Seam allowances/making a pattern smaller

I have a pattern that I know is going to be a bit big on my 3 year old.  It is a standard 5/8 seam allowance.  If I made the seam allowance 1 inch all over, would that effectively make the whole thing smaller, or would I somehow run into trouble doing this?  Thanks for any feedback!

If you look at a multisized pattern, you'll notice that the difference between sizes is not uniform throughout--some places are wider than others, some narrower, some overlap etc.  Though it seems like a good solution to just use 1" SA's, it'll probably only work in some of the areas of the garment. 1" sa's are a little futzy to sew too, especially in curved areas (setting in sleeves is bad enough at 5/8--I'd hate to try at 1"--I always cut down my sleeve sa's to 3/8"--it's so much easier).

It is possible to grade the pattern down--if it's a multisized pattern, this is a cinch to do.  Are you using a multisized pattern?

Yes - it is a multi-sized pattern but I am using the smallest size.  Is there still some guideline to grade it?  I have never tried doing this.  I would love any ideas or tips!

What about sewing your one-inch seam allowances with a basting stitch first, then having your 3-year old try the item on? Then taking the seams up wherever the garment seems too loose and letting the seams out wherever the garment seem too tight?