adverse Childhood Experiences (ACEs) With Health Outcomes of Positive Experiences“

15. 1 ACE
2+ ACEs
Total
ßßß
14
Better welfare service will both reduce incidence
of ACEs and enhance children’s resilience
Before
1,500
1,000
2,500
1,395
930
2,325
-7%
-7%
-7%
After Change
Number of children
10%
20%
14%
9.3%
18.6%
13%
-7%
-7%
-7%
No resilience
150
200
350
130
173
303
-14%
-14%
-14%
Deviations from wellbeing
X
=
Effect of integration of services in the cause of children’s wellbeing (annual figures)
More preventive measures and
early support reduces the
number of ACEs
Integrated services for those
who have ACEs plus a more
robust school environment lead
to more resilience
The synergistic effect of these
impacts is thus conducive to
reducing the number of children
deviating from normal development
Impact of
the Bill
Source: Ministry of Social Affairs estimate
BeforeAfterChangeBeforeAfterChange

16. 15
The changes will take decades to yield benefits
for people of working age
Sources: Statistics Iceland (population forecast), Ministry of Social Affairs estimate
Reduction in number of deviations from wellbeing arising from the Bill
0
10
20
30
40
50
60
70
years
40
years
10
years
60
years
50
years
30
years
20
years
<1
year
2050
2060
2040
2070
2030
Education Employment market
The number of children in
difficulties in the educational
system will fall in the next decade
The impact on the employment market will not materialise until later,
when large numbers of individuals who have enjoyed enhanced
welfare services have completed their education

17. ß
16
In order to estimate the financial impacts of the
changes, we must answer three key questions
1.Whatare thefinancialcostsarisingfrom the
deviationstoday?
2.Whatwill thebenefitsof thechangesthat thenew
Prosperitylegislationrequiresbeintermsof
reducingthosecosts?
3.Whatdoesit costtoimplementthechanges in
such a wayastoachievethedesiredresults?

18. 1717
The cost of implementation of the Bill is estimated
at ISK 2 billion/year
Estimated annual cost increase after implementation of the Bill (ISK millions)
1 Inter alia enhancement and integration of service of case managers by Child and Family Agency, oversight and performance evaluation via
collection and processing of data, plus monitoring of action plans of regional wellbeing councils by Welfare Quality and Monitoring Authority
Sources: Source: Government Accounts, municipalities’ annual reports, Ministry of Social Affairs estimate
Educational system
Social services
Healthcare
Youth and Sports
Legal system
Administration
Total
Operate intermediary personnel with welfare services by expanding roles
in smaller schools and additional staff in larger ones
Ensure all children case managers, operate support teams, frame and
implement support plan
Improve infant and baby protection via intermediaries at healthcare
centres, and enhanced nursing service in schools
Ensure availability of basic service through organised sports and leisure
programmes, plus monitoring of implementation and quality of the service
More preventive measures and improved services to children in police
districts, and enhanced oversight by Commissioner of Police
Enhancement and coordination of services, plus monitoring by Child and
Family Agency and Welfare Quality and Monitoring Authority
5501.450
600
150
250
100
150
750
2,000
MunicipalNational

19. 18
Integration of servicesinthecauseof children’s
wellbeingis a profitablelong-terminvestment
Estimated costs, economies, and overall impact on public finance (ISK bn)
1
1 Figures are at fixed prices, i.e. in real terms
2 Internal rate of return of overall impact premised on 2% annual growth after 2070
Source: Ministry of Social Affairs estimate
-5
0
5
10
Net impactCostBenefit
-50
0
50
100
206020502030 20702020 2040
Annual
Cumulative
Costsremainsimilarwhile
economiesincrease
cumulativelyyearbyyear
The annualgainwill
exceedcostsin2035
Cumulativeimpacton public
financewill bepositive
from 2050
Fundingspenton
implementingtheBill will
yielda 9,6% realrateof
return
2

20. 19
DiscussionPoints
What type of data and evidence are needed to underpin well-being-informed policy
tools?
Establishing where policy change will actually have an impact.
Establishing a baseline and be ready to track the process over a long period of
time.
Which areas of government decision making could benefit from a more widespread
use of well-being-informed policy tools?
Everything that has to do with the wellbeing of the child, whichever field that
may be in (education, health care, social care, etc.)
When it comes to children our responsibility is great and so are the potential
rewards in personal wellbeing and as a public investment.
What is the need for/role of co-appraisal/co-evaluation that engages non-
government actors?
For both gathering support and for the development of changes, the
participation of non-government actors is crucial.