The impact of child poverty and family cash assistance programs has been rigorously studied by academics. While approaches and geography vary, the findings have been remarkably consistent: boosting children out of poverty with cash support enhances child well-being across a variety of different indicators.
The first section of this page details these findings by outcome areas, including brain development, education, health, crime, and long-term impacts. The latter half includes a short summary of some specific empirical studies that have been important in the field of child poverty and support research.
The negative side effects of poverty begin at a young age. One study found that children growing up in families experiencing poverty had reduced gray matter volumes in the frontal and temporal cortex and the hippocampus (Brito, 2014). The frontal cortex and hippocampus are directly connected to an individual’s ability to learn, suggesting that poverty may reduce a child’s ability to take in and process new information as early as age 4. The authors were able to build on these findings to estimate that the measures of gray matter in frontal and temporal regions accounted for between 15% and 20% of the income-related achievement gap in standardized testing (Hair, 2015).
Research from other authors have found that the reduction in brain activity may start at an even younger age. In 2013, a group of researchers used an EEG study, which is a test that detects abnormalities in your brain waves, to study 6 to 9 month old infants. The researchers found reduced high-frequency electrical oscillations in the frontal cortex of children from impoverished families (Tomalski, 2013).
Additional research has demonstrated that the cortisol, the area of the brain which handles stress, is heightened in children experiencing poverty (Chen, 2010). Dozens of other papers have found similar findings: In a 2016 literature review, Clancy Blair cites more than 60 studies that demonstrate a negative relationship between a child's brain development and poverty (Blair, 2016).
Because poverty has a negative impact on a child's brain development, it is not surprising that research has also documented a negative relationship between poverty and educational outcomes. In fact, the disparities are documented before children even begin their formal schooling. A 2010 study found that children living in poverty score significantly lower on measures of “vocabulary and communication skills, knowledge of numbers, copying and symbol use, ability to concentrate and cooperative play” compared to children from higher income households (Thomas, 2007).
The gaps between low and high income students persist throughout the education process with poor students on average underperforming across a variety of educational measures (Ferguson, 2007). Additional research has isolated poverty and demonstrated a causal relationship between income and educational outcomes. In a 2011 paper, researchers in Canada demonstrated how an expansion of Canada's child benefit led to an increase in student test scores. Research using the Earned Income Tax Credit within the United States found a similar causal relationship between cash and test scores (Dahl, 2012). Additional studies have found a positive relationship between family income supports and GPA, total educational attainment, and student behavior (Akee, 2010), (Aizer, 2016), (Cooper, 2017).
Research also shows mental and physical health benefits for children in families that receive income support. Cash payments have a larger impact on boys' physical health and girls' mental health (Milligan, 2011). Cash payments boost maternal heath as well. A 2017 paper found that $1,000 in income support reduces maternal depression by between 10 percent and 20 percent of a standard deviation and also leads to new mothers reporting higher levels of self-worth and happiness (Cooper, 2017).
Additionally, numerous studies have demonstrated that poverty has a negative impact on both parent and child stress levels. People experiencing poverty are often stressed about money and the other burdens of poverty and these adverse effects can be directly traced to the brain (Blair, 2016).
Because poverty has a substantial impact on a health outcomes, further research has shown that reducing child poverty through cash support reduces overall healthcare costs (Garfinkel, 2022).
In a 2008 study using data from profit sharing from a nearby casino, researchers at Duke University estimated that “an additional $4,000 per year for the poorest households reduces the chances of an adolescent committing a minor crime by 22 percent” (Akee, 2010).
Further research has reached similar conclusions. In a 2020 paper, Richard Dorsett examines the impact of the Alaska Permanent Fund Dividend (an annual installment of varied payments for Alaskan residents) on crime. Dorsett found that cash payments reduced crime across the state and estimates that the larger the payments, the larger the reduction in crime (Dorsett, 2021).
A 2022 paper attempted to quantify the social benefits from decreased crime and estimates that for every $1,000 of cash support to children, society saves $1,117 from decreased crime activity alone (Garfinkel, 2022).
With all the negative effects poverty has on a child, it is of no surprise that these burdens follow them into adulthood. Children that are born into poverty are more likely to be poor as adults (Isaacs, 2008).
In 2016 researchers were able to use administrative records of applicants to the Mothers’ Pension program—the first government-sponsored welfare program in the United States (1911–1935) to examine the lifetime impact of poverty and cash transfers. Because some families were randomly rejected from the program, the authors were able to compare individuals that were children in the families that received the cash and were lifted out of poverty to those individuals who did not receive the cash and were kept in poverty. The authors found that male children of accepted applicants lived one year longer than those of rejected mothers. Accepted applicants also obtained one-third more years of schooling, were less likely to be underweight, and had higher incomes in adulthood than children of rejected mothers (Aizer, 2016).
Some have argued that child benefits may negatively impact employment and workforce participation. However, empirical research does not back this assertion. A 2015 paper found that the Canadian child benefit decreased employment by 1.4 percent for married mothers but boosted employment by 2.8 percent for single mothers (Koebel, 2015). Similarly, in the US, economist Wei Zhang estimates that a $1,000 increase in the CTC would increase labor force participation by 1.1 percent among single mothers (Zhang, 2020).
A pilot program in Stockton, California, gave families $500 monthly unconditionally. Recipients saw a 30 percent increase in full-time work in just one year, verses just a 5 percent increase from the control group (SEED, 2021). While some other studies have found small reductions in overall working hours, they are primarily due to parents preferences to raise their children at home. Zhang found that a $1000 increase in the average CTC leads to a 13.4 percent increase in the probability of children being looked after by relatives.
All of the negative symptoms of child poverty listed above have a detrimental impact on our overall economy. A 2018 study found that the annual aggregate cost of U.S. child poverty is $1.0298 trillion, representing more than 5 percent of the gross domestic product (McLaughlin, 2018).
This paper uses a literature review to explore the causal impact of short- and long-term effects of cash transfers to families. Their research finds that for every $1,000 we spend on cash transfers for children, society receives $5,603 in benefits. They find that even households without children, who face an increased tax burden to fund a child benefit, are net winners due to large societal gains in crime reduction, increased productivity, and reductions in healthcare costs.
The American Rescue Plan increased the federal Child Tax Credit from $2,000 per child to $3,000 per child for children over the age of five and to $3,600 for children five or younger. They also removed the phase-in and started cutting monthly checks to parents across the income distribution. Using the Census Household Pulse, researchers at the Social Policy Institute found that families primarily spent the new payments on essential bills, as shown in the chart below.
America's birthrate has now fallen to approximately 1.7 births per woman. Any number below 2 means that, without immigration, a country's population will decline, resulting in a variety of economic problems. Lymon Stone at the Institute for Family Studies examined how cash policies can increase fertility. He found that an increase in the present value of child benefits equal to 10% of a household’s income can be expected to produce between 0.5% and 4.1% higher birth rates.” Stone found that average elasticity to be about 0.25 meaning that, based on Maryland's median household income of $84,000, a $100 monthly child benefit would increase fertility by 0.45 percent.
Updating a previous paper on the topic, the authors use over 61 empirical studies to conduct a literature review and examine the the impact of money on a child's development. They found that cash had a positive effect on GPA, test scores, and short and long term memory. Cash also had a positive impact on a child's social behavior and reduced physical aggression.
The paper finds that mothers benefit from cash support as well. $1,000 in income support reduces maternal depression by between 10 percent and 20 percent of a standard deviation. Mothers also report having a higher self-worth and happiness.
In 1911, the US established the Mother's Pension Program which provided cash payments to impoverished single mothers representing between 12 to 25 percent of family income for about 3 years. Researchers matched data from the program to the Census, WWII data, and death records to evaluate the long-term impact of the program. They found that "male children of accepted applicants lived one year longer than those of rejected mothers. They also obtained one-third more years of schooling, were less likely to be underweight, and had higher income in adulthood than children of rejected mothers."
While the research primarily explores long-term impacts, they also note that the Mother's Pension Fund resulted in a 50 percent decrease in under-nutrition and a 13 percent increase in income.
Advancements in technology have made it possible for researchers to disentangle complex interplay between genetic and environmental factors that influence a child's development. The authors of this paper conduct a review of literature discussing the link between a child's socioeconomic status and brain structure. They find that children experiencing poverty had reduced grey matter in their frontal and temporal cortex and the hippocampus, the parts of the brain responsible for cognitive thinking and memory.
Using panel data on almost 4,500 children and changes in the Earned Income Tax Credit, the authors find that a $1,000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run. Children from marginalized backgrounds experience even larger academic gains from cash support.
The author use changes in Canada's Child Benefit program to measure the impact of cash payments on child and parental well-being. The authors find that the child benefit program has significant positive effects on test scores, maternal health, and mental health. The paper also discusses interesting differences between outcomes for boy and girls. Cash payments have a larger impact on boys educational outcomes and physical health. However, mental health effects were stronger among girls.
Overall, $1,300 in payments raised math and vocabulary scores by 7.4 and 6.8 percent of a standard deviation, respectively.
In 1996 the Eastern Band of Cherokee Indians in North Carolina’s Great Smoky Mountains opened a casino and shared the profits with tribal families in the surrounding area. These new benefits provided the perfect opportunity for researchers to compare the outcomes of children in homes that did and did not receive the benefit. While the children are still being tracked, this paper concludes that an additional $4,000 per year for the poorest households increases educational attainment by one year at age 21, and reduces the chances of committing a minor crime by 22 percent for 16 and 17 year olds.
Before 2001, Manitoba Canada reduced a families welfare benefits dollar for dollar with the child benefit, essentially eliminating the benefit for many families. This changed in 2001, when Canada ended the clawback and guaranteed the benefit to low-income families. Researchers were able to use this policy change to isolate the impact of increased cash benefits for children. They found that increased cash lead to enhanced motor skills and social development among young children and and reduced aggression and anxiety among children ages 4-5.