Child Poverty and Health: The Role of Income Support Policies

Abstract

Policy Points.

• Child poverty is associated with both short‐ and long‐term health and well‐being, and income support policies can be used to improve child health.

• This article reviews the types of income support policies used in the United States and the evidence of the effectiveness of these policies in improving child health, highlighting areas for future research and policy considerations specific to income support policies.

Child poverty is associated with both short‐ and long‐term health and well‐being. ¹ , ² Poverty affects child health directly through the experience of deprivation, such as through food insufficiency or lack of housing, but also indirectly through the availability of parental or community resources. ³ Economic resources also shape children's access to health‐promoting policies, like education, child care, parental leave, and health care, which affect both current and later‐life health and mortality. Many income support policies also reduce poverty and improve economic well‐being, which in turn improves child health. In this paper, I review the evidence on income support policies in the United States and their effects on child health. I focus on income support policies because there is a growing interest in considering how income policies, and basic income policies in particular, might be used to improve child health. ³ Although this review focuses on the US context, the implications of such policies are broadly applicable beyond the United States. The goal of this paper is not to conduct an exhaustive literature review, as this has been done elsewhere, ⁴ but rather to paint a broad picture of findings related to income support and child health. I focus my review on studies that take seriously issues of selection and causal inference, and concentrate on the biggest poverty policies that target families with children in the United States. I then outline policy considerations and areas where additional research is needed in order to understand how income support and poverty reduction might best support child health.

Structure of Income Support Policies in the United States

Income support policies can take many different forms. One approach conditions support on engaging in a particular behavior, known as a conditional cash transfer. Conditional cash transfers reward “good behavior”—say, getting regular health checkups or immunizations, or attending school—in exchange for income support. Conditional cash transfers are commonly used in low‐ and middle‐income countries, in particular, in Latin America and to a lesser extent in sub‐Saharan Africa. ⁵ Critics of conditional cash transfers suggest they are paternalistic and may reduce intrinsic motivation to engage in these behaviors independently. ⁶ Although common in many countries, conditional cash transfers are rarely employed in the United States.

Unconditional cash transfers, where cash is provided without any conditions, have been gaining popularity both the United States and around the world. ⁴ An advantage of unconditional cash transfers is that they are typically less expensive to administer than other income support policies where additional infrastructure may delay aid. ⁷ Cash also provides families with flexibility to address their specific needs, which may more effectively target hardships. ⁸ Yet, one of the biggest critiques of unconditional cash transfers is that they may fuel dependence on the government by disincentivizing employment. ⁹ Additionally, unconditional cash transfers raise concerns about the use of cash, especially if money is spent on drugs or alcohol.

Despite their rising popularity and the many ongoing experimental studies of unconditional cash transfers (e.g., Baby's First Years, Open Research, Compton Pledge), fully unconditional cash transfer programs are also rare in US social policy today. (See https://basicincome.stanford.edu/experiments‐map/ for a list of some of the previous, current, and proposed programs.) Rather, most income supports are provided through in‐kind transfers or cash transfers that are work contingent. In‐kind transfers (like food stamps or housing vouchers), also known as consumption‐based transfers, are those that provide goods or services for free or at a reduced price. The advantage of in‐kind transfers is they provide individuals with basic necessities such as housing, health insurance, or food. However, in‐kind transfers constrain spending, providing families with little flexibility to purchase other necessities. Additionally, in‐kind programs require program infrastructure, which can be expensive to administer. ¹⁰

Work‐contingent cash transfers (or earning supplement programs, like the Earned Income Tax Credit or Temporary Assistance for Needy Families) provide families with more flexibility to use money as they see fit, while also avoiding potential concerns about fueling government dependency as they require individuals to work. These types of cash transfers are typically less expensive to administer than in‐kind programs as they require less oversight. However, by conditioning on work, those families that might need assistance the most—those that do not work—are left out of these safety‐net policies. Similarly, because they provide cash, work‐contingent cash transfer policies in theory could raise concerns about how the money is used; however, in practice this concern rarely enters the political discourse in the United States.

What Do We Know About US Income Transfer Policies and Child Health?

In‐Kind Transfers and Child Health

The US social safety net relies heavily on in‐kind transfers. Although there are many in‐kind programs, here I limit my discussion to the largest policies: food assistance (Supplemental Nutrition Assistance Program [SNAP]/food stamps, school breakfast and lunch), health insurance for children in low‐income families (Medicaid/Child Health Insurance Program [CHIP]), and housing assistance (housing vouchers and public housing). Many studies show that food assistance programs reduce food insecurity and poverty. ¹¹ In 2020, food assistance programs lifted about 1.6 million children out of poverty. ¹² SNAP reduces food insecurity, which is linked with better child health and well‐being. ¹³ Additionally, SNAP improves birth outcomes and children's health, ¹⁴ and children who received SNAP have better health outcomes as adults. ¹⁵ , ¹⁶

Housing assistance, such as vouchers to purchase housing, Section 8 project‐based vouchers or public housing, also lifts many children out of poverty—about 615,000 in 2020. ¹² Evidence of the effects of housing assistance policies on health is mixed and less robust. ¹⁷ Some studies find evidence of negative effects of housing vouchers on health, ¹⁸ while others find no effects. ¹⁹ Studies also find heterogeneous effects by child gender, finding small reductions in mortality for girls ²⁰ as well as positive effects on girls’ mental health but not boys’. ²¹ , ²² Thus, it is hard to draw strong conclusions from the current evidence on housing assistance and child health.

Much more clear evidence is available for Medicaid and CHIP. Although Medicaid and CHIP are not included in measures of poverty, estimates suggest that were the costs of health insurance included, nearly 3.9 million children would be lifted out of poverty. ²³ Many studies show that Medicaid and CHIP expansions have significantly reduced uninsurance among children ²⁴ and have had positive effects on health outcomes for children. ²³ Medicaid reduces ¹² infant and child mortality, ²⁵ , ²⁶ improves child health, ²⁷ reduces preventable hospitalizations, ²⁸ reduces mortality, ²⁹ and improves health and economic well‐being in the long term. ³⁰ , ³¹

In sum, although the literature is clear that both food assistance and health insurance policies improve child health, the evidence for housing assistance is less clear. Nonetheless, in‐kind programs can, and do, improve child health.

Cash Transfers Conditioned on Work and Child Health

The two main work‐contingent income support policies in the US are Temporary Assistance for Needy Families (TANF) and the Earned Income Tax Credit (EITC). TANF is basic cash assistance provided to families in need. TANF lifts about 150,000 children out of poverty, ¹² thus it is relatively limited in scope (about 12 million children lived in poverty in 2020). ³² TANF was implemented in 1996 as a reform to the then welfare program Aid to Families with Dependent Children (AFDC). TANF policy changes reduced the scope of cash assistance provided under AFDC, adding work requirements, time limits, and other policies to the basic cash assistance program. TANF also devolved program administration from the federal government to states, resulting in significant heterogeneity across states and programs in terms of rules for access to TANF. As a result of these changes, the cash assistance component of TANF has been dramatically reduced (from about 80% of eligible families receiving cash assistance under AFDC to only about 20% today) ³³ and, thus, we know little about the effects of the cash component of TANF on child health.

In contrast, a huge body of literature has examined the effects of the EITC on a variety of well‐being measures. The EITC, a refundable tax credit, is the largest work‐conditioned cash transfer program to families with low incomes in the United States. Unlike TANF, the EITC lifts many children out of poverty, more than 4 million children in 2020. ³² The EITC reduces economic hardships ³⁴ , ³⁵ , ³⁶ and poverty during childhood, ³⁷ effects that are particularly pronounced in early childhood (ages 0–5). ³⁸ In addition to improving economic well‐being, studies show that EITC lowers the incidence of low birth weight, ³⁹ , ⁴⁰ , ⁴¹ , ⁴² , ⁴³ and increases general child health, ⁴⁴ , ⁴⁵ although the evidence on child obesity is mixed. ⁴⁴ , ⁴⁶ The EITC also improves children's educational outcomes, ⁴⁷ , ⁴⁸ , ⁴⁹ reduces child maltreatment, ⁵⁰ and improves maternal physical ⁵¹ and mental health. ⁵² Exposure to the EITC in childhood also reduces adult poverty, ⁵³ improves self‐reported health and obesity, ⁵⁴ and delays first births in early adulthood. ⁵⁵

Because the EITC is conditioned on work, and many studies show it is effective at moving mothers into the labor force, ³⁷ , ³⁸ , ⁵⁶ , ⁵⁷ it is difficult to disentangle the effects of the cash transfer from employment effects. Additionally, by being conditioned on work, it excludes those households with children who are arguably the most needy—whose parents are not working. Thus, while the EITC has been very successful in providing low‐income families with much‐needed additional income, it is hard to know if the lump‐sum cash transfer or the additional income from work in combination with the transfer is particularly effective at improving child health. Research that can disentangle these two effects is needed to really know how best to support families with children.

Cash Transfers Not Conditioned on Work: A Brief Experiment

In 2021, as part of a package of COVID‐19 relief policies, the United States engaged in a brief experiment of providing basic cash assistance to families with children without conditioning receipt on employment. Under the American Rescue Plan Act, Congress reformed the Child Tax Credit (CTC), a refundable tax credit, to mirror a child benefit or a child allowance, common in many European countries. ⁵⁸ The 2021 CTC temporarily removed the earnings minimum (and the phase‐in rate) and provided nearly all families with children with a monthly payment of $250‐$300 per child for six months. Prior to the temporary reform, earnings minimums and phase‐in rates meant that 35% of US children were either ineligible for the CTC or received only a partial refund of the CTC, disproportionately excluding families that were Black or Hispanic and those living in poverty. ⁵⁹ Evidence of the effects of the 2021 CTC is still limited, but quasiexperimental studies have found that the temporary credit reduced food insecurity among families with children ⁶⁰ , ⁶¹ and improved their ability to meet expenses. ⁶² Some evidence suggests that the CTC may have had beneficial effects on parental mental well‐being, ⁶³ , ⁶⁴ whereas other studies find no effects. ⁶⁵ , ⁶⁶ Evidence from a similar benefit in Canada suggests that policies like these may have beneficial effects on maternal and child health. ⁶⁷

Unfortunately, the 2021 CTC was short‐lived and many economically vulnerable families did not receive monthly payments for which they were eligible, because they did not file taxes, had a change in living arrangements (that meant the child was not on their prior tax filing), or because they experienced some other tax filing error. ⁶⁸ , ⁶⁹ , ⁷⁰ Additionally, the 2021 CTC was implemented during a global pandemic, when the federal government put forth a robust policy response (e.g., expanded SNAP benefits, stimulus checks) to help families avoid extreme hardships, but also coincided with a period of high inflation. Thus, more research is needed to understand what would be the effects of a fully unconditional cash transfer to families with children during less tumultuous times.

Cash Transfers and Child Health: Other Programs

Although unconditional cash transfers are relatively uncommon in US social policy, a number of studies and experiments have considered the effectiveness of unconditional cash transfers. Baby's First Years, an ongoing randomized controlled recurring cash transfer study, found some suggestive evidence that the transfers increased infants’ brain activity in areas correlated with language, cognition, and socioemotional well‐being. ⁷¹ This study also found evidence that the cash transfer increased parenting time in developmental activities. ⁹ The negative income tax experiments, conducted several decades ago by the US government, examined the effects of unconditional cash transfers and found that the cash transfers reduced low birth weight ⁷² and improved educational outcomes in children. ⁷³ , ⁷⁴ Research on casino openings and regular cash transfers to US tribes have shown that cash transfers improve mental health and reduce substance use of parents ⁷⁵ and children in the short ⁷⁶ and long term, ⁷⁷ and improve children's behavioral and emotional well‐being. ⁷⁸ Evidence from the Alaska Permanent Fund, a fund paid as an annual lump sum to all Alaskan residents, indicates the program reduces low birth weight. ⁷⁹ Lastly, the Family Reward program, two cash transfers that were conditioned on educational, work, and health outcomes, had few health effects. ⁸⁰ , ⁸¹ , ⁸²

Other Important Income Support Policy Considerations

The weight of the evidence in the United States suggests that income support policies, be they unconditional, work‐contingent, or in‐kind, improve child health and reduce poverty. ⁸³ However, questions remain about the best, or most effective, approach to using income support policies to reduce child poverty and improve child health. In order to understand whether income support policies are more effective when they are in‐kind versus cash, research needs to compare these two approaches, although this is rarely done. ⁸⁴ Another key challenge is determining what outcomes we expect to change. An advantage of cash (over in‐kind or a conditional transfer) is that families can use it in ways that are meaningful or needed by them—but this can make it challenging for researchers who study the effectiveness of cash. ⁸⁵ , ⁸⁶ , ⁸⁷ , ⁸⁸ Researchers need to consider new ways to measure outcomes, perhaps adaptively, where they evaluate different outcomes for different families, to focus on studying effects on outcomes that families say are important to improve after receiving cash transfers. ⁸⁹

In the United States, work‐contingent policies are very popular, as voters and politicians tend to identify the working poor as deserving of assistance. Yet research also shows that those who are left out of these work‐contingent policies are often Black and Latinx families, ⁵⁸ who are frequently excluded from labor market opportunities due to structural and historically racist policies. ⁹⁰ Thus, although work‐contingent policies like the EITC lift many families out of poverty, they are limited in their ability to help reduce inequality. If income support policies really want to target children in need, policies like the 2021 Child Tax Credit that provided support to all families with children are likely to do much more to improve child health than those that are work‐contingent.

An ongoing area of debate among those interested in using cash transfers to reduce poverty is optimal frequency and size of cash assistance. There is some evidence that suggests that households use monthly payments for different types of expenses than lump‐sum payments, but both are linked with better outcomes for families. ¹⁰ Few studies have compared lump‐sum versus monthly payments (or both) in the United States. Research that can compare both approaches is needed, although one study, the Compton Pledge, is in progress. ⁹¹ In terms of the size of transfers, in the United States, transfer sizes tend to be modest, whereas in many low‐ and middle‐income countries, where studies show large effects on economic well‐being and mental health outcomes, cash transfers are often very large, multiple times the annual income of households. ¹⁰ This makes it difficult to extrapolate to the United States, where transfers of these sizes would be cost prohibitive. ⁹² However, even relatively small transfers, like the 2021 CTC and SNAP, improve child outcomes.

Finally, other questions remain regarding the most effective way to implement income transfer policies, such as the best approach to administering such policies (e.g., through the tax system or a government agency), the level of administration (federal, state, local), and the extent to which programs should be targeted (by income or children's developmental age). More universal policies reduce stigma and may have larger effects, but also are more costly than those that are more targeted. Federal cash assistance policies (like the EITC or SNAP) tend to provide more consistent assistance across populations; however, in the past few decades there has been increased push in the United States to allow states to administer cash assistance programs with the idea that states can tailor programs to their communities. This push has led some states to provide more generous income support benefits while others provide less, which impacts their effectiveness. Many local governments are also currently running small basic‐income pilot programs to test the effectiveness of cash. The advantage of these programs is that they provide the opportunity for communities to help develop these programs and to determine desired outcomes. The disadvantage is they are small and highly targeted and unlikely to yield large‐scale changes in child well‐being (at the current scale).

Despite many unanswered questions regarding the best approach to providing income support policies, it is clear that these types of policies improve child poverty and, in turn, child health in both the short and long term. Future research that can better compare across income support approaches, to better inform policy design, will be important in order to tackle child poverty and improve child health.