Running Head: LONG REACH OF FATHERS’ EARNINGS The long-reach of fathers’ earnings on children’s skills in two- parent families: Parental investments, family processes, and children’s language skills Natasha J. Cabrera University of Maryland, College Park Ronald B. Mincy Hyunjoon Um Columbia University Fragile Families Working Paper WP18-06-FF LONG REACH OF FATHERS’ EARNINGS 2 ABSTRACT Using a sample of 735 two-parent families drawn from the FFCWS, we examined the direct and indirect associations between fathers’ permanent earnings during the early childhood and children’s cognitive and behavioral outcomes at ages 5 and 9 through parental investments, family processes, and children’s skills at age 3. We found that fathers’ earnings in the early years were significantly related to children’s language skills at age 5 but not to aggressive behavior or to any outcomes at age 9. The association between earnings and language skills at age 5 and math and reading at age 9 were mediated by cognitively stimulating materials and children’s language skills at age 5. The effect sizes are small and the mediating effects of fathers’ earnings on reading and math are only for children of the highest earning fathers. For two-parent families, policies to increase fathers’ earnings alone will have little impact on children’s development. KEYWORDS: Early and middle childhood, FFCW, parental investment, coresidence Note: This work was done when Natasha J. Cabrera and Ron Mincy were Visiting Scholars at the Russell Sage Foundation in 2016. LONG REACH OF FATHERS’ EARNINGS 3 The long-reach of fathers’ earnings on children skills in two- parent families Policies and programs aimed at increasing men’s involvement in their children’s lives have focused on their ability to support them financially. To estimate income effects on children’s development. Researchers typically use Becker and Tones (1986) family investment model that couples pool their income and, as a unit, make decisions about spending time and money in purchasing the materials and services children need to develop. This approach is reasonable in single-mother households where typically the mother works and makes decisions about how to utilize her earnings and transfers. It may not be reasonable in two-parent households, especially among cohabiting couples, who are more individualistic and more likely than married couples to make household expenditure decisions using partial pooling or individual management strategies (Ashby & Burgoyne, 2009; Bennett, 2013). A substantial literature, summarized by Lundberg and Pollak (1996) questions the assumptions of unitary preferences and suggest that mothers and fathers might not pool their earnings or might do so partially, and might also have different preferences about how they spend time and money on children (Kenney 2006). Thus studies based on family income might give us insight into how household income matters for children but do not speak to whether increasing fathers’ earnings, net of other income, is a wise policy option. Disparate wage and earnings trends among men and women offer other reasons to focus on fathers’ earnings. Stagnation and decline in male wages, especially among those lacking four years of college, has helped to reduce the gender gap in earnings favoring men over the last five decades (Autor, Katz, & Kearney, 2006). Nonetheless, fathers’ earnings constitute a larger share of household income than mother’s or transfer payments in two- parent households (Kenney, 2006). Residual wage inequality among men, driven mostly by older and more-educated workers, has also risen (Lemieux, 2006). These trends suggest that younger and less-educated fathers, who cohabit rather than marry (Lerman, 2010), earn more LONG REACH OF FATHERS’ EARNINGS 4 than their peers by working longer hours. The resulting increases in household income might reduce fathers’ own time spent at home but might enable their partners’ to invest more time with children. For these reasons, fathers’ earnings could have important implications for child-related household expenditures, and therefore, child well being (Kenney 2008). The question of interest is, how do fathers’ earnings matter for children’s development? We draw from the extensive literature on the mechanisms linking family income to children’s development because, theoretically, fathers earning effects should largely resemble the effect of household income on child wellbeing. This literature has tested mostly parental investment and family stress pathways and is characterized by several limitations: (1) findings are inconsistent across populations and have included both single and two-parent (including cohabiting) families, leaving unanswered questions about variations across family type (Berger, Paxson, & Waldfogel, 2009; Yeung, Linver, & Brooks-Gunn, 2001); (2) studies have exclusively tested maternal pathways and hence it is unclear whether father’s earning influence children thorough their effect on paternal investments of time or money; (3) most studies have focused on parental investments (e.g., reading) that are directly linked to cognitive outcome and have paid less attention to other types of parenting practices (e.g., discipline) that are also implicated in development; (4) the direct and indirect effects across studies although of practical importance are relatively small, which suggests that other mechanisms might be at work. For example, the developmental cascades perspective that distal factors (e.g., income) influence later skills through their effect on early foundational skills (e.g., language skills) has not been explored in this literature (Forget-Dubois, Lemelin, Perusse, Tremblay, & Boivin, 2009; Masten & Cicchetti, 2010). Developmental cascade effects suggest that family income also operates through changes in children’s early skills. We address these limitations by replicating prior findings and extending the literature on income and child development in several ways. Using data from the Fragile Families and LONG REACH OF FATHERS’ EARNINGS 5 Child Wellbeing Study (FFCWS) we assess the (a) direct associations of fathers’ earnings during the early childhood to children’s cognitive and behavioral outcomes at ages 5 and 9; (b) extent to which these associations are mediated by parental investments in cognitive stimulating activities (investment pathway), parenting stress (family stress pathway) and, children’s early skills (developmental cascade pathway). The study will focus on children born two-parent families encompassing poor, near poor and working class families. By testing key mediating mechanisms that link fathers’ earnings and children’s outcomes, these models provide the underlying rationale for policies aimed at improving family and child well being. We focus on middle childhood because children at this age acquire the fundamental skills (e.g., reading, math, and social) they need to succeed in later schooling and adulthood. We focus on two-parent families because child-related investments are likely to be different from investments of single-parent households and because resident fathers are likely to exert much more influence over child-related expenditures and can spend much more time with their children than nonresident fathers. However, stagnant earnings among resident fathers in the last few decades may have altered investments of time and money in children, with consequences that have not yet been explored. The FFWCS is especially well suited to our study because it has rich information on parents’ earnings, child outcomes, and multiple aspects of the home environment. FFWCS also includes marital births, but over-samples births to unmarried couples (3600 non-marital, 1100 marital). Economic resources and children’s development A sizable interdisciplinary literature examining associations between family economic resources and children’s developmental outcomes has emerged over the last few decades (Auginbaugh & Gittleman, 2003; Berger et al., 2009; Blau, 1999; Duncan, Morris, & Rodrigues, 2011; Maurin, 2002; Shea, 2000; Taylor, Dearing, & McCartney, 2004). This LONG REACH OF FATHERS’ EARNINGS 6 work, which is mostly based on nonexperimental studies (but see Duncan et al., 2011), leads to several distinct conclusions. First, there is evidence of positive, though small, associations between permanent household income (i.e., parents’ total income) and children’s cognitive development (e.g., Berger et al., 2009; Duncan et al., 2011). Using American and British national datasets, Aughinbaugh and Gittleman (2003) found that for both countries family income has a positive effect on child cognitive and behavioral assessments but the magnitude of the effect is small relative to other family background variables. Taylor et al. (2004) found income effects that are comparable in magnitude to those of other studies. Raising permanent income by $13,000 per year would improve children‘s cognitive scores by 15 percent of a standard deviation (SD) and reduce behavior problems by 20 percent of a SD at age 3. Similarly, using the FFCWS dataset, Berger and colleagues (2009) found that raising permanent income by $9,000 per family per year yielded one fifth of a SD increase in PPVT scores for 3 year olds and an 11 to 23 percent of a SD decrease in behavior problems. Second, the largest associations between income and child outcomes occur in early childhood (e.g., Duncan, Ziol-Guest, & Kalil, 2010; Votruba-Drzal, 2006). Poverty experienced before the age of 5 is more strongly associated with