Policies that reduce intergenerational poverty

Roughly one-third of children who grow up poor in the United States will also experience poverty as adults. Intergenerational poverty is a weight on the backs of millions of Americans, keeping many from achieving their full potential, for their own benefit and that of society.  Understanding the causes of intergenerational poverty, and implementing programs and policies to reduce it, would have important benefits for children and for the entire nation.

The Consolidated Appropriations Act of 2021 directed the National Academies of Sciences, Engineering, and Medicine to conduct a comprehensive study of intergenerational child poverty in the United States. The resulting report, entitled “Reducing Intergenerational Poverty,” was issued in September 2023.¹ The authors both served on the committee that developed the report, and we provide our perspectives here on some of its key messages.

Key facts about intergenerational poverty

Intergenerational poverty was defined as a situation in which individuals who grew up in families with incomes below the poverty line are themselves poor as adults. Data from two intergenerational studies provided very similar estimates of the fraction of children born into low-income households in the 1970s or 1980s who also had low household incomes in adulthood. As shown in Figure 1, about one-third of children from low-income households remained poor in adulthood. Racial differences in this rate were stark, with considerably more persistence of poverty among Black and, especially, Native American children, the least persistence among Asian children, and similar persistence rates for white and Latino children.

These data also showed that:

• More (40%) individuals with low household incomes in both childhood and adulthood are white than in other racial/ethnic groups. Although the rates of intergenerational poverty are lower for white than for Black and Native American children, Whites outnumber Black (34%), Latino (19%) and other racial/ethnic subgroups in the ranks of persistently poor children because they make up such a large share of the overall population.
• Low-income children of U.S.-born parents experience less intergenerational mobility than low-income children of immigrants from almost every country.
• An individual’s mobility is predictable by geography. Even within regions and individual communities, there are areas where low-income children tend to grow up and join the middle class, as well as areas where generations are more likely to remain mired in poverty. At the regional level, persistence rates are highest in the South and lowest in the Upper Midwest.
• The spatial patterns of economic mobility vary by racial and ethnic group; nonetheless, disparities in economic mobility between Black and white children persist within virtually every community with substantial numbers of children in both groups.

The drivers of intergenerational poverty

We investigated the factors that appeared most likely to generate intergenerational poverty and for which we might be able to develop policy prescriptions. We began by delineating seven key areas in which child, family, or neighborhood characteristics strongly correlate with the later success of the child:

• Child education and access to schools
• Child health and access to health care system
• Parental income/wealth and employment
• Family structure
• Housing and neighborhood characteristics
• Neighborhood crime and the criminal justice system
• Child maltreatment and the child welfare system

There were four areas with the strongest evidence for being key drivers of children’s long-term success:

1. Education and Skills: Educational attainment and occupational skills have large impacts on lifetime earnings. Achievement gaps (measured by test scores) in the educational process develop early in life, and these gaps go on to generate large disparities in high school and postsecondary attainment of children who grew up in low-income families relative to their high-income counterparts.
2. Child Health: Children growing up with low family incomes have worse health than other children, beginning even before birth and worsening as children age. These health disparities among children lead not only to greater disparities in adult health but also in education and earnings. Despite improvements from policy (like Medicaid and the Affordable Care Act), many poor children lack access to health insurance coverage. Access to nutritional programs (especially in summer) and family planning services is limited as well.
3. Parental Employment, Income and Wealth:

   a. Low wages and employment levels drive the relatively low earnings and family incomes of the poor, which limits the ability of families to invest in their children’s health and education and to live in safe neighborhoods with good schools. Further, a lack of affordable childcare is an employment barrier.

   b. Parental employment is important, but employment gains that are not accompanied by income gains seem to have little positive effects on children’s development.

   c. Family wealth is also highly correlated with later child outcomes; however, causal evidence on wealth effects is limited.

4. Crime and Criminal Justice Systems: Although crime rates have mostly fallen in the past three decades (despite a recent increase in homicides), violent crime remains relatively high in many poor neighborhoods, and exposure to violent crime has a negative impact on children’s long-term education and earnings. At the same time, adolescents who reside in poor neighborhoods experience high rates of juvenile detention and incarceration, which also have negative effects on their future outcomes.

Policies to improve long-term outcomes of poor children

The committee reviewed a great deal of evidence on the long-term impacts of various programs and policies on the outcomes of children growing up in poor families. We identified programs and policies supported by strong causal evidence—based either on randomized controlled trials (RCTs) or on natural (quasi-) experimental variation—of long-run impacts that improve the outcomes of these children when they become adults. In addition, we limited our lists of effective programs to those where there is at least some evidence of scalability—at a minimum, where programs were tested at multiple sites or where policies were tested and shown to have generated causal impacts.

With respect to our four major drivers, we identified the following policies and programs that have generated direct long-term impacts:

Regarding education

Recent research has consistently pointed to the beneficial impacts on educational attainment of increased funding for K-12 schools in poor districts. Evidence also supports policies that would increase the diversity of the teacher workforce—many children learn and attain the most when matched with teachers of a similar ethnic background. And research suggests that reducing the incidence of excessively harsh punishment of Black children (especially boys) would improve their longer-run outcomes as well.

An important policy goal is to increase college access for youth from low-income households and to give them a better chance of success while enrolled. In that context, we found that funding for effective forms of financial aid (such as the HAIL program in Michigan and the Buffett Foundation Scholarship in Nebraska) boosts enrollment in high-quality institutions and completion rates. Key support services, like guidance and case management, also raise completion for poor students.

We found that high-quality occupational training has lasting positive impacts on poor youth as well, especially on those who will not attend four-year college programs. These come in two forms: a) high-quality career and technical education (CTE), beginning in high school (e.g., Career Academies, technical high schools or pathway programs for grades 9-14, like P-TECH); and b) sectoral training, which equips low-income youth or adults with the skills they need for high-paying jobs in high-demand industries (e.g., Per Scholas, Year Up, and Project Quest).

Regarding child health

Given the strength of the evidence on the beneficial impacts of Medicaid on child and adolescent health, the federal government could consider ensuring that all poor parents and children have continuous access to Medicaid—including some populations (such as the undocumented) that sometimes lack such access. It is especially critical that mothers and infants have access to health care in the post-partum period. Access to nutritious meals for all children could be provided by expanding the Supplemental Nutrition Assistance Program (SNAP). Access to family planning services has proved its long-run value for child development as well.

Regarding parent employment and income

We found strong evidence that the Earned Income Tax Credit (EITC) not only raises parental earnings and after-tax income but also increases children’s educational attainment, leading to upward mobility. We developed ideas for how federal or state governments could make the EITC more generous—during the phase-in of the credit, in terms of its maximum level, and/or in the phase-out stage.

There is strong recent evidence that the 2021 extension of the Child Tax Credit produced large reductions in child poverty, but we have no evidence to date on its long-term impacts on children. We believe that considering some extension for parents with little or no earnings makes sense, when combined with a more generous EITC for working parents.

Regarding crime and criminal justice

A number of policies and programs appear to reduce crime in poor neighborhoods. These include: a) funding for community nonprofit institutions; b) funding for abatement of vacant lots and abandoned buildings; c) putting more police on the streets and requiring them to use cost-effective tactics, such as community policing. Gun safety regulations can also reduce homicide rates (if they can pass constitutional review).

What about racial disparities?

Poor Black and Native American children suffer from particular drivers that worsen their outcomes and diminish the likelihood that they will experience upward mobility and escape poverty as adults. Large racial disparities persist on all of the most important drivers discussed above and reflect historical patterns of exclusion and racism as well as contemporary barriers.

For example, Black and Native American children suffer worse health and have lower educational achievement than other children. Some of this is due to residing in highly segregated regions with low-quality schools, as well as to experiencing excessive punishment relative to other groups. Unemployment is nearly twice as high among Black adults as among white adults, and labor force participation among Black men is much lower than among their white counterparts. Black youth and adults, especially males, perpetrate and are victimized by higher rates of violent crime (especially homicides and robberies), but they also experience much higher levels of detention in their youth and a higher incidence of later incarceration.

Historical episodes of racism, such as the Dawes Act of 1887 (which regulated the land rights of Native Americans on reservations) and the 1921 Tulsa riots against Blacks, have led to lower education and incomes for these groups, and research has shown² that some of these effects persist today. We also have rigorous evidence showing that discrimination persists in health care, schools, housing, employment, and the criminal justice system. It should be noted, however, that some discrimination is “statistical,” meaning that real group characteristics are attributed to individuals by employers, teachers, or the police when clear evidence about those individuals’ personal skills or behaviors is not available. Descriptive evidence strongly suggests that “structural racism” persists, although clear definitions and direct causal evidence of its effects are only beginning to emerge.

At the same time, behavioral choices made by individuals in these groups when they face constrained opportunity—such as labor force nonparticipation and crime—worsen racial disparities in a range of outcomes, including employment and incarceration.

Fortunately, we also have clear causal evidence that several policies are effective in promoting the upward mobility of low-income Black children. For instance:

• Increasing K-12 spending clearly boosts the educational performance of Black children;
• monitoring and improving air quality improves their health;
• expanding the EITC for parents raises the eventual earnings of Black children; and
• reducing juvenile detention and incarceration improves the education and adult earnings of Black children.

Research priorities

In its efforts to identify promising programs and policies that would reduce intergenerational poverty, the committee was hampered by a lack of strong policy evaluation evidence. It identified three key research priorities for funders:

• Prioritize strong research designs that provide causal estimates of long-term program impacts;
• Set aside funding not only for rigorous small-scale experiments but also for replications and long-term follow-ups of promising programs at scale; and
• Fund research arms for specific communities at highest risk

Improving existing census, survey, and administrative data—linked for families over time and across subject domains—would also be invaluable for promoting needed policy research on intergenerational mobility. Specifically, the report recommends that the White House Office of Management and Budget facilitate research on economic opportunity, intergenerational poverty, and related topics; and it suggests the federal government should make available existing census, survey, and administrative data to researchers, in a manner that respects and protects the confidentiality of respondents’ data.

Conclusions

Children who grow up in low-income families are much more likely than other children to be poor when they become adults. This both violates the notion of equal opportunity and limits the future productivity of the U.S. economy.

The NAS report “Reducing Intergenerational Poverty” documents an exceedingly diverse set of factors that affect a child’s chances of experiencing intergenerational poverty. The good news is that recent policy research has discovered an equally diverse set of programs and policies that appear effective in disrupting the intergenerational cycle of poverty. None is a silver bullet, but evidence-based programs and policies in education, health care, employment/income, and criminal justice can all play an important role. Filling gaps in the long-run data available to the policy research community would help us add to this list. We hope the report spurs more research where needed and more policies to improve life outcomes for the nation’s children.