Research Shows the U.S. Child Poverty Rate Could Be Cut in Half

A new report from the National Academies of Sciences, Engineering, and Medicine presents evidence-based policy and program packages that could cut the national child poverty rate by as much as 50 percent, while increasing employment and earnings among adults living in low-income families. The report was co-authored by NYU Steinhardt Professor J. Lawrence Aber and other members of the National Academy’s Committee on Building an Agenda to Reduce the Number of Children Poverty by Half in 10 Years.

“Child poverty – which costs the nation between $800 billion and $1.1 trillion – is not an intractable problem,” said Aber, Willner Family Professor of Psychology and Public Policy at NYU Steinhardt. “We can reduce child poverty by 50 percent with proven policies for a fraction of the annual cost to the nation.”

The content below has been adapted from the National Academies of Sciences, Engineering, and Medicine. 

Estimating the Impacts of Policy Changes
To generate estimates of poverty reduction from a range of program and policy changes, the committee commissioned research from the Urban Institute’s Transfer Income Model, version 3 (TRIM3), a microsimulation model that applies the rules of benefit and tax programs to each of the households in a survey data file, one by one. The model can simulate the outcomes of either the actual rules of programs (“baseline” simulations) or potential alternative policies, showing whether a particular policy lifts a family’s income above the poverty line and whether family members work more or less under an alternative policy than under baseline circumstances.

To explore whether program and policy changes could reach the goal of reducing child poverty and deep poverty in the United States by half within 10 years, the committee developed four policy packages. Simulations by TRIM3 showed that two policy packages – a “means-tested supports and work package” and a “universal supports and work package” – could meet the 50 percent poverty reduction goal:

1. The means-tested supports and work package combines expansions of the Earned Income Tax Credit (EITC) and the child dependent care tax credit (CDCTC) with expansions of two existing income support programs: the Supplemental Nutritional Assistance Program (SNAP) and housing voucher programs. The committee estimated that this package of programs would cost $90.7 billion per year based on the 2015 tax law. The package is also estimated to add about 400,000 workers and generate $2.2 billion in annual earnings.
2. The universal supports and work package is designed to enhance income security and stability while also rewarding work and promoting social inclusion. The cornerstone of this package is a child allowance, but the package also includes a new child support assurance program, an expansion of the EITC and CDCTC, an increase in the minimum wage, and elimination of the immigrant eligibility restrictions imposed by the 1996 welfare reform.

This package of programs is estimated to cost $108.8 billion per year based on the 2015 tax law. The net effect of this full package is to increase employment by more than 600,000 jobs and earnings by $13.4 billion.

At a lower cost of about $44 billion per year, a promising third program package combined expansions in the EITC and CDCTC with a child allowance, and was estimated to reduce child poverty by a third, rather than a half. It too increased employment and earnings substantially.

Any policies aimed at reducing child poverty would be implemented in complex societal and individual contexts, and these contexts can influence the policies’ success. The report identifies six major contextual factors that policymakers and program administrators should consider when designing and implementing anti-poverty programs including: stability and predictability of income, equitable and ready access to programs, equitable treatment across racial and ethnic groups, equitable treatment by the criminal justice system, positive neighborhood conditions, and health and well-being.

Assuming that Congress, federal and state agencies, and the public agree that further reduction of child poverty is a priority goal for U.S. policy, the report recommends that a coordinating mechanism be put in place to ensure that well-considered decisions are made on new anti-poverty programs and policies. This mechanism would also ensure that the associated research and data needed for monitoring, evaluating, and further improvement are supported as well. The report recommends that the White House Office of Management and Budget coordinate an assessment of the report’s conclusions and put together an implementation plan.

View a snapshot of the report at https://www.nap.edu/child-poverty/.

Background on Child Poverty in the U.S.
Child poverty costs for the U.S. range between $800 billion and $1.1 trillion annually, based on the estimated value of reduced adult productivity, increased costs of crime, and health expenditures associated with children growing up in poor families. The committee found that more than 9.6 million children lived in families with annual incomes below the poverty line in 2015, based on the Supplemental Poverty Measure (SPM). The 2015 poverty line for two-parent, two-child families was about $26,000 for renters and homeowners with a mortgage. That same year, roughly 2.1 million children lived in “deep poverty,” defined as having family resources below half of the poverty line. The highest rates of poverty and deep poverty were found among Hispanic, African American, and American Indian/Alaska Native families.

Poor children develop weaker language, memory, and self-regulation skills than their peers. When they grow up, they have lower earnings and income, are more dependent on public assistance, have more health problems, and are more likely to commit crimes. Robust research evidence has shown that low income itself, rather than other conditions poor children face, is responsible for much of these negative impacts on children’s development.  Given the evidence that poverty harms children’s well-being, policies designed to reduce poverty by rewarding work or providing safety-net benefits might be expected to have the opposite effect. The report confirms this supposition, finding that many programs that alleviate poverty – either directly by providing income transfers, or indirectly by providing food or medical care – have been shown to improve child well-being.

Both the U.S. historical record and the experiences of peer countries demonstrate that reducing child poverty is an achievable policy goal. Child poverty fell in the United States by nearly half between 1970 and 2016, and rates of deep poverty declined as well over that period, both overall and across subgroups of children defined by race and ethnicity. This was in part due to government tax and transfer programs and increases in government benefits, such as the EITC. In 1999, the United Kingdom enacted measures that made it possible to meet a 50 percent poverty reduction goal by 2008 – a year earlier than anticipated. More recently, the Canadian government introduced the Canada Child Benefit in its 2016 budget. According to government projections, this will reduce the number of Canadian children living in poverty by nearly half by just one full year of implementation.

The Researchers and Study Sponsorship 
In addition to Aber, members of the Committee on Building an Agenda to Reduce the Number of Children in Poverty by Half in 10 Years include: Greg J. Duncan (chair), Dolores Acevedo-Garcia, Janet Currie, Benard P. Dreyer, Irwin Garfinkel, Ron Haskins, Hilary Hoynes, Christine James-Brown, Vonnie C. McLoyd, Robert Moffitt, Cynthia Osborne, Eldar Shafir, Timothy Smeeding, and Don Winstead, Jr.

The study was sponsored by the Doris Duke Charitable Foundation, Foundation for Child Development, Joyce Foundation, Russell Sage Foundation, W.K. Kellogg Foundation, William T. Grant Foundation, and the U.S. Department of Health and Human Services.