Child Poverty in the U.S.

The Issue:

The United States has one of the highest rates of child poverty among high-income countries. While government policies have played an important role in improving the material well-being of poor children over the past four decades, much remains to be done. The cost of driving down rates of child poverty through targeted cash transfers to low-income families would be substantial, but it would take a relatively small fraction of GDP. A meaningful reduction in child poverty would have positive long-term effects for the children whose lives are improved and for society at large.

Expanded safety net programs have improved the lives of poor children in the U.S., but millions of children continue to live in material poverty.

The Facts:

• More than 10 million U.S. children were officially poor before the current pandemic, according to government statistics. In 2019, 14.4 percent of kids in this country, 10.46 million children, were living in poverty as measured by the official U.S poverty rate. This is higher than the share of adults age 18 to 64 (9.4%) and higher than the share of those 65 and over (8.9%) who live in poverty (see chart). The official poverty rate is determined by a comparison of pre-tax family cash income – including, for example, from earnings and government cash transfer programs, like Social Security or Temporary Assistance to Needy Families (TANF) – to the corresponding poverty threshold. The Census poverty thresholds were originally set at three times the cost of a minimum food diet in 1963 and they have been adjusted for inflation. They vary based on family size and composition. If the sum of income is below the poverty threshold, all of the members of the family are classified as poor. The official poverty thresholds are quite low: for one adult and two children, the federal poverty line is $20,598 per year; for two adults and two children, the federal poverty line is roughly $26,000 per year. 
• There are well-known issues with the official poverty measure. It doesn’t capture the contribution of some of the government programs designed to address poverty, including the Earned Income Tax Credit, since that is post-tax, and food assistance benefits through the SNAP program, since that is not pure cash. Another major issue is that the official statistics don't account for geographic differences in the costs of living. Despite its flaws as a measure of material well-being, tracking a consistent income-based measure allows scholars and policymakers to gauge how the country's most economically vulnerable individuals are faring and how income-based poverty rates vary across groups, places, and over time. 
• The extent of child poverty varies greatly across race and ethnic groups, as well as by family structure. Black and Hispanic children have the highest rates of poverty in the U.S.: 26% and 21%, compared to 8.3% among white children and 7.3% among Asian children. Different family structures also correlate with different rates of poverty. In 2019, 41% of children in mother-only families lived in poverty, as compared to 8% in married-parent families. These poverty differences by family structure hold within race/ethnic groups as well. According to data on child poverty rates within race and ethnic groups, children in mother-only families are three to six times more likely to live in poverty. This largely reflects the fact that two adults bring in more income than one adult. But it also reflects the fact that parents who have lower levels of education and lower levels of income are less likely to marry. Thus, single-parent family structure is both a cause and an effect of poverty. 
• Growing up in poverty has long-term consequences for children and is very much entwined with issues of inequality and social mobility. Children who grow up in poverty have poorer physical and mental health; worse performance in school, and, given neighborhood segregation by income, they are more likely to attend lower quality schools and live in neighborhoods with fewer employed adults. These factors all make it harder for children to reach their human capital potential and achieve higher levels of income when they reach adulthood. This contributes to the relatively low level of social mobility in the United States. Based on worker productivity losses, costs to the healthcare system, and the costs of incarceration and the judicial system, a recent report from the National Academies of Science estimated that child poverty costs the economy of the United States between $800 billion and $1.1 trillion each year (see here). 
• The expansion of various safety net programs has meaningfully improved children's material well-being over the last 40 years. Policy efforts that have improved children's material well-being over recent decades include expansions in the Earned Income Tax Credit (EITC), SNAP, and Medicaid. The impact of these programs on child well-being is not readily seen in official poverty rates, since the resources these programs deliver to families are not counted in the calculation of official poverty statistics. However, using the U.S. Census Bureau’s Supplemental Poverty Measure, which is based on more comprehensive measures of family's resources (including from post-tax and in-kind government transfers) and costs, rates of child poverty have fallen from around 30% in the mid-1960s to around 15% in recent years. This implies that expanded safety net programs have made a positive difference in the lives of poor children in this country, but millions of children continue to live in material poverty. 
• A social insurance program for children could dramatically reduce child poverty in the U.S., as Social Security has done for elderly poverty. The fact that children have the highest official rates of poverty in the U.S. is a dramatic reversal from the mid-twentieth century, when elderly poverty rates were the highest in the country. In 1959, 35% of those aged 65 and up lived in poverty, versus 27% of kids and 17% of adults. Social security has been a great anti-poverty success story for the elderly in this country. We could make a similar commitment to children. If each child living in poverty received a social insurance benefit equal to the average annual social security retiree benefit ($17,112), child poverty would fall to less than 1%. If each child living in poverty received half the average social security retiree benefit ($8,556), the rate of childhood poverty in the U.S. would fall below 4 percent. This would cost on the order of $179 billion and $90 billion a year, respectively. If the benefits were phased out at a rate of 70 cents on the dollar (which would clearly be a better policy design than a cutoff at the poverty line and would additionally reduce the number of children living in near poverty conditions), the annual cost estimates would be $293 billion and $118 billion, respectively. In 2019, our national Gross Domestic Product was $21.4 trillion. That means that with spending in the range of 0.4% to 1.4% of GDP, we could bring childhood poverty rates to less than 4 or 1 percent.
• The economic scars of the COVID-19 pandemic could increase child poverty in the coming years. Child poverty was declining up until the pandemic. There had been a slow, steady decline since the Great Recession. However, those gains could be reversed, without continued federal assistance to low-income families. The pandemic has hit low-income and vulnerable populations the hardest, both in terms of its health effects and its economic effects. Fortunately, the relief measures of the CARES act passed by Congress last spring helped prevent a large increase in poverty in the early months of the pandemic. Research by Jeehoon Han, Bruce Meyer, and Jim Sullivan suggests that the provision of regular Unemployment Insurance, expanded Unemployment Insurance, and the Economic Impact Payments kept poverty from increasing last spring, even though there was a huge drop (14%) in employment. However, when relief provisions expire, child poverty may increase, just as it did during the Great Recession. The post pandemic path of child poverty will depend on how rapidly the economy recovers, how quickly out of work parents are able to find new jobs, and how sustained and effective government assistance to low-income families is.