The effects of economic instability on children's educational outcomes

Welfare Based on Assets, a Way to Smooth Out Economic Instability and Develop Children's Human Capital is a four-part series of papers that focuses on the relationship between economic instability (i.e., income shocks, asset shocks, home loss, and asset poverty) and children's human capital development. Collectively, these reports build on the compelling observation that the pattern low-income families walk into is a present time oriented or consumption based pattern of behavior; in contrast, the pattern higher income families walk into is future oriented or asset based. In the third paper we find in most cases income shocks and asset shocks do not appear to be harmful to children's educational outcomes. However, children living in liquid and net worth asset poor families have lower academic achievement scores, high school graduation rates, college enrollment rates, and college graduation rates than children living in families that are asset sufficient. Overall, findings can be interpreted as suggesting that a bifurcated welfare system, with income-based programs for poor families and asset-based programs for higher income families, may provide higher income families with an educational advantage over low-income families and might ultimately help exacerbate educational inequalities in America.     

Policies to promote economic stability,asset building,and child development

This paper makes the case that the pattern low-income families walk into is a present time-oriented or consumption-based welfare system, with attendant incentives and disincentives; in contrast, the pattern higher-income families walk into is future-oriented or asset-based. These two divergent systems do not deliver equitable educational outcomes for children. To ensure that higher education can play an equalizing role in the U.S. economy, the nation needs a better welfare system for the poor, one that builds on the asset-accumulation structures that serve the needs of advantaged families. This new institutional approach would undo the current system of educational advantages for higher-income children over low-income children and, in turn, redress educational inequalities in America. In order to create a level playing field welfare policies are needed that enable low-income families to accumulate assets. In this paper we discuss policies that might help low-income families accumulate assets, including modifications to existing income supports, as well as the development of complementary asset-based institutions.     

Child care subsidies and care arrangements of low-income parents

While enrollment into early education programs has increased significantly in the past two decades, many low-income children still do not attend these programs due to lack of funding and access. This study uses data from the 2005 National Household Education Survey to examine the effects of child care subsidies on the enrollment of low-income children in early childhood education programs. Multinomial regression results show that families that receive child care subsidies are more likely to place their child in center-based preschool programs. The analyses also show that subsidy receipt increases the probability of using center care for low-income households. These findings indicate that policies aimed at increasing funding and availability of early education for low-income families can help close the gap in enrollment.     

The effect of income shocks on food insufficiency

In this paper we investigate the relationship between income shocks and food insufficiency for U.S. households. Using Survey of Income and Program Participation data on U.S. households, we test the importance of both stable and transitory income components in determining food insufficiency. In a logistic regression model, we find that both the level of income and negative income shocks affect the predicted probability of food insufficiency, while positive income shocks do not. Although we do not have a definitive measure of a household’s liquidity constraint status, our work suggests that negative shocks may matter more for households that face liquidity constraints. Understanding the role of income shocks in determining food insufficiency is especially important in light of recent policy changes. It is likely that welfare reform in the U.S. increased the volatility of income in the low-income population. Our findings here suggest that this increase in volatility may not be without consequence.     

Out-of-Home Placement of Children and Economic Factors: An Empirical Analysis

In this paper, we use data from the National Longitudinal Survey of Youth (NLSY) to estimate the effects of income, maternal employment, family structure, and public policies on several measures of childrens living arrangements. We use both linear probability models and discrete-time event history models to explore the effects of these factors on: (1) the probability that a child is living out-of-home in a given year; (2) the probability that a child is removed from home in a given year, conditional on the child living at home in the previous year; (3) the probability that a child is removed from home for the first time; (4) the probability that a child is reunified with his/her biological parent(s) given that the child was living out-of-home in the previous year. We also analyze whether these estimates differ by types of out-of-home placements. Our results suggest that children from lower-income, single-mother, and mother–partner families are considerably more likely both to be living out-of-home and to be removed from home. A change in family structure also tends to place a child at higher risk of an out-of-home living arrangement, unless this transition functions to bring a childs father back into the household. Maternal work appears to increase the probability that a child lives at home. Additionally, once a removal has taken place, we do not find a relationship between income and the probability of a family reunification, but we do find that single-mother and mother–partner families are less likely to reunify. Finally, our analyses provide some evidence that welfare benefit levels are negatively related to out-of-home placements.Funding for this project was provided the National Institute of Child Health and Human Development through grant number 5 F32 HD044 302-02. We are grateful to Shoshana Grossbard-Shechtman, Jennifer Hill, Sanders Korenman, Leonard Lopoo, Katherine Magnuson, and Christina Paxson for their excellent comments and advice.JEL Classification: D10, I30, J13     

Family Structure and Parent–Child Contact: A Comparison of Native and Migrant Families

This article is an investigation of the frequency of contact between parents and adult children in Germany. It compares Turkish immigrants and native Germans and includes both biological and step‐relations. After the United States and Russia, Germany reports the third highest proportion of immigrants internationally, but the extent to which results regarding natives are applicable to immigrant families remains unknown. Data are from the first wave of the German Generations and Gender Surveys (2005) and the supplemental survey of Turkish citizens living in Germany (2006). A total of 7,035 parent–child relations are analyzed. The frequency of parent–adult child contact is significantly higher for biological parents living with the child's other biological parent than for parents without a partner, parents with a new partner, or stepparents. Contact is more frequent for all Turkish families, but the pattern of variation by family structure is similar for both Germans and Turks.     

Do Minimum Wages Fight Poverty?

We present evidence on the effects of minimum wages on family incomes. The results indicate that minimum wages increase both the probability that poor families escape poverty and the probability that previously nonpoor families fall into poverty. The estimated increase in the flow into poverty is larger, although this difference is not statistically significant. We also find that minimum wages tend to boost the incomes of poor families that remain below the poverty line. On net, the various trade-offs created by minimum wage increases more closely resemble income redistribution among low-income families than income redistribution from high- to low-income families.     

Increasing access to quality child care for children from low-income families: Families' experiences

Identifying effective strategies for increasing access to quality care for children from low-income families has important implications for society. This study examined the effectiveness of expanding child care assistance for low-income families (capping expenses at 10% of income and raising eligibility to 200% of the federal poverty line) to purchase quality care. Mixed methods documented families' experiences (N = 181) and capitalized on a natural experiment when families lost assistance. Results pointed to improved access to quality care for children from low-income families by: 1) helping low-income families continue utilizing quality providers when incomes dropped, and 2) enabling others to begin utilizing quality providers. Perceived impacts were greatest for families with higher incomes (within the eligibility range), and for those with children ages five and younger. Additionally, parents were able to pay providers the full rate that they charge for care, which may help quality providers continue serving low-income families.     

Long-run economic consequences of child support enforcement for the middle class

The purpose of this research is to examine the economic impact of child support transfers for middle-income custodial and noncustodial parent over a 15-year period. We have a substantial amount of research on low-income families, but little research about middle-income families. This research is based on computer simulations using income and expenditure data from the Consumer Expenditure Survey (CES) tables prepared by the Bureau of Labor Statistics. The results of the simulations challenge the majority of research that proposes that women suffer far more than men after family dissolution. Instead, we conclude that it is the noncustodial parent, usually the father, who suffers the most. In every case and for every income, according to our analyses, the payer of child support is never able to cover household expenditures if paying child support at guideline levels. By reducing the standard of living to the next lowest income category, in some cases to a level below the custodial parent’s, the parent owing child support is able to make child support payments and cover consumer expenditures. We use exchange and choice theories to analyze the economic alternatives in making a decision to divorce and consequently propose that public support for strict child support enforcement may encourage middle-income women to seek divorce. Micro-level decisions, we argue, have macro-level economic and social consequences for the middle-income parents.     

Doubling Up or Moving Out? The Effect of International Labor Migration on Household Size

We use household panel data from Tajikistan to explore the change in living arrangements as a response to income shifts related to international labour migration. In addition, we analyse the interaction between the effect of idiosyncratic income increase resulting from a completed migration episode, and the effect of an aggregate shock – the global financial crisis – and show how different households adjust their household size during times of financial hardship. The empirical evidence indicates that while current migration is associated with an increase in household size, a completed migration episode two years before the interview was followed by family members moving out. At the same time, our empirical analysis demonstrates that migrant families doubled up in response to a financial crisis to the same extent as non-migrant families, which suggests that labour migration in Tajikistan does not insure against economic shocks in the long run.     

Foster care and the earned income tax credit

Foster care is a source of significant costs to both governments and foster children. Policies that provide income support to households potentially reduce entry into foster care via reducing child maltreatment and improving child behavior. As part of the American Recovery and Reinvestment Act in 2009 (ARRA2009), the federal government expanded the earned income tax credit (EITC), which is an important income support program for low-income working households. Using state-level data, we investigate the impact of this EITC expansion on state-level foster care entry rates. Typically, states with state-level EITC match federal EITC spending at a specific rate, meaning that increases in federal EITC spending increase state-level spending as well. We find that expansion of EITC decreased foster care entry rates by 7.43% per year in states with a state-level EITC, relative to those without. In models that separately examine foster care entry rates by age of the child, we find that the ARRA2009 had different effects on foster care entry based on the child’s age. We find that ARRA2009 decreased foster care entry rates for children age 11–15 by nearly 12% in states with a state EITC and it decreased foster care entry rates for children age 16–20 by roughly 17% in states with a state EITC, relative to states without a state EITC.     

Effects of Employment-Based Programs on Families by Prior Levels of Disadvantage

This study examines how welfare and employment policies affect subpopulations of low-income families that have different levels of initial disadvantage. Education, prior earnings, and welfare receipt are used to measure disadvantage. The analysis of data from experiments suggests that employment-based programs have no effects on economic well-being among the least-disadvantaged low-income, single-parent families, but they have positive effects on employment and income for the most-disadvantaged and moderately disadvantaged families. These programs increase school achievement and enrollment in center-based child care of children only in moderately disadvantaged families. The most-disadvantaged families are found to increase use of child care that is not center based. Parents in these families experience depressive symptoms and aggravation. The findings raise questions about how to support families at the lowest end of the economic spectrum.     

Changes in durable stocks, portfolio allocation, and consumption expenditure in the aftermath of the Kobe earthquake

To understand the household recovery process from unexpected serious damage caused by a natural disaster, we analyze household data from the Kobe earthquake in 1995. We address three questions—how damaged stocks of durable wealth are reinvested, how an ex post portfolio of borrowing or dissaving is reallocated to diversify the asset shocks caused by the disaster, and how formal and informal consumption insurance mechanisms are effective for amending home damage—all of which have been largely unanswered. We obtain three findings. First, people respond to negative income changes and housing damage by reinvesting damaged wealth. Second, households borrow extensively to amend the large housing damage caused by the earthquake. However, they dissave only for minor household asset damage. Third, consumption smoothing is not achieved for nondurable goods that are significantly affected by negative income changes and household asset damage. These findings suggest that asset shocks caused by a large natural disaster are not sufficiently diversified for households, indicating a large gap in designing effective insurance mechanisms.     

Child maltreatment in families experiencing domestic violence

This study examined the association between physical domestic violence (PDV) and reported child maltreatment in a cohort of children at risk for maltreatment. Participants were 219 6- to 7-year-old children and their caregivers. PDV was measured by combining caregivers' self-reports and children's reports, while child maltreatment was based on state Division of Social Services Central Registry records. Among 219 child-caregiver pairs studied, 42 (19.2%) had at least one maltreatment report in the 2 years following the interviews. PDV consistently predicted child maltreatment, with adjusted odds ratios ranging from 2.96 to 3.46. In addition, we investigated interactions between PDV and other predictors of child maltreatment. Among Aid to Families with Dependent Children (AFDC) participants, PDV was highly associated with child maltreatment. However, this pattern was not observed among subjects who did not have AFDC. There is an increased incidence of child maltreatment reports in families experiencing PDV. AFDC participation intensified the probability of child maltreatment in the presence of PDV. Findings also suggest that in households experiencing PDV, social supports may protect children from maltreatment.     

Trade Balance and Income Shocks: Experience of Transition Economies

This paper investigates the major sources of changes in the trade balance of four Central European and three Baltic transition economies with an emphasis on the difference between permanent and transitory disturbances to income. In all seven countries the findings support the hypothesis that transitory disturbances to income are the main determinants of changes in the trade balance. These results seem to be fairly consistent with inter-temporal models of trade balance, which view transitory shocks to income as the main source of variations in the trade balance. These results do not seem to support the view that productivity shocks alone generate most of the variation in the trade balance.      

The use of child care center for infants of dual-working families in Korea

Using the first and second wave data of the Panel Study of Korean Children (PSKC), which is comprehensive longitudinal data with a nationally representative birth cohort, this study explores whether and when dual-working families place their infants and toddlers in child care centers and what factors influence these families' selection process. Among the 2078 families examined in the PSKC, 466 dual-working families which had any kind of nonparental care arrangement for their very young children at the time of the second survey were included in the analysis. Since our research questions address when the use of child care centers occurred, an event history analysis was conducted. The results show that 32.4% of the families had placed their infants in child care centers prior to the second interview. Family structure and income variables (number of children, nonparental adults in the household, and household income), mother's education level, and the mother's number of working hours turned out to be significantly related to the probability of child care center use.     

Effects of federal programs on children: Absolute poverty, relative poverty, and income inequality

Since the 1996 welfare reform, federal spending on means-tested programs targeting the poorest children has decreased, while programs that benefit children in low-income working families have been expanded substantially. With this background, this study examined changes in the antipoverty and anti-inequality effects of children's programs between 1995 and 2007 using data from the Annual Social and Economic (ASEC) Supplements to the Current Population Survey (CPS). The findings suggest that although the poverty-reduction effects of the federal child programs increased between 1995 and 2007, the programs' effects on the reductions of children's absolute poverty gaps, relative poverty rates, relative poverty gaps, and income inequality all decreased. More importantly, the antipoverty effects of the federal child programs were most weakened for the poorest children (i.e., those in female-headed, immigrant, and nonworking families) between 1995 and 2007.     

Housing Costs in an Oil and Gas Boom Town: Issues for Low-Income Senior Women Living Alone

In resource-based towns that have historically been dominated by young workers and their families, seniors’ housing issues have received little attention by community leaders and senior policymakers. However, since the 1980s there has been a growing trend of older women living alone in Canadian rural and small town places. Although research on rural poverty focuses on small towns in decline, booming resource economies can also produce challenges for low-income senior women living alone due to higher housing costs and the retrenchment of health care and service supports. Because housing costs can consume a significant proportion of household income, low-income senior women living alone may not have the financial resources to cover expenses in a competitive housing market. Using a household survey, we explored this different dimension of the Canadian rural landscape by looking at housing costs for low-income senior women living alone in the booming oil and gas town of Fort St. John, British Columbia, Canada. The authors findings indicate that low-income senior women living alone are incurring higher housing costs compared with other senior groups.     

Small-scale farming in semi-arid areas: Livelihood dynamics between 1997 and 2010 in Laikipia,Kenya

The rural population of semi-arid lands in Kenya face multiple challenges that result from population growth, poor markets, land use and climatic changes. In particular, subsistence oriented farmers face various risks and opportunities in their attempt to secure their livelihoods. This paper presents an analysis on how livelihood assets and strategies of smallholders in Laikipia County, Kenya, have changed within the last decade and discusses the implications for development interventions. The analysis is based on bi-temporal data from 170 semi-structured household interviews in 1997 and a follow-up survey of 30 households conducted in 2010. Well-being indicators were developed and livelihood portfolios compared. The results show a striking persistence in low asset endowment for the majority of smallholders from an aggregated perspective, whereas transitions into and out of better livelihood conditions become evident from a household perspective. The investment in, and accumulation of, conventional buffer or productive assets, such as grain stocks, livestock or land, does not shield households from adverse shocks and stresses as smallholders were shown to easily slip back into poverty. Household portfolios display particular constraints for smallholders in expanding natural resource related activities and a substantial decrease in livestock numbers. While off-farm activities could possibly increase well-being, the prevailing low income levels and high insecurity for the majority who are engaged in off-farm employment, limits the ability to increase livelihood assets in the area.     

Financial Strain and Participation in the Supplemental Nutrition Assistance Program

Participation in the Supplemental Nutrition Assistance Program (SNAP) has increased over the past decade. Although poverty and sudden financial shock faced by households via unanticipated adverse events, such as sudden loss of income, are among major contributors, the findings of our study suggest that having an adequate stock of savings and financial assets might reduce the probability of household SNAP participation. Using data from the Panel Study of Income Dynamics, we tested whether a household’s emergency savings, asset poverty, and debt burden could predict SNAP participation separately from the effects of income and program participation. Results demonstrate that a household’s lack of emergency savings and asset inadequacy increased the probability of its SNAP participation. Implications for financial practitioners and policy makers are discussed.