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12/31/91

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The poor who've become poorer are children, economists say

STANFORD -- Many conservatives blame widespread divorce and other cultural changes from the 1960s for the problems of America's children. Many liberals blame the nation's uneven prosperity in the 1980s.

There is some truth in both claims, "but mutual recrimination does little to help children," a Stanford economist and a researcher at the National Bureau of Economic Research say in the Jan. 3 issue of the journal Science.

The '80s were a bad decade for U.S. children economically, especially the poorest one quarter of them, say Victor Fuchs, the Henry J. Kaiser Jr. Professor of Economics at Stanford, and Diane Reklis, a research assistant at the National Bureau of Economic Research at Stanford, where Fuchs is also a research associate.

In fact, the gap between rich and poor grew wider for children over the past 30 years, but not for adults, the economists discovered when they divided household income by the number of children and adults living within the household.

Yet economic adversity cannot explain the fall in test scores, the doubling of teenage suicide and homicide rates, and the doubling share of births to unwed mothers that occurred between 1960 and 1970, they say.

"During that decade, purchases of goods and services for children by government rose very rapidly, as did real household income per child, and the poverty rate of children plummeted," Fuchs and Reklis wrote. "Thus we must seek explanations for the rising problems of that period in the cultural realm."

Cultural critics have pointed to the waning influence of religion on the daily lives of most Americans, the fragmentation of the family through divorce and unwed motherhood, and the harmful influence of television on children's intellectual development and physical activity, the authors say.

Calculating the impact of such changes is generally impossible, but Fuchs and Reklis show that it is possible to calculate two important interactions between cultural and material factors on children's lives:

  • The growing incidence of divorce and unwed motherhood, a cultural change over the past 30 years, has had the overall material effect of reducing household income available to spend on children.
  • The slow growth of real income for young fathers, an economic factor since the 1970s, has induced more mothers to take paid employment; that has had repercussions for family life. By 1986, the researchers say, adults in households with children had 10 to 12 fewer hours available per week to provide children with "non- market goods and services" - things like home-cooked meals and help with homework.

In terms of cash income alone, children's households have more to spend on each child now than in 1960. The researchers divided total household income by the number of people in the household in order to calculate the income available per child. They found that the median child's income, adjusted for inflation, was $6,917 in 1988, compared with $4,133 in 1960.

On the surface, the economists say, this would seem to indicate that material well-being cannot explain a decline in children's well-being overall.

Fuchs and Reklis, however, conclude that "material conditions did deteriorate for children in the 1980s, especially among children in households at the lower end of the economic distribution."

Some of the factors they took into account:

  • Two-parent family households have became increasingly dependent on women's earnings to maintain income levels for children. More than half of the gain in income for children since 1960 is attributable to working mothers. Fewer than one in five children had a mother employed outside the home in 1960, compared to about three in five now.
  • In one-parent households, the income per child declined in the 1980s.
  • Inequality in income among children increased appreciably, especially between 1980 and 1988, when there was no income gain at all for the child at the first quartile point on the income distribution curve - that is, the child whose share of household income was below that of 75 percent of U.S. children but above 25 percent of them. When the earnings of women were excluded, the income of this child fell by 14 percent from 1980 to 1988, Fuchs said.

"If we were to look at the average income for children in the bottom quarter only, it would show an actual decline in income for these children as a group in the 1980s," Fuchs said.

  • Children at the middle of the economic ladder fared better in the '60s than in the '70s and '80s. The income for the child at the median point grew 2.8 percent annually between 1960 and 1970, compared with 1.3 percent annually in the last two decades.

"Consideration of women's earnings, non-market production and the presence of an adult male shows that the cultural and material explanations are not completely distinct," Fuchs and Reklis wrote.

Take, for example, the cultural trend of more households having no adult male. In 1960, only 7 percent of children lived in such households; by 1988, it was 19 percent. The median income per child in 1988 was $7,640 in households with an adult male, but only $2,397 in those without, the economists say.

Policy recommendations

Policies that improve the material conditions of children ultimately require a transfer of resources from households that do not have children to those that do, Fuchs and Reklis say.

"Government programs such as tax credits and child allowances are more efficient and equitable than employer- mandated programs," they wrote.

When government mandates that employers provide daycare, parental leave or better health care programs for employees' children, national economic efficiency is reduced, Fuchs and Reklis say. The benefits distort relative prices and wages, because the cost of the programs falls disproportionately on the consumers of particular products or on workers in particular industries and firms that employ relatively more women of childbearing age.

In addition, employer-provided programs don't serve the children most in need of the benefits.

"Indeed, the households that would receive the bulk of the benefits (where both the woman and the man are employed) have the highest income and the smallest poverty rate," they wrote.

"An alternative way to help children is for government to provide tax credits, subsidies or child allowances with the costs met by raising taxes or cutting spending for other programs. . . . A major challenge for government is to devise tax credits or allowances for children without exacerbating cultural changes (such as more divorce or more births to unwed mothers) that would increase the number of children in poverty."

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