The Future of Children, Princeton - Brookings: Providing research and analysis to promote effective policies and programs for children.

The major question of this article is why, according to the official measure of poverty, more than 20% of the nation's 67 million children are poor. There is no single answer to this simple, but perplexing, question. Children live with adults and rely upon those adults for their economic well-being. By and large then, children are poor because they live with adults who are poor. Thus, to understand child poverty one must look to the causes underlying adult poverty, such as economic and demographic forces and factors affecting individual earning capacity. The rate of poverty for children is almost double that for adults, as shown in Figure 1, so it is necessary to examine why children are more likely than adults to reside in poor families. A decomposition of the population of poor families by demographic characteristics, such as number of adults and number of children per family, sheds some light on this question.

When considering the ability of adults to meet the needs of their families, a distinction is made among three groups: adults who are "family self-sufficient," those who are "adult self-sufficient," and those who do not even attain "adult self-sufficiency." Adults are defined as family self-sufficient if their own resources (their income and their receipts from social insurance programs that are not dependent on the presence of children) are enough to keep their entire family out of poverty. Self-sufficient adults are defined as those who would have enough resources to maintain themselves above the poverty threshold if their children were not present but do not have enough to meet the additional needs of their children. This difference is reflected in the poverty thresholds for families of varying sizes. In 1995, the threshold was $10,205 for two nonelderly adults, and it was $15,455 if two children were included in this family. Using this terminology, an adult couple with an income of $12,000 in 1995 and two children would be classified as adult self-sufficient but not family self-sufficient because they would have had sufficient resources to exceed the official poverty threshold for two adults but not enough to meet the poverty standard for a family of two adults and two children. Clearly, the distinction being drawn here is only a first approximation, but it is a useful one.³

Using data from the March 1993 Current Population Survey (CPS), a monthly survey of about 60,000 households in the United States carried out by the Census Bureau, it is possible to determine the percentage of adults who live in families at each of these three levels of sufficiency.⁴ In 1992, some 10.2% of adults in families with children lacked adult self-sufficiency. Because 10.3% of adults without children are also classified as poor, it appears that adults who live with children are not more likely to be poor than a random sample of all adults. In addition, 5.5% of all adults with children were adult self-sufficient but failed to achieve family self-sufficiency. Based solely on the resources brought to the family by the adults, therefore, a total of 15.7% (= 10.2 + 5.5) of all adults with children did not meet the needs of their families and would have been counted as poor in 1992 were it not for government cash welfare programs designed for children. The impact of these cash programs is discussed below.

Why Are These Adults Poor?

The determinants of adult poverty can be classified into two general categories: (1) macroeconomic and demographic forces which affect the overall income distribution and (2) factors that affect an individual's earning capacity, such as education, age, and race.⁵

• Economic and demographic forces. Over the past three decades, there has been an increase in the inequality of earnings among workers, resulting in a larger proportion of the population in poverty. The rise in inequality might not have led to higher poverty rates among adults if it had been accompanied by a substantial rise in the average level of real (inflation-adjusted) earnings, but in these past two decades, average real earnings have not grown much. Traditionally, unemployment has been a major factor influencing the poverty rate,⁶ but despite the fact that unemployment has fallen by nearly one-third since 1983, the low and declining wages of less-educated workers have led to greater poverty.

The major demographic trends of the past several decades are dramatic growth in the proportion of women who are in the labor force and the entry of those born during the baby boom. Together, these two groups contribute to a younger and more female-intensive workforce. The young have less job experience and, thus, receive lower wages, and females traditionally have experienced lower earnings, so both of these demographic factors have tended to create greater inequality in earnings. With regard to family income, however, the contributions of women's earnings to two-income families may have partly offset the trend resulting from greater inequality of individual earnings.

• Individual earnings capacity. Education, race, and age are among the personal factors that most affect earnings and income; they play a role in determining which and how many families are poor. Education level is an indicator of market skills that yield higher earnings; age proxies for job skills acquired through experience; and race, because of discrimination, affects both job market opportunities and payoffs.

Table 1 demonstrates the association between each of these characteristics and an adult's ability to attain adult self-sufficiency. The education of the adults in the family is critical for the family income. The proportion of adults who are not in the labor force and the proportion who experience at least one period of unemployment during the year both decline dramatically as education rises. For example, the proportion of high school graduates who are not adult self-sufficient (10%) is less than half the proportion of nongraduates who are not adult self-sufficient (24%).

The education panel of Table 1 shows that the distribution of adults and of children by the education level of the primary person in the family are, surprisingly, almost identical.⁷ The age panel reminds us that children live with relatively young adults who have not typically reached their peak earning capacity and are (except for the retired elderly) relatively less likely to be adult self-sufficient; this is especially true for those under age 25, which helps explain in part the social concern about teenagers having children.

Race also has a strong relationship to poverty. As compared with whites, black adults have lower earnings on average and are more likely to be unemployed or out of the labor force. The race panel of Table 1 shows that black adults are three times as likely as white adults to have incomes that are too low to meet even the adult's needs in the family.

While each factor—education, age, and race—separately can greatly influence an adult's chances of being able to support the adults in the family, let alone the children as well, consider the chances of a young, black, high school dropout. An adult with these three attributes has a 15% chance of being adult self-sufficient. However, a young black who graduates from high school has a much higher (42%) chance of being adult self-sufficient.⁴

The Role of Federal Government Cash Assistance

As discussed above, in 1992, a total of 15.7% of adults who lived with children did not attain family self-sufficiency. Of these 15.7% of adults, only 1.3% were raised out of poverty by cash assistance from federal programs such as Aid to Families with Dependent Children (AFDC, welfare payments to low-income families with children) and Supplemental Security Income (SSI, payments to low-income persons of all ages with disabilities). Thus, even with cash assistance, 14.4% of all adults with children in 1992 remained in poverty. While the dollar amount of actual cash transfers to poor families that year was $20.7 billion, the "poverty gap"—the dollar amount needed to raise all poor families above the official poverty line—was $58.5 billion, more than twice the amount provided.^4,8

To this point, the focus of the discussion has been on poverty among adults who live with children. If children were randomly distributed among all adults with children, then the child poverty rate would be the same as the poverty rate of adults with children. However, the rate of poverty among children—21.9% in 1992—was much higher than the 14.4% poverty rate among adults with children. This 7.5 percentage-point difference results because poor families have more children per adult than the population as a whole. Calculations based on the March 1993 Current Population Survey show that poor families have 1.61 children per adult, which is much higher than the 0.93 children per adult in nonpoor families with children.⁹

The higher ratio in poor families is, in turn, attributable to two other characteristics of poor families. First, poor families with children have fewer adults than nonpoor families with children. For example, 55.7% of poor families with children have only one adult, while only 13.9% of nonpoor families with children have only one adult. The much discussed high rate of divorce and relatively high rate of nonmarital births both contribute to there being fewer adults in poor families with children. Second, poor families with children have more children on average (2.24 per family) as compared to nonpoor families with children (1.79 per family).

Most children who live with either a nonmarried or a divorced parent do, in fact, have another parent who lives elsewhere. If the family were thought of as a combination of those two units, the rate of child poverty might be substantially lower. Thus, the higher poverty rate for children in one-parent families reflects demographic circumstances, not necessarily the economic circumstances of all the relevant adult family members. This distinction underlies the policy efforts in recent years to tie the economic well-being of children to the economic circumstances of both of their biological parents.

Table 2 summarizes the reasons for child poverty. Nearly 10% of children would be poor even if children were distributed uniformly among adults. The reasons for that amount of child poverty, then, are directly related to the reasons for adult poverty—the skills and labor supply of workers and the market demands for labor of various types. Another 4.6% of children live in families in which the adults achieve self-sufficiency but do not earn or receive enough income to cover the additional needs of their children. An additional 7.5% of children are poor because they live in families with more children per adult than the average family.

This particular breakdown of the child poverty rate is but one of the many ways one might partition and think about the causes of child poverty. Because this dichotomy distinguishes between how adults fare in earning sufficient income for themselves and their children on the one hand, and how adults structure their families in terms of the number of adults and number of children on the other hand, it suggests how different social policies may affect child poverty.

Policies such as job training and education directed at increasing adults' earnings will increase their chances of providing for themselves and their children. Such policies can have a secondary salutary impact on child poverty in the long run if these more educated adults then choose to have fewer children. Of course, not all policies may have multiple impacts that reinforce one another. Consider the proposal to cap welfare benefits to a mother who has an additional child while already receiving assistance. If this "family cap" policy were successful in limiting the number of children born to the poor, it would lower the average number of children per adult in poor families and decrease child poverty by reducing the gap between adult and child poverty rates. However, it would also limit the effectiveness of cash transfers in aiding adults in meeting their family's needs. Unless adults met the increased needs of their families through increased earnings, adult poverty would rise, and correspondingly, so too would child poverty.