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Understanding Recent Changes in Child Poverty Austin Nichols An Urban Institute New Federalism Program to Assess Issues and Options for States Changing Social Policies THE URBAN INSTITUTE Series A, No. A-71, August 2006 Understanding Recent Changes in Child Poverty Austin Nichols Over the past 10 years, U.S. child poverty the recent changes in child poverty. Ac- rates took two sharp turns: a major reduc- cording to the analysis, the 1993 to 2000 tion from 1993 to 2000 followed by a slight drop in child poverty is largely due to hike from 2000 to 2004. Both shifts have improvements in the job market, especially been even more dramatic for black and for less-educated workers. The economic Hispanic children. Such abrupt shifts offer downturn beginning in 2000 hit all fami- an unusual opportunity to tease out what lies, even those with more education, but factors contribute to changes in child the families of black children were hit poverty. Exploring the driving forces hardest. behind trends in child poverty offers Economic conditions, insights on policy, as well as on the well- being of children, since child poverty is Factors Affecting Poverty together with parental associated with many negative outcomes in later life—low earnings, reduced educa- Many factors affect child poverty, and it is education and work, tional attainment, teenage childbearing, natural to suppose that child poverty rates 1 change as the factors change. But the rela- are the dominant and physical and mental health problems. Prior research identifies three groups of tionships between the factors and child factors behind recent factors, all of which may be influenced by poverty rates may change over time. For public policy, that account for fluctuations example, as more families have an adult changes in child in child poverty: (1) changes in federal and with some college education, it is natural to suppose that child poverty would fall, but poverty. state economies; (2) changes in family char- acteristics, such as size and composition; the ability of college to lift a family out of and (3) changes in the behavior of parents, poverty might diminish at the same time. such as their work effort. For example, To ascertain which factors are responsible Blank and Blinder (1986) find that, histor- for changes in child poverty rates, this brief ically, changes in such economic factors identifies factors associated with child as unemployment rates can explain poverty and examines what has happened changes in the overall poverty rate well. to them in recent years. Then it assesses Lerman (1996) finds that the increased how child poverty rates would have share of families headed by single parents changed if the relationships between the can explain changes in the child poverty factors and child poverty rates had stayed rate between 1971 and 1989. Hoynes, Page, the same and attributes a portion of the and Stevens (2006) find that increases in change to each factor. This indicates which female labor supply and female-headed changes in factors are most responsible for households had offsetting effects on the the recent changes in child poverty rates. overall poverty rate. A simple look at trends in child This brief shows that economic con- poverty and unemployment rates over the ditions, together with parental education past four and a half decades suggests a and work, are the dominant factors behind strong relationship between child poverty recent changes in child poverty. Changes in and unemployment (figure 1), and it is true the share of families headed by single par- that families with a full-time worker are ents seem to have played almost no role in much less likely to be poor (table 1). 1 ASSESSING THE NEW FEDERALISM An Urban Institute Program to Assess Changing Social Policies FIGURE 1. Child Poverty and Unemployment Rates, 1959–2004 30 25 Child poverty 20 t n e c r 15 e P 10 Unemployment rate 5 0 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 19891992 1995 1998 2001 2004 Year Sources: BLS and Census published estimates (http://www.bls.gov/cps/prev_yrs.htm; DeNavas-Walt, Proctor, and Lee 2005) and author’s calculations. Work is affected by economic condi- labor force participation rates among single tions, of course, and by such policies as the mothers in the 1990s, though welfare Earned Income Tax Credit (EITC) and wel- reform and other policy changes played a fare reform. The EITC expansion in 1993 role (Meyer and Rosenbaum 2001). The was responsible for much of the increase in EITC encouraged more labor force partic- TABLE 1. Child Poverty Rates in 2004 for Subgroups, by Work and Family Structure Size of Subgroup Poverty Rate (Percent of All Children) (Percent) White Black Hispanic White Black Hispanic Any Adult Full Time 50.23 9.85 15.26 3.80** 13.34** 17.54** Both Parents Present 41.78 4.72 11.35 2.98** 7.34** 15.80** Any adult more than HS 34.14 3.43 5.06 1.79** 4.09** 6.09** All adults HS or less 7.64 1.29 6.29 8.29** 15.95** 23.61** One Parent 7.65 4.47 3.42 8.20** 20.36 22.92** Any adult more than HS 4.70 2.42 1.32 4.32** 10.52 12.16** All adults HS or less 2.95 2.05 2.10 14.39** 32.00 29.69** No Adult Full Time 8.28 4.87 4.02 49.17** 73.79 71.14** Both Parents Present 3.09 0.53 1.35 34.50** 57.83 57.93** Any adult more than HS 2.12 0.31 0.40 26.55** 56.20** 34.30* All adults HS or less 0.96 0.22 0.95 52.00 60.09 67.88** One Parent 4.80 3.72 2.43 59.22** 77.15 78.38** Any adult more than HS 2.36 1.28 0.60 47.03** 63.48 58.84** All adults HS or less 2.44 2.44 1.83 71.01** 84.32 84.74** Source: Author’s calculations from CPS data. HS = high school Notes: Sizes of subgroups sum to approximately 90 percent, and the excluded group is children of other racial and ethnic groups not tabulated. Tests of significance are for equality of proportions across white and black in white column, black and Hispanic in black column, and Hispanic and white in Hispanic column. * proportions differ at the 5% level; ** proportions differ at the 1% level. 2 An Urban Institute Program to Assess Changing Social Policies ASSESSING THE NEW FEDERALISM ipation by allowing workers to keep more Over the past 20 years, black children of their wages. The share of children in have been more likely than white children families with a full-time worker increased to live in families without a full-time between 1993 and 2000, and has since worker. In the period 1993 to 2000, how- fallen. Since the EITC did not disappear in ever, the difference shrank as black chil- 2000, this tax credit cannot explain both the dren’s families worked more. The pattern increase in work in the 1990s and the de- of improvement in educational attainment crease in work over the past four years. of children’s families has been similar Accordingly, we should not attribute too across races over the past 20 years. The much credit for the increase in work in the patterns over time in the share of children 1990s to the EITC. living with only their mothers are also sim- Educational attainment has increased ilar for white and black children, though over time, which may improve both wages changes are more pronounced for black and the work attachment of parents who children. are able to find better jobs. More work and Table 1 shows that the racial gap per- higher pay mean lower child poverty. sists when we examine the combined Poverty is also affected by family struc- effect of family characteristics. Among ture, which has changed dramatically over children in families with at least one full- the past few decades. The share of children time worker and both parents present, the living with only their mothers increased for poverty rate is more than twice as high for all children while the share of children liv- black children as for white children (7.34 ing with both parents decreased from 1980 compared with 2.98 percent). Hispanic chil- to the early 1990s, but both trends have dren have even higher poverty rates, five since leveled off. Family size has decreased, times that of white children (15.8 com- and age of parents has increased. pared with 2.98 percent). Among children Race is a powerful Looking at 2004 data, the most recent in families with at least one full-time predictor of child available, parents’ work effort and educa- worker and only one parent present, the tion are important determinants of child poverty rates of black and Hispanic chil- poverty status. 2 poverty, as are race and family structure. dren are two and a half times the rate for Children in families with at least one full- white children. time worker are substantially less likely to Among the more disadvantaged chil- be poor (7.6 percent are poor) than those dren whose families do not have a full-time without one (61 percent), and children in worker, the ratios of poverty rates differ families with at least one adult who has less by race, in proportional terms, but the more than a high-school degree are much differences in raw percentage points are less likely to be poor than those without often much larger.
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