The United States has a higher poverty rate than almost any rich nation in the world. According to the official poverty measure (OPM), the rate has remained more or less stable since the late 1960s, at around 15 percent. It had fallen sharply before that from nearly 25 percent, showing the war on poverty did indeed work in the 1960s. Measured properly, poverty fell even more in ensuing years due to new social policies. But it remains much too high.
Child poverty—those under 18—fell in the 1960s as well, but unlike the poverty rate overall, it hasn’t stayed flat, instead rising significantly under Ronald Reagan. It dropped again during the few years of the Clinton boom but has recently risen to around 20 percent. In other words, according to the OPM, one out of five of our kids lives in poverty at any point in time, the highest rate in the rich world.
What’s more, deep poverty in America for children is at catastrophic levels. According to the OPM, the rate of children who live at half the poverty line has risen sharply since 2000 to nearly 10 percent. Some analysts attribute this to the welfare reforms in the mid 1990s, when TANF replaced its more generous predecessor, Aid to Families with Dependent Children (AFDC).
Even more troubling, extreme poverty in the United States—the number of people who live on 2 dollars or less per person per day—has also been on the rise. The rate has shot up since the year 2000, with about 1.8 million households, including 3.7 million children, living in extreme poverty in 2013, without counting government benefits. Under the most conservative estimate, with all benefits included (and in-kind benefits counted as cash) 613,000 households, including 1.17 million children, live in extreme poverty today.
U.S. Poverty in an International Context
Examining LIS data, which includes social transfers, the U.S. poverty rate in 2010 was the highest among rich nations, using a relative poverty threshold of 50 percent of the median income. The child poverty rate in the U.S. was also the highest, though it was comparable to the rates in Spain and Italy. Notably, child poverty was lower than general poverty in the United Kingdom, Denmark, Finland, Norway, due in no small part to each country targeting benefits to families with children. In comparison, the rate of child poverty in America is significantly higher than the general poverty rate.
A New Measure Reveals That Child Poverty Is Not Inevitable
The OPM, which was devised in the 1960s, when spending norms were very different, is a poor measure of poverty. It does not adjust for geographic cost of living and, most notably, does not include any government taxes or transfers. In 2010, the Census Bureau released an alternative, the Supplemental Poverty Measure (SPM), which sought to correct for these distortions and also to deduct work-related and medical expenses. The SPM also updates the the poverty threshold to reflect contemporary needs.
Using the SPM, it is now easier to quantify the effects of major social programs. Based on a study done by researchers at Columbia University that extended the SPM to measure historical poverty data, it’s possible to see how anti-poverty programs like SNAP, the EITC, and Social Security cut poverty over time.
The graph above reveals that child poverty would be significantly higher without these taxes and transfers. In 2012, the cumulative impact of these programs was to cut child poverty by nearly 12 percentage points, to 18 percent. Unfortunately, this is still much too high.
As we’ve seen, the United States’ high child poverty rate, compared to other nations, is a direct consequence of its social policies. The question isn’t whether government programs can cut poverty, but what types of policies are effective. While in-kind benefits like SNAP and tax credits, such as the EITC have proven to be hugely important, as the SPM measures show, the effects of policies that transfer cash directly to parents without conditions have been largely neglected by policymakers.
This is problematic, as there is strong evidence showing the important benefits that cash alone can have for children. Multiple studies such as those by Pamela Morris and Greg Duncan, and other researchers show that income is correlated with parental emotional well-being, child achievement, and health outcomes. In addition, poor children are more likely to repeat grades, have asthma, and suffer from a learning disability. They are far more likely to experience damaging psychological stress than non-poor children, such as abuse, neglect, witnessing violent crimes, or hearing gunshots.
Careful measures on the impact of increases in income alone show that boosting income has a statistically significant effect on graduation rates, reading and math scores, and school attendance. For example, a study by researchers at Duke University that analyzed a North Carolina Cherokee tribe that distributed $4,000 annually to each adult after opening a casino found that for adolescent children, school attendance and graduation rates increased, while criminal behavior and drug use decreased.
How Policy Can Help
Cash allowances, a common benefit in the U.S.’s industrialized counterparts, is an example of a policy that could cut child poverty rates significantly. Such allowances generally work by transferring a weekly or monthly sum of cash to parents per child in order to alleviate the costs of childrearing. A study done by sociologist Jane Waldfogel at Columbia University shows that after a large increase in the United Kingdom’s child allowance in 1999, child poverty was reduced by 53 percent in the following decade, based on an absolute measure of poverty.
A high priority should always be the creation of jobs with a decent wage. However, Britain’s demonstrated success affirms that we also have the ability to cut child poverty through more vigorous social policies. In addition to cash allowances, other options include expanding SNAP and the EITC or making the Child Tax Credit fully refundable (so that those without an earned income would still receive the benefit). Increased funding for successful home visitation programs, such as Nurse Family Partnership and Early Head Start, and investing in universal pre-K education would help significantly as well.
With several proven solutions available, the tragedy of our country is not that child poverty exists. It is that we have the means to reduce it, yet we choose not to.