CHILD INDICATORS

Children in Poverty
Eugene M. Lewit
Eugene M. Lewit, Ph.D., is director of research and grants for economics at the Center for the Future of Children.
his Child Indicators section focuses on children in poverty. The annual Census Bureau report on income and poverty in the United States, issued in September 1992, revealed that 35.7 million people lived in poverty in 1991. Of these impoverished Americans, 13.7 million were children under 18 years of age. During 1991, some 943,000 more children lived in poverty than in 1990, an increase of 7.4%.1 Because the poverty rate tends to move with the unemployment ratewhich continued to rise in 1992 as it had since 1989it is likely that the number of poor children in the United States is substantially higher today than it was in 1991.
Poor children encounter multiple problems during their childhood. They are more likely than their more affluent counterparts to go hungry, to be inadequately housed and clothed, and to receive inadequate medical care as well as insufficient social support. Poor children face increased risk of death, infectious and chronic illness, and injury from accidents and violence. In-depth analyses of the effects of environmental stresses and family problems on childrens mental health suggest that in urban poverty areas, poor children who live with violence, deteriorating housing, and disrupted living conditions are at high risk for depression, low self-confidence, and conflict with peers and authority figures.2 Poor children face numerous obstacles in school and in their efforts to achieve economic self-sufficiency as adults. Some are trapped in a cycle of poverty because growing up poor leaves them vulnerable to the very conditionsteenage pregnancy, school failure, substance abusewhich may perpetuate poverty in succeeding generations.2 The growth in the number of children living in poverty over the past two decades (see figure 1) has grabbed headlines and fostered debate. Although several new policy initiatives have been implemented in an attempt to reverse or slow this trend, the growth in the population of poor children has itself been cited as evidence of the failure of long-established programs of aid to poor children such as Aid to Families with Dependent Children (AFDC).3 Because the current situation of debate without effective action may in part result from a lack of understanding of the make up of the population of poor children, we review how child poverty is measured and analyze the composition of the growing population of poor children. goods and services purchased for them by their families, the amount of goods and services provided by government, and the production of goods and services within their families.4 Official poverty statistics, however, are based on a somewhat arbitrarily determined definition of poverty developed by the Social Security Administration in 1964 and modified slightly in 1969 and 1980.1 Families and individuals are classified as being in poverty if their annual money income (including cash earnings, unemployment insurance benefits, cash benefits from other government programs, and other sources of regular nonearnings income) before taxes and other deductions falls below official poverty thresholds. These thresholds, which reflect differences in family size and composition (see table 1), are statistical constructs based primarily on the Department of Agricultures Economy Food Definition of Plan, the least costly of four nutritionally adequate food Poverty plans designed by the DepartChildrens economic well-be- ment in 1961. Because it was ing depends on the amount of determined in a 1955 survey Vol. 3 No. 1 - Spring 1993

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that families of three or more persons spent approximately one-third of their income on food, official poverty thresholds for families with at least three members were set at three times the cost of the Economy Food Plan. 5 This procedure for measuring the poverty status of the population was officially adopted in the mid-1960s as part of the war on poverty because official, uniform criteria were needed to measure how well the war was progressing and also to establish eligibility criteria for programs specifically targeted to assist the poor.6 Annual statistics on the size and characteristics of the poverty population are derived primarily from the Current Population Survey (CPS). In March of each year, the CPS includes supplemental questions on work experience, income, and benefits for the preceding year. These survey data and official poverty thresholds are used annually to describe the poverty population. Poverty thresholds are Table 1

adjusted each year by the annual percentage change in the Consumer Price Index. Poverty status is based on reported pretax money income received in the previous calendar year. The poverty status of children and their families is determined by total family income. The poverty status of children under 15 years of age living in foster homes, institutions, or not living with relatives for other reasons is not reported.1 (Accordingly, the total number of children living in poverty is somewhat underreported. Data reported herein are from the 1992 CPS and reflect the poverty status of children in families in 1991.)

One source of confusion about federal poverty measures is that they are used for different purposes. Federal poverty thresholds, which are Criticisms of the subject of this note, are used for statistical purposes, Official Poverty for example, to determine the Thresholds number and characteristics of persons in poverty. Federal The method the federal govpoverty guidelines, however, ernment uses for measuring are used for administrative the rate of poverty among chil-

purposes to determine eligibility for benefits under particular government programs. Thresholds and guidelines for families of different sizes are provided in table 1. Although thresholds and guidelines are somewhat different, they are based on a similar methodology for determining poverty status. Accordingly, changes in procedures for measuring poverty status statistically can have profound repercussions for program expenditures as shifts in poverty measures can affect eligibility for many large government programs. Some observers believe that reluctance to modify official measures of poverty stems in part from the budgetary implications of increasing the levels of poverty thresholds.6

Poverty Thresholds and Guidelines by Size of Family

Size of Family Unit
2 3 4 5 *Householder under 65 years Poverty thresholds and poverty guidelines are closely related but used for different purposes. For example in 1992, poverty thresholds, issued by the Census Bureau, are used with March 1992 survey data on 1991 income to describe the population living in poverty in 1991. Poverty guidelines for 1992, issued in February by the Department of Health and Human Services, however, are used to help determine eligibility for particular government programs in 1992. Source: U.S. Bureau of the Census, Current Population Reports, Series P-60, no. 181. Poverty in the United States: 1991. U.S. Government Printing Office, Washington, DC, 1992; Fisher, G.M. Poverty guidelines for 1992. Social Security Bulletin (Spring 1992) 55,1:43.

Average Poverty Thresholds for 1991

$ 9,165* 10,860 13,924 16,456

Poverty Guidelines for 1992

$ 9,190 11,570 13,950 16,330

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THE FUTURE OF CHILDREN - SPRING 1993 dren and the general population has been criticized almost since its inception. The most significant criticisms include: (1) inadequate adjustments for changing consumption patterns, inflation, and different family sizes and structures; (2) failure to include in income the value to recipients of in-kind benefits (food stamps, Medicaid, subsidized housing) received and taxes paid; (3) failure to reflect the value of leisure and assets; (4) the arbitrary designation of a particular income threshold to denote poverty; (5) failure to capture true cash income, especially nonreported income; and (6) failure to acfor substantial count geographic variation in the cost of Iiving.6A thorough critique of current procedures for measuring child poverty is beyond the scope of this report; however, the following brief examination of several critical issues should illustrate some of the concerns which arise in this area. Changes in Consumption Patterns One important problem with current poverty thresholds is that they are based on 1955 consumption patterns and thus may not adequately reflect the level of resources necessary for a minimally adequate standard of living for families with children today. Modifying the thresholds to reflect changing patterns of consumption could substantially raise the poverty thresholds and hence substantially increase the number of children in poverty.7 One such change might center on the proportion of the total family budget spent on food. Current thresholds are based on the 1955 survey finding that expenditures on food accounted for onethird of all expenditures by families. Today, however, food accounts for less than 18% of expenditures by low-income families. In Drawing the Line: Alternative Poverty Measures and Their Implication for Public Policy, Patricia Ruggles estimates that raising poverty thresholds from the current three times the cost of an inexpensive but adequate diet to more than five times the cost of such a diet would increase the poverty threshold by 70% for a family of four. This would have increased the number of children classified as poor by over 9 million, an increase of more than 70%, in 1987.6 Value of Benefits Another criticism of current procedures for measuring poverty is that they fail to take account of the effects of taxes, capital gains, and the value of noncash benefits on economic well-being. Criticism of current measurement procedures on these grounds have been most frequently expressed by those who think that these current procedures fail to adequately account for the value of the noncash benefits (food stamps, Medicaid and Medicare, housing assistance, school lunches, etc.) received by poor children and their families.3 In response to these criticisms the Census Bureau has begun issuing reports which attempt to measure the effects of benefits, taxes, and home ownership on poverty. A recent analysis, issued in 1991 for the 1989 calendar year, demonstrates that modifying the definition of income can have a substantial impact on childrens poverty rates.8 Under the current official definition of income, 19% of children lived in families with income below the poverty line in 1989. This percentage increases to 22% of all children under 18 years of age if government cash benefits are excluded from before-tax income, but falls to 15% if state and federal taxes are subtracted from income and the value of government cash transfers and noncash benefits (Medicaid, food stamps, school lunches), capital gains income, and the value of employer provided health insurance are added to income. Thus the effect of government tax and transfer programs is to reduce the poverty rate of those under 18 years of age by almost a third.9

Poverty Gap Because current procedures rely on income thresholds to denote poverty, they do not reflect variations in family income and may therefore give a misleading picture of the severity of poverty within the population of poor families. Statistics such as the poverty gap and income deficitthe amounts by which the incomes of poor families fall below poverty thresholdshave been used to measure the severity of poverty. In 1991, the average income deficit for all families with children was $6,022. This amounts to a deficit of $1,571 for each family member (children and adults) or a total poverty gap of $37.2 billion for all poor families with children.1 Despite these differences in the approach to defining poverty, most of the alternative measures of poverty tend to be highly correlated over time and are consistent in showing declining rates of poverty until the early 1970s, increasing poverty in the early 1980s, and increases again during the economic downturn which started in 1989.

Poverty Rates
Figure 1 illustrates trends in the number of children in families with incomes below official poverty thresholds. The 13.7 million children in poor families constituted more than 40% of the nations poor in 1991. The poverty rate for children the percent of children in families with incomes below the poverty level, 22% in 1991 has been consistently higher than the poverty rate for other age groups since 1975. Among poor children, more than 60% were white, 34% were black, and 5% were of other racial backgrounds. Children of Hispanic origin, who may be of any race, accounted for almost 22% of poor children in 1991. The poverty rate for whites (16%) is lower than the poverty rates for black and Hispanic children (46% and 40%, respectively). The very high rates of poverty among minority populations may have fostered

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Figure 1

Children Under 18 in Families with Incomes Below Poverty Thresholds in the United States, 1970-1991

Children are classified as poor if they live in families whose annual cash income is below official thresholds. Poverty thresholds reflect differences in family size and composition and are adjusted annually to account for changes in prices as measured by the Consumer Price Index. Poverty among children has increased since the early 1970s. Poverty tends to rise during recessions when unemployment increases and wages stagnate and fall during economic expansions when employment and wage rates rise. On balance, however, over the past 20 years the number of poor children has increased despite overall growth in the economy. This is generally viewed as cause for considerable concern. Although the rates of poverty among black and Hispanic children are two to three times higher than poverty rates among white children, the majority (60%) of poor children are white. An important factor in the growth in the number of Hispanic children in families below the poverty line between 1970 and 1991 was the doubling of the population of Hispanic families with children during that period. Source: U.S. Bureau of the Census, see note no. 1; U.S. Department of Commerce, Bureau of Economic Analysis. Survey of Current Business. Washington, DC: U.S. Government Printing Office, April 1992, p. c-25.

the notion that childhood poverty is largely confined to minority groups, but because whites are the largest population group, the majority of poor children are white.

bearing on child poverty. In single-female-headed housepart, because married-couple holds account for more than families with both spouses pre- 60% of all children in families sent have two potential (and living in poverty. Not shown in frequently actual) breadwin- the figure is that this effect cuts ners, poverty rates for children across all ethnic groups. in married-couple families are Among whites, children in sinFamily Structure much lower than poverty rates gle-female-headed households As illustrated in figure 2, family for children in families headed are almost five times as likely as structure has an important by single females. Children in children in married-couple

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THE FUTURE OF CHILDREN - SPRING 1993

Figure 2

Poverty Status and Family Structure of U.S. Children, 1991

Family structure is an important factor in child poverty. The overall incidence of poverty among children in female-headed families is five to six times as high as the incidence of poverty among children in married-couple families. In 1991, the majority of poor children (about 60%) lived in single-female-headed families. The increase in the proportion of families with children headed by single women from 12.6% of families in 1970 to 22.9% of families in 1991 accounts for much of the increase in child poverty during that period although it is not possible to say with certainty that child poverty would not have increased over the past two decades if the shift in family structure had not occurred. Poverty rates for children living in all other families are about twice as high as poverty rates for children in married-couple families. But relatively few children live in such families so that children in all other family types account for less than 4% of poor children. Source: U.S. Bureau of the Census, Current Population Reports, Series P-60, no. 181. Poverty in the United States: 1991. Washington, DC: U.S. Government Printing Office, 1992.

families to live in poverty. Poverty rates among black and Hispanic children in singlefemale-headed households are respectively 4.5 and 2.4 times greater than poverty rates for those in married-couple families. Almost 60% of black children live in single-femaleheaded families; because of the high rates of poverty experienced by children in families headed by single females, black children in single-female-headed families account for more than 85% of all poor black children.

differences between children who experience poverty temporarily and those who live in persistent poverty. So-called panel data studies which follow a sample of families over a number of years indicate that between 1968 and 1983 slightly more than one-third of all children experienced poverty in at least 1 year between their fourth and nineteenth birthdays. Almost 5% of children were poor for 10 or more of these years, but for more than 22% of children, poverty lasted for only 1 to 4 years.10 As illustrated in figure 3, Persistent and Transitory race has been identified as the Poverty most striking distinction beAggregate poverty statistics tween families whose poverty is and trend data can obscure persistent and those for whom

poverty is transitory. The average black child in the Panel Study of Income Dynamics spent 5.5 years in poverty as compared with an average of less than 1 year for nonblack children. Poverty also tends to be chronic for children in single-mother families, in families where the mother was never married or was a teenager when the child was born, and in families with a disabled head of the household.10 Transitory poverty for children is primarily related to parental unemployment and divorce. Figure 1 highlights the relationship between periods of economic recession and increases in the number of poor children. Poverty among

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Figure 3

Fifteen-year Poverty Experience of Children Who Were Under Age Four in 1968

Nonblack children

Black children
Data in this figure are from the Panel Survey of Income Dynamics (PSID) which traces the experiences of a group of the same children over a 15-year period beginning in 1968 when they were under the age of 4 years. Unlike Census Bureau data which present snapshots of conditions at the time when data are collected, the PSID data allow us to view the patterns of poverty experienced by individual children over a 15-year period. Race is an important determinant of the persistence of poverty among children. Over the 15-year period of this study, 75% of nonblack children were always above the poverty line while only 21% of black children escaped poverty. Five percent of black children were poor for the entire 15-year period of the study; no nonblack children were poor for so long a period. Less than 1% of nonblack children were poor for 10 to 14 years. On average, nonblack children in the survey experienced less than 1 year of poverty during the 15 years of this study while black children experienced more than 5 years of poverty on average.

Source: Duncan, G.J. The economic environment of childhood. Children in Poverty. A.C. Huston, ed. Cambridge, MA: Cambridge University Press, 1991.

182 white children is more responsive to cyclic fluctuations in the level of economic activity than poverty among black children. Poverty among black children is more persistent. The effects of transitory poverty on children have not been well studied. While most observers believe that transitory poverty entails fewer risks for children than chronic poverty, the dislocations, stress, and uncertainty attendant to large fluctuations in family income are likely to have a negative effect on children and families.10

THE FUTURE OF CHILDREN - SPRING 1993 contexts. Because poverty can result from a variety of causes, policies designed to reduce its impact must be diverse. Enhancing unemployment insurance and other safety net programs may be adequate for families who suffer transitory bouts of poverty during recessionary periods. Similarly, improved child support arrangements may significantly enhance the well-being of children who end up in single-female-headed families following divorce. On the other hand, such palliative measures may have little impact on the large population of children for whom poverty is persistent. Patricia Ruggles points out that the main reasons for measuring poverty are to identify people with unmet needs and to assess the effects of policies and programs on people in need.6 Analyses of the impact of government tax and benefit programs suggest that they raise the living conditions of a large number of poor children. However, data on the large and growing poverty population and poverty gap as well as the persistence of poverty among certain population groups suggest that new policy initiatives may be necessary to reverse the growth of poverty among families with children. To the extent that a lack of understanding of poverty statistics has interfered with the development of effective policies to reduce poverty among children, it is necessary to reach consensus on these measurement issues. Clarifying measurement issues may be easy, however, compared with the consensus-building that will be necessary to launch effective antipoverty policies and programs. Don Hoban assisted in the preparation of this article.

Conclusion
Childhood poverty is an important and growing problem in this country. But poverty is not a homogeneous condition. It is found in different levels of severity and duration and in different ecological

1. U.S. Bureau of the Census, Current Population Reports, Series P-60, no. 181. Poverty in the United States: 1991. Washington, DC: U.S. Government Printing Office, 1992. 2. Huston, A.C. Children in poverty: Development and policy issues in Children in Poverty. A.C. Huston, ed. Cambridge, MA: Cambridge University Press, 1991. 3. Rector, R. Americans poverty myth. The Wall Street Journal. September 3, 1992, at A10. 4. Fuchs, V.R., and Reklis, D.M. Americas children: Economic perspective and policy options. Science (January 2, 1992) 253:41-46. 5. A multiplier somewhat greater than three is used for smaller families and unrelated individuals to reflect the larger expenses they face. 6. Ruggles, P. Drawing the line: Alternative poverty measures and their implication for public policy. Washington, DC: The Urban Institute Press, 1990. 7. An increase in the cost of housing has had a major impact on patterns of consumption among poor families with children. In 1989, the governments estimate of the fair market rent for a two-bedroom apartment was more than half the poverty level threshold for a family of three. Other data suggest that almost two-thirds of poor families with children spent more than half their income on housing in 1987. In 1974, only a third of poor families with children spent over half their income on housing. Johnson, C.M., Miranda, L., Sherman, A., and Weill, J.D. Child poverty in America. Washington, DC: Childrens Defense Fund, 1991. 8. U.S. Bureau of the Census, Current Population Reports, Series P-60, no. 169. Measuring the effect of benefits and taxes on income and poverty: 1989. Washington, DC: U.S. Government Printing Office, 1990. 9. These statistics indicate that using a more inclusive definition of income reduces the poverty rate and that government programs are functioning as intended to reduce poverty. These computations, however, raise conceptual issues. One issue is whether the income thresholds that are used to demark poverty when cash income is measured before taxes should be used with after-tax income which includes nontaxed in-kind transfers. This dilemma is reinforced when official poverty guidelines, a variation of the official poverty thresholds, are used to determine eligibility for government programs for the poor. 10. Duncan, G.J. The economic environment of childhood. Children in Poverty, A.C. Huston, ed. Cambridge, MA: Cambridge University Press, 1991.