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Economic and Social Costs of Child Poverty Subject of House Committee Hearing

On January 24, the House Ways and Means Committee held a hearing to discuss the economic and societal costs of childhood poverty. The committee heard testimony from experts in economics and public health, and child advocates, about the direct and indirect costs of poverty, including reduced economic growth, increased crime, lower life expectancy, and educational achievement gaps.

Dr. Sigurd Nilsen, director of the Education, Workforce, and Income Security Issues division at the Government Accountability Office, said, “According to the Census Bureau, approximately 37 million people in the United States nearly 13 percent of the total population lived below the poverty line in 2005. This percentage was significantly larger for particular population groups, specifically children, minorities and those living in certain geographic areas such as inner cities.” He continued, saying, “Economic research suggests that individuals living in poverty face an increased risk of adverse outcomes, such as poor health and criminal activity, both of which may lead to reduced participation in the labor market.” Describing the factors that contribute to poor outcomes, Dr. Nilsen listed air pollution, risky behaviors, such as smoking or a sedentary life style, and difficulty accessing health insurance. Conversely, he said, “Some research has shown that increased availability of heath insurance such as Medicaid for low-income mothers led to a decrease in infant mortality.” He warned that the relationship between poverty and poor outcomes is complex “in part, because most variables, like health status, can be both a cause and result of poverty.”

“Most arguments for reducing poverty in the U.S., especially among children, rest on a moral case for doing so one that emphasizes the unfairness of child poverty, and how it runs counter to our national creed of equal opportunity for all,” said Dr. Harry Holzer, a professor at Georgetown University. He discussed his recent publication with the Center for American Progress, The Economic Costs of Poverty in the United States: Subsequent Effects of Children Growing Up Poor, in which he and three colleagues “reviewed a range of rigorous research studies that estimate the average statistical relationship between growing up in poverty…and one’s earnings, propensity to commit crime, and quality of health later in life.” He said the results suggest that the costs associated with childhood poverty total about $500 billion per year, or the equivalent of nearly four percent of GDP. He warned the committee that “these estimates almost certainly underestimate the true costs of poverty to the U.S. economy.”

Calling the report by Dr. Holzer “an exceptionally interesting product of sophisticated social science methods,” Dr. Ron Haskins, a senior fellow at the Brookings Institution and a senior consultant at the Annie E. Casey Foundation, said that “even if we reduce child poverty and prevent some of the costs childhood poverty impose on this economy, whatever actions we take to end poverty would themselves have substantial costs.” He said his concern is that many people think that poverty is a “random event” or “that the only difference between the poor and middle class is money.” To the contrary, “the poor are poor in large part because they make decisions that greatly increase the likelihood that they will be poor,” said Dr. Haskins. He emphasized two strategies for reducing poverty: increasing work levels and increasing marriage rates. In regard to the first strategy, Dr. Haskins touted the 1996 welfare reform law, saying that the rules were “drastically changed so that mothers on welfare had to look for work or have their cash benefit reduced or even terminated.” Based on these reforms, he added that “as many as two million poor mothers left or avoided welfare and found jobs…Child poverty declined for seven consecutive years beginning in 1993, falling by 29 percent over the period.” Dr. Haskins said, “Another decision that people make that greatly increases their odds of living in poverty is the decision to have a baby outside marriage. Children in female-headed families are four or five times more likely to be poor than children living with married parents.” He concluded his remarks, saying, “If we can increase the number of parents who decide to work, if we can encourage young people to marry before having children, and if we can help young people complete high school, or even achieve additional years of schooling beyond high school, we will greatly reduce poverty and realize the economic gains predicted by the Holzer report.”

Dr. Jane Knitzer, director of the National Center for Children in Poverty, provided some key facts on child poverty, including: 55 percent of low-income children have at least one parent who works full-time, 52 weeks per year; 20 percent of children under five live in poor families and in half the states, more than 20 percent of children under age six are growing up in poverty; and the rate of childhood poverty varies considerably among states, from 24 to 44 percent of all children in the state. Dr. Knitzer focused her testimony on the health and education of low-income children. She told the committee that there are dramatic differences in the early language development of children by income: “By the time children from middle-class families are in the third grade, they know about 12,000 words. Children in low-income families with undereducated parents have vocabularies of 4,000 words.” She said it is important to recognize that barriers to employment, such as low education, poor work histories, substance abuse, and domestic violence are also barriers to effective child development. Dr. Knitzer concluded by admitting that “the policy challenge is large,” but said that “we have data that says we can reduce the societal costs of child poverty across generations if we are smarter about making different kinds of up front investments in our public policies.”

David R. Jones, president and CEO of the Community Service Society (CSS) of New York, detailed his experience with poverty in New York City. “In 2005,” he said, “CSS issued a report that revealed 16 percent of young people in our city, ages 16 to 24, are neither enrolled in school nor employed…The report found that the city’s black and Latino youth particularly young men are twice as likely as whites and Asians to be out of school and out of work. This predicament is most pronounced in the Latino community, where four in 10 young men are disconnected.” He urged longer-term educational programs, saying that “short-term, superficial training programs don’t make up for 12 years of inadequate education.” He said that special focus must be placed on individuals who are jobless — that is, not those who are unemployed and actively seeking a job, but those who have “dropped out of the market.”

During questions, Rep. Pete Stark (D-CA) said it was “hard for [him] to believe” Dr. Haskins’ claim that raising the marriage rate to 1970 levels would result in a drastic reduction of child poverty. Rep. Stark noted that marriage rates were higher in 1960 than in 1970, but that childhood poverty rates were higher 26.5 percent compared to 14.9 percent, according to the Census Bureau.

Rep. Wally Herger (R-CA) asked Dr. Haskins if there was a trend toward more childbearing outside of marriage. Dr. Haskins said yes, that about one in four children now live in a single parent family and that those children are four to five times more likely to experience poverty. He said, “There is no doubt that if we did nothing else but work to increase marriage, poverty would drop substantially.” Dr. Herger said that his interest in marriage promotion was based on economic, rather than moral, terms. He said, “We’d like to work with you and others to make marriage more attractive to young men maybe through the tax code.”

Rep. Jim McDermott (D-WA) said that the conflict in Iraq costs $8 billion per month; he asked the panelists what they would do to combat child poverty if they had that amount of money. Dr. Holzer said the money should be spent on education, “not just pre-K but career and technical education linking people to good jobs.” Mr. Jones also recommended attention to career development, saying it would help make younger people more marriageable; without a job, he said, young people have little incentive to marry. Dr. Haskins suggested boosting the Earned Income Tax Credit (a refundable tax for low-income workers) to encourage employment. Dr. Knitzer said the money should be spent on early childhood education and initiatives to involve fathers in childrearing.

Chair Charles Rangel (D-NY) asked the panelists when the government last updated the definition of poverty. Dr. Haskins said that the definition was created in 1965, at the onset of President Lyndon Johnson’s war on poverty. In 1995, the National Academy of Sciences released a report that offered recommendations for improving the official measure of poverty. Dr. Haskins cautioned the committee that any definition change that included non-cash benefits such as food stamps would be unlikely to pass Congress, because any change in measurement would affect state subsidies for programs like school lunch.

Rep. Jim Ramstad (R-MN) asked Dr. Holzer what sort of faith-based initiatives might help combat child poverty. Dr. Holzer said that faith-based groups had been especially successful in prisoner transition and targeting high-risk individuals with educational and other forms of assistance before they were incarcerated.

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