Luxembourg Income Study Working Paper Series Working Paper No. 525 Keynes, Family Allowances and Post Keynesian Anti‐Poverty Policy Steven Pressman December 2009 Luxembourg Income Study (LIS), asbl KEYNES, FAMILY ALLOWANCES AND POST KEYNESIAN ANTI‐POVERTY POLICY Steven Pressman, Department of Economics & Finance, Monmouth University, West Long Branch, NJ 07764;
[email protected] 1. Introduction Family or child allowances are regular payments made to families on behalf of their children. They can be made either by the government or by private firms. Usually allowances are universal, made without regard to family income; all households with children below a certain age qualify for them. The payments are made to assist families with children by raising their income, and they are intended to help families support their young dependents. Another way to think about family allowances is that it is a policy that keeps families from being penalized because they have a large number of children and many mouths to feed. It is well‐known that poverty rates rise with the number of children in the household. According to the US Census Bureau (2008), for 2007 the official poverty rate for households without children was just 4.6%. In contrast, households with one child had a poverty rate of 12.5% and households with two children had a poverty rate of 16.9%. My own calculations for the United States, using the Luxembourg Income Study (LIS) and a relative definition of poverty, give similar results. The poverty rate for US households with just one child in 2004 was 15.8% and 18.3% for households with 2 children; but the poverty rate jumps to 30.7% for households with three children and to 44.9% for households with four children.