Until recently, analysts, policymakers, and many of the rest of us thought the pronounced difficulties poor children face were the result of factors like single-parent families, bad prenatal health, poor nutrition, low levels of parental education, poor schools, crime-ridden neighborhoods, and frequent moving and evictions.This remains true. Recent research, however, has increasingly shown that low income itself is a key, and arguably the major, cause of the debilitating outcomes in cognition, emotional stability, and health for poor children. The countless studies reinforcing this claim are an important breakthrough.

The claim that poverty-level income explains many of the damaging hardships for children had long been challenged both by the political right and some mainstream analysts, but the impressive newer research has whittled away at these counterclaims. The new emphasis on the importance of money alone leads to proposed solutions that are more efficient at reducing poverty, the most effective of which, in my view and that of a growing number of academic experts, is an unconditional cash allowance for households with children.

As we’ve seen, poor children suffer hardships at a much higher rate than the non-poor. Now we know that there is growing evidence that universal cash transfers, money itself, can solve or mitigate many problems. After canvassing a wide variety of recent studies, a research team from the London School of Economics writes, “household income appears to affect a wide range of different outcomes at the same time. We have seen evidence of significant effects on parenting and the physical home environment, maternal depression, smoking during pregnancy, children’s cognitive ability, achievement and engagement in school, and children’s behavior and anxiety.”

Twenty years ago, it was not yet clear which channels led from poverty to damage. Jeanne Brooks-Gunn and Greg Duncan wondered in their influential 1997 report whether the damage done by poverty is “through inadequate nutrition; fewer learning experiences; instability of residence; lower quality of schools; exposure to environmental toxins, family violence, and homelessness; dangerous streets; or less access to friends, services, and, for adolescents, jobs?”

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Newer research has focused on three pathways by which income poverty has led to damage. These pathways include, first, inadequate money for food, rent, heat, and other material necessities. With money one can buy nutritious food, larger and more stable housing, heat and electricity, toys, warm coats, eyeglasses, and regular visits to the doctor, including transportation.

But two other potent pathways are less obvious. Money also helps reduce family stress, which significantly affects children’s prospects. Such stress results in parental depression, anger, neglect, drinking, taking drugs, and violence. Money also helps parents provide a psychologically nourishing, unchaotic environment in which learning and social development can germinate. They can buy books and computers, subscribe to an Internet provider, hire tutors, send children to special classes, pay for music or art lessons, and provide wholesome recreation. In our era, poor parents particularly cannot keep up with an America in which parents spend more and more on children’s activities.

The absence of money measurably affects poor children’s ability to reason and calculate, undermines emotional stability and self-control, and in general deleteriously affects health. Moreover, the longer children live below the poverty line, it is now clear, the worse the damage. The younger they are when they become poor, the greater the damage. Even children who are in poverty for a short time are adversely affected—and one in three children in America live in poverty for at least one year. One in twenty live in poverty for ten years or more. Poverty also has long-term consequences as children turn into young adults. Fewer graduate high school or college, the wages they eventually earn are on average lower, and a highly disproportionate number of poor young men enter the prison system.

At age 50, people who spent some time in poverty as young children were significantly more likely to have high blood pressure, asthma, and diabetes than children who grew up in families with incomes more than twice the poverty line. They were 71 percent more likely to have a stroke or heart attack. Some disadvantages of poverty can likely be offset over time, but longer-term studies may reflect a circle of material disadvantage that continues to affect these children as they grow older.

“You can argue accident and injury hospitalizations are strongly related to poverty.”

The doubters continue to make their case that more cash welfare means more damage. As we’ve seen, the political right, in particular, focuses less on inadequate income than on genetics, parental character, dependency, and a culture of “bad habits,” including out-of-wedlock childbirth, crime, laziness, disdain for school, and, in Oscar Lewis’s famous accounts, the inability to delay gratification. According to these ideologues, government welfare programs—and it seems, in particular, more cash income—would contribute further to these destructive bad habits.

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Even some who do not share what I consider the prejudices of the right question whether money or the lack of high-wage jobs are the main causal factors. A 1997 book by Susan Mayer was a well-researched example that challenged the assumptions about the direct line between poverty-level incomes and damage. Mayer writes, “Parental incomes are not as important to children’s outcomes as many social scientists have thought. This is because the parental characteristics that employers value and are willing to pay for, such as skills, diligence, honesty, good health, and reliability, also improve children’s life chances, independent of their effect on parents’ income.”

Analysts with aligned positions often support a wide range of solutions to child poverty like more housing subsidies, more professional home visitations, publicly financed childcare, early education, and crime prevention. Others emphasize behavioral, character-based issues as chief causes—not the lack of money— asserting that factors like young parentage and female-headed households are the primary causes of poverty and its hardships. In fact, many maintain poverty can be corrected without additional cash money for the poor.

The result has been a tendency to document a single hardship and propose a specific solution to fix it. The wide range of solutions proposed are usually valuable. But in my view, these many one-off solutions have turned out to be an encumbrance for reducing poverty sharply.

In the past two decades, scholars have done very well at parsing many interrelated factors to isolate the causal role of income itself. As Brooke-Gunn and Duncan wrote in 1997, these studies adjust for other factors, including,“statistically, the effects of maternal age at the child’s birth, maternal education, marital status, ethnicity, and other factors on child outcomes.”

These studies have isolated low income as the cause of damage to children in poverty by, for example, comparing cognitive and health outcomes for siblings who were raised at different times, when the family income had changed significantly. Those raised in periods when the family generally had more income performed better in measurable ways, such as on achievement tests, than their siblings did when family income was lower. The children who were raised when incomes were low also were less securely attached to parents and had higher levels of depression and shorter attention spans and were prone to behavioral problems such as frequent fighting.

Actually, we can find low income as the main cause of the hardships and damage of poverty by looking at the consequences of current welfare policies themselves. Government programs in which benefits have changed over time provide abundant data for isolating low incomes as a fundamental cause of problems.

Variations in government programs, or the creation of new programs, create what scholars sometimes call natural experiments. This “exogenous” increase in incomes offers an opportunity to measure the consequences of sudden increases in benefits and income compared to periods when funding was lower, or compared to those families who did not get increases.

Two sets of government-expanded income programs offered among the most interesting examples of natural experiments about the impact of money. The benefits of the Earned Income Tax Credit, which are especially helpful for families with children, were generously raised in 1993. The value of the credit increased by 40 percent on average for families with one child and roughly 100 percent for those with two children.

Researchers estimated how much improvement there was for those children in families with significant increases in tax credit income, comparing them to those where incomes didn’t rise as much. Such exogenous increases of income were separated from the effects of other potential coincident factors such as parental behavior or education. There were also increases in the EITC before 1993 and again in 2009 that add to the dataset on these issues. In addition, the state EITCs provided more information for analysis.

The results were a particularly fascinating affirmation that money makes a major difference. The children whose families had significant increases in EITC income as compared to those who did not had higher school grades and results on achievement tests, attended college in greater proportion, and were generally healthier. One study also showed that the birth weight of newborns was higher in these newly better-off families, and the stress level for mothers was also measurably reduced.

Looking back to the early 1970s, Richard Nixon proposed a guaranteed income program in the form of a “negative income tax” in order to continue but streamline the implementation of the War on Poverty. The lower the income of the poor family, the greater the tax refund benefits would be (to a maximum ceiling benefit); benefits would be distributed in the form of cash payments. It was a forerunner of the Earned Income Tax Credit. But in Nixon’s case, even if a family earned no income, it would receive a cash stipend. Opponents were concerned that it would encourage individuals not to work.

Various localities experimentally implemented the negative income tax for brief periods. The results were encouraging. Little labor time was lost, it turned out, and in some cases there was no evidence of work shirking at all. But the Nixon proposal, passed by the House of Representatives, was defeated in the Senate. Nixon himself withdrew his support.

Years later, another set of studies on the positive effects of increased incomes for poor children attracted a great deal of attention. The American Indian tribes of North Carolina opened a casino in 1996 on the reservation of the Eastern Band of Cherokees. Each member of the Cherokee tribe was given a share of the casino’s profits, paid every six months. Children’s shares were placed into a bank account until they were eighteen. The contribution the first year averaged $4,000, but by 2006, when several studies of the consequences were complete, the annual contribution per person had reached $9,000.

Analyses showed that the payments improved educational achievement significantly for the average child compared to non-Indian families in neighboring communities (who received no additional support). The proportion graduating from high school increased substantially. The increase in income also reduced the chances of the children’s committing a crime once they were teenagers. One study found that psychiatric disorders in adolescence and well into young adulthood were significantly lower than for those who had not received supplemental income.

An early guaranteed income program in Canada opened a research avenue that showed clear benefits for families, including their children, and set the stage for future programs. A town in the Canadian province of Manitoba experimented with a guaranteed annual income from 1974 to 1978. Under the program, dubbed Mincome, the people of Dauphin, Manitoba, “were offered guaranteed incomes equivalent to $19,500 for a four-person household (the guarantee varied by household size). People earning no labor market income, for whatever reason, could access the full guarantee, which was about 49 percent of median household income in 1976.” Roughly 18 percent of Dauphinites—over 2,000 individuals, or roughly 700 households—received benefits at some point throughout the program. A study done many years after the program was terminated in 1978 proved eye-opening. A Canadian scholar found “that, overall, hospitalizations in Dauphin declined relative to the control group.” Accidents and injuries also declined. The Canadian scholar Evelyn Forget of the University of Manitoba continued, “You can argue accident and injury hospitalizations are strongly related to poverty.” Teenagers whose families received Mincome stayed in school longer.

Today’s Canadian child allowances have also provided useful data for analyzing the impact of differing incomes on outcomes for poor children. Child cash payments differ by region. The results have been striking. Researchers found positive results for educational test scores and mental and physical health outcomes among those children whose families received higher allowances. Cognitive success was measured by achievement exams and school attainment levels. Mental and emotional health were measured in a number of ways, including observations about hyperactivity and social aggression. The researchers also assessed depression in mothers, thought to be a factor that can weigh on child performance. In all these cases, those families who received higher allowances showed substantial positive results compared to the others.

One of the most influential and thorough reports on the consequences of giving additional money to families with poor children, mentioned above, was undertaken by the researchers at the London School of Economics and published in 2013. The LSE researchers reviewed 44,000 studies of poverty’s impact before they pared them down to thirty-four that they concluded truly isolated income as a determinant of outcomes. Among these dependable studies, income increases led to notably higher scores on achievement tests for children, more stable emotional behavior, and improved health. Only five of the chosen studies did not show a positive relationship between income and outcomes.

“Our review indicates clearly,” the LSE researchers concluded, “that money makes a difference to children’s outcomes. Poorer children have worse cognitive, social-behavioral and health outcomes in part because they are poorer, and not just because poverty is correlated with other household and parental factors. The evidence relating to cognitive development and school achievement is the clearest, followed by that on social and behavioral development.”

One historical study provided stunning evidence of long-term benefits of unconditional cash welfare. It involved the federal Mothers Pensions programs that were instituted in the early 1900s as part of the first wave of Progressive reforms in America. There had been widows’ benefits more or less since the Civil War, but mothers’ pensions were instituted at the turn of the century to help in raising children with decent nutrition and housing.

Researchers traced the outcomes for the children of the pension recipients until their eventual deaths, usually late in life. A summary published in 2016 found that these children lived one year longer than comparable children whose mothers did not receive the benefits. A year as an average for a large group is a long time, and many lived much longer. The researchers also found that the number of underweight infants in the pension groups was reduced sharply, the children attended school longer, and they were much less likely to drop out of high school, thereby earning higher wages.

More recently, a measure called the HOME scale has been developed to gauge how constructive the home environment is for children. It inventories the number of toys, books, and learning materials in the home. It also observes and measures parental practices at home. The lower the income, it has been found, the lower the ranking on this HOME scale.

Several studies show convincingly that low income itself increases the maltreatment of children.

According to one of the early surveys, low-income families spent about $880 (in 2012 dollars) per child annually, and higher-income families spent more than $3,700. By 2006–2007, while low-income families had increased their spending to $1,400, high-income families had increased theirs to $9,400. One study measured the impact of an extra $10,000 a year of income for poor children from birth to five years old, finding major positive impacts on cognitive achievement.

Several studies also show convincingly that low income itself—even when adjusted for family composition, the characteristics of parents, and other possible causal factors—increases the maltreatment of children.

For example, the Children’s Bureau of the U.S. Administration for Children and Families (ACF) reports the number of instances of child protective services visits annually. Research concluded that one-quarter of child maltreatment was attributable to poverty, unemployment, and financial stress. Another study found that increases in the EITC led to reduced child maltreatment. Sexual and physical abuse of children, and exposure to domestic violence between adults, were most sensitive to economic factors.

A closer look at the thirty-four studies cited by the London School of Economics researchers provides still further evidence that more money given to needy parents leads to more investment in children. One study specifically found that as incomes rose, more books were read and more discussions took place with parents. Another study found that when income increased, parents spent more on children’s clothing, toys, and fruits and vegetables, and less on alcohol and tobacco.

Three scholars—Hirokazu Yoshikawa, J. Lawrence Aber, and William Beardslee—similarly reviewed a range of contemporary research. They concluded: “On the basis of this selective review of key studies, we come to several major conclusions. First, the causal effect of family poverty, and to a lesser extent, neighborhood poverty, on worse child and youth M-E-B [mental, emotional and behavioral] health is well established. This causal effect provides a strong rationale for prevention based on poverty. The [measured] effect of poverty is independent of associated factors such as levels of parental education or race/ethnicity; there is little evidence that the harmful impact of poverty on child or youth M-E-B health differs by race/ethnicity.”

Based on analyses of how more income had closed the achievement gap with better-off children, the LSE group finds that half the achievement gap could be closed by an increase in family income of $10,000 a year. The growing evidence that money matters—that low income is the principal cause of material hardship—should be a guide to new, more efficient public policy and justify greater government spending.

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Excerpted from Invisible Americans by Jeff Madrick. Copyright © 2020 by Jeff Madrick. Excerpted by permission of Alfred A. Knopf, a division of Penguin Random House LLC. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

Jeff Madrick



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