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The Cost of Child Poverty

Pink projects.jpg
Christopher Anderson/Magnum Photos
A boy looking into the Louis H. Pink housing project, Brooklyn, New York, 2012

Among the many forces contributing to the recent epidemic of tension between police and mostly black urban communities, from Ferguson to Cleveland to Baltimore, one in particular has been all too little acknowledged: America’s child poverty crisis.

There are between 10 and 17 million children under eighteen living in poverty in America today, depending on how you measure it. If we take the measure most often used in international comparisons, up to 20 percent of the young population—one in five children—is poor. This is a far higher proportion than in any other developed country except Romania, according to a 2012 study of thirty-five developed nations by UNICEF. Worse, nearly one in two blacks is born into poverty in the US. And many black men have disappeared into the nation’s penal system, often because of harsh prison sentences for minor drug abuses, leaving children to be raised on one income, the mother’s.

Meanwhile, years of research have made clear the direct connection between childhood poverty and social dysfunction, ranging from poor health outcomes to higher incarceration rates. Dozens of studies have reported that poor kids are more likely to have learning disabilities, language delays, behavioral problems, and to contract diseases such as asthma and diabetes. They tend not to do as well at school and are more likely to drop out of high school, or even grade school. Women more often have babies in their teenage years. The Children’s Defense Fund says the path to prison is often paved in these years. And, most important, neurologists have found virtually incontrovertible evidence that high levels of stress experienced from birth to the age of three can actually damage brain architecture, reducing, for example, the size of the hippocampus.

Ignoring these problems is hugely costly to the US government. Harry Holzer of Georgetown University, with co-authors, showed that child poverty cost America $500 billion a year in lost productivity, higher crime rates, and raised health expenditures. Nor is it hard to find government programs that can effectively address these issues. And yet until now, there has been little interest in tackling child poverty on a large scale.

For example, Congress has recently given bipartisan support for a valuable, though limited, home visitation program for poor families—which sends nurses and social workers to poor families to help them raise and nourish their children and which Congress recently extended for another two years. Home visitation is not new and the earlier programs have been closely studied. Infant mortality declines. Children in these families are twice as likely to be screened for developmental delays. At age twelve, the children have better test scores. They get arrested less often before they are sixteen. Mothers are less likely to have a second child in their teens or early twenties. And yet the program, however welcome, is rather small potatoes, having reached only 115,000 families since its inception. It also aims largely at improving the health conditions of poor children, not at reducing the poverty rate.

But there are much more direct ways to alleviate poverty, and some of them have already been shown to have dramatic effect. These include the Earned Income Tax Credit, the Child Tax Credit, Temporary Assistance for Needy Families (or TANF, the welfare program that replaced the Johnson era welfare program), housing subsidies, food stamps, and others. Indeed, taken together, the programs have reduced child poverty rates by up to 12 percentage points, according to researchers at Columbia University. A new analysis made by the Urban Institute suggests the reduction may be even greater.

These findings may stun readers. But they also carry bad news. The results are based on the new Supplemental Poverty Measure created by the Census Bureau in 2010, according to which the poverty rate was significantly higher in the 2000s than the Official Poverty Measure indicated. (The new measure takes into account government benefits, but also medical expenditures and expenditures required to work, such as the costs of daycare, among other outlays, and also raises estimates of minimal needs for the poor to account for changes in social needs since the adoption of the original poverty line in the 1960s.) Thus, the reduction of up to 12 percentage points according to the Supplemental Poverty Measure still leaves child poverty at about the same inexcusable level reported by the Official Poverty Measure or only a few percentage points less—that is, much too high by any moral standard. Imagine if we didn’t have those other programs.

There is another, far more sweeping idea that America has until now refused to try, though it has been widely successful in other advanced countries: providing direct cash allowances to poor families for every child they have. Many South American nations provide such allowances for those who meet certain conditions, such as school attendance and doctor visits. Of the thirty-five countries in the UNICEF study, only the US does not have such a policy. Why not?

It’s expensive, of course, but so are home visitation and other programs like TANF and the Child Tax Credit; unlike those programs, cash allowances seem to carry a stigma. When I ask economists and policy analysts what they think of the idea, they often say that poor parents will just spend them on themselves. In fact, the experience of the British cash allowance system, instituted in 1999 by the Tony Blair government, shows the opposite. Blair provided generous cash allowances for children among other programs. With support from the allowances and several other Blair programs, the bottom 20 percent of British families received roughly $5000 a year. Columbia University’s Jane Waldfogel, who has closely researched the British program, found that the families spent the money on clothes, food, and books for their children—indeed, more so than did higher income parents, who spent the money on items for themselves such as alcohol. A recently published long-term study from Canadian researchers on the effects of a similar Canadian program also found that most parents have spent the allowance constructively on kids.

The British program, which continues today, is, like Social Security in the United States, universal—all children whether rich and poor, receive it. This means it has broader political support. But cash allowances can also be tailored so that they are higher for the poor and lower for the better off. (Cash allowances were reduced for higher income British citizens to meet stringent government budget reductions under the current Prime Minister.) The lack of strings tied to how the money is spent recognizes that the poor can make decisions for themselves, and this can be highly useful. As Clio Chiang points out, a policy associate who works with me on these issues at the Bernard Schwartz “Rediscovering Government Initiative” at the Century Foundation, a poor person in New York City could now buy a discounted monthly Metro Card he or she couldn’t previously afford, while a poor parent in Wyoming could fill up the gas tank. Cash allowances reflect a simple idea: treat the poor like people.

But does cash turn poor kids into more productive and well-educated teenagers and adults? It turns out there is substantial evidence for this as well. In one study, the children of poor parents who got a sudden increase in family income due to changes in the Earned Income Tax Credit in the 1990s made substantial educational gains by comparison. A Duke University study of a Cherokee tribe in North Carolina is highly instructive. The tribe opened a casino and distributed $4,000 out of the profits annually to the adults in its community. Compared to families in other Native American communities whose parents didn’t receive such allowances, Native American teenagers belonging to the tribe in question had significantly higher school attendance and graduation rates. Indeed, Duncan found that the children of poor families that got an income boost for whatever reason had improved school performance.

Based on the relative poverty measure, Waldfogel found that the Blair plan reduced the British child poverty rate by half. The plan cost less than 1 percent of GDP. That would translate in the US to about $150 billion a year, still a substantial sum, but the British plan was universal and also, as noted, included additional programs, some of which the US already provides. If the US reduced other programs, such as the Child Tax Credit, in order to fund a broad child benefit plan, as financial writer Matt Bruenig has noted, the cost of a cash allowance program that provided $300 to $400 a month per child could be substantially cut. Administering such a program would also be less burdensome than home visitation. Results could be monitored.

For an investment likely to be well less than $100 billion a year, it’s plausible that child poverty could be cut in half. And the payoff to the American economy could be large. The reduction in the suffering of innocents may be what would count most. Imagine the effect this might have in poorer neighborhoods of Baltimore or Chicago.