The Hutchins Center Explains: Why programs for young children are long-term investments
There is mounting and dramatic evidence that transfers to low-income families early in children’s lives have impacts that last well beyond the childhood years. As Kristin Butcher argues in a Hutchins Center Working Paper, work from across disciplines has developed a robust body of research indicating that children’s environment in the prenatal, neonatal, and early childhood periods can profoundly affect the capacities that children develop. These capacities persist into adulthood, affecting earnings, health, and other life outcomes.
1. What adverse in utero and early childhood circumstances have been shown to affect adult outcomes?
A number of factors during pregnancy and early childhood have been linked to adult earnings, educational attainment, and health outcomes. They include:
- Stress during pregnancy: Children of mothers who had higher levels of the stress hormone cortisol during pregnancy have worse health and lower educational attainment, compared to their siblings who did not have high level of cortisol present during pregnancy.
- Low birthweight: Even within twin pairs, having higher birthweight is associated with higher IQ, higher likelihood of high school completion, and higher earnings as an adult.
- Poverty during the early years: Even after controlling for income later in childhood, poverty before age 5 is associated with lower adult earnings and work hours. Neuroscience research shows that there are differences in the brain structures of children living in poverty that are large enough to explain much of the effect of poverty on achievement.
2. Is there evidence that interventions for low-income children have a lasting impact on adult outcomes?
Yes. Evidence suggests that programs targeting low-income families with children improve long-term health, education, and employment prospects.
In-kind benefit programs. Programs like SNAP and Medicaid improve early childhood environments and have long-lasting positive effects on a range of adult outcomes, including:
- Health: For families eligible for SNAP (formerly known as food stamps), researchers have found that children who were in the prenatal period or under 5 years old when their mothers began receiving SNAP have better health and economic outcomes as adults than those whose mothers did not receive the benefit, including lower incidence of metabolic syndrome and, for women, better self-reported health. Access to food stamps for mothers in their last trimester of pregnancy also lowers neonatal mortality and increases birth weight. Medicaid eligibility early in life also improves adult health, lowering rates of obesity, disability, and adult mortality.
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- Education: Medicaid and Food Stamps also affects educational attainment. Access to food stamps during childhood increases the probability that girls in disadvantaged families complete high school. Children who had access to Medicaid or the State Children’s Health Insurance Program (SCHIP) at birth have improved scores in 4th and 8th grade reading compared to those who did not have access to the program.
- Employment/Wages: Food stamps during childhood also lead to greater economic self-sufficiency as adults, defined as greater educational attainment, higher employment and earnings, and less reliance on welfare programs. Medicaid eligibility during childhood also provided long-run economic benefits, increasing income and decreasing EITC receipt during adulthood.
Cash benefits. Programs like the Child Tax Credit and the Earned Income Tax Credit, which provide cash benefits to families, also have long-lasting positive effects on outcomes:
- Health: The EITC has a major impact on infant health. For single mothers with low education, a $1,000 increase in the EITC income reduces the incidence of low birth weight by between 7 percent and 11 percent. Numerous studies have shown that low birth weight has significant and deleterious effects on later-in-life outcomes.
- Education: Researchers have found that for each $1000 credit to the family, a child sees gains of 6% of a standard deviation in both reading and math scores, and is about 2 percentage points more likely to complete high school.
- Employment/Wages: These effects on test scores suggest that a $1000 increase in the EITC can raise a child’s lifetime earnings by half a percentage point.
Cash transfers may also improve long-term outcomes in other ways. More cash for parents may lead to higher spending on enrichment activities or a reduction in work hours that can increase time spent with young children, which in turn can positively influence that child’s development.
3. Does it matter when transfers occur? That is, does the age of the child at the time of intervention affect adult outcomes?
One conclusion that jumps out from all of these studies is that timing matters. Helping children in their earlier years seems to have a larger beneficial impact on long-run outcomes than help received as teenagers. This result is seen most starkly in the effects of Moving to Opportunity, a program that provided vouchers for families to move out of high-poverty neighborhoods.
Education: For children ages 13 and below, moving to a lower-poverty neighborhood increased the rate of college attendance by 2.5 percentage points and improved the quality of the college attended.
Income: For children ages 13 and below, moving to a lower-poverty neighborhood significantly improved earnings later in life, raising income in their mid-twenties by 31 percent. Children who were older than 13 at the time of the move actually had lower income.
4. Where can I read more about the returns to investing in children?
In addition to the papers below, you can also watch Butcher’s presentation of her paper in this video of a discussion held at the Hutchins Center on Fiscal and Monetary Policy. Other resources include:
Anna Aizer, Laura Stroud, and Stephen Buka. “Maternal Stress and Child Outcomes: Evidence from Siblings.” Journal of Human Resources 51, no. 3 (2015): 523-555. http://www.nber.org/papers/w18422.pdf.
Sandra E. Black, Paul J. Devereux, and Kjell G. Salvanes. “From the Cradle to the Labor Market? The Effect of Birth Weight on Adult Outcomes.” Quarterly Journal of Economics 122, no. 1 (2007): 409-439. http://ftp.iza.org/dp1864.pdf.
David W. Brown, Amanda E. Kowalski, and Ithai Z. Lurie. “Medicaid as an Investment in Children: What is the Long-Term Impact on Tax Receipts?” National Bureau of Economic Research, No. 20835 (2015).http://www.nber.org/papers/w20835.pdf.
Kristin F. Butcher, “Assessing the Long-Run Benefits of Transfers to Low-Income Families,” Hutchins Center on Fiscal & Monetary Policy at Brookings. (2017).
Raj Chetty, John N. Friedman, and Jonah Rockoff, “New Evidence on the Long-Term Impacts of Tax Credits,” Washington, DC: US Internal Revenue Service, November 2011. https://www.irs.gov/pub/irs-soi/11rpchettyfriedmanrockoff.pdf
Raj Chetty, Nathaniel Hendren, and Lawrence F. Katz. “The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Experiment.” American Economic Review 106, no. 4 (2016): 855-902. http://www.nber.org/papers/w21156.pdf.
Gordon Dahl, and Lance Lochner, “The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit,” American Economic Review vol. 102, iss.5 (2012):1927-1956. http://econweb.ucsd.edu/~gdahl/papers/children-and-EITC.pdf.
Greg J. Duncan, Kathleen M. ZIol-Guest, & Ariel Kalil. “Early Childhood Poverty and Adult Attainment, Behavior and Health,” Child Development vol. 81, no. 1, (2010): 306-325. http://www.ipr.northwestern.edu/events/other-events/docs/conf08-attainment/papers/duncan.pdf.
Nicole L. Hair, Jamie L. Hanson, Barbara L. Wolfe, and Seth D Pollack, “Association of Child Poverty, Brain Development, and Academic Achievement,” JAMA Pediatrics, vol. 169, no. 9, (2015): 822-829. http://www.waisman.wisc.edu/childemotion/pubs/2015-AssociationOfChildPovertyBrainDevelopment.pdf.
Hilary Hoynes, Doug Miller, and David Simon, “Income, the Earned Income Tax Credit, and Infant Health,” American Economic Journal: Economic Policy, 7(1), (2015):172-211. http://www.nber.org/papers/w18206.pdf.