Boosting Family Income to Promote Child Development

Abstract

Families who live in poverty face disadvantages that can hinder their children’s development in many ways, write Greg Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal. As they struggle to get by economically, and as they cope with substandard housing, unsafe neighborhoods, and inadequate schools, poor families experience more stress in their daily lives than more affluent families do, with a host of psychological and developmental consequences. Poor families also lack the resources to invest in things like high-quality child care and enriched learning experiences that give more affluent children a leg up. Often, poor parents also lack the time that wealthier parents have to invest in their children, because poor parents are more likely to be raising children alone or to work nonstandard hours and have inflexible work schedules.
Can increasing poor parents’ incomes, independent of any other sort of assistance, help their children succeed in school and in life? The theoretical case is strong, and Duncan, Magnuson, and Votruba-Drzal find solid evidence that the answer is yes—children from poor families that see a boost in income do better in school and complete more years of schooling, for example. But if boosting poor parents’ incomes can help their children, a crucial question remains: Does it matter when in a child’s life the additional income appears? Developmental neurobiology strongly suggests that increased income should have the greatest effect during children’s early years, when their brains and other systems are developing rapidly, though we need more evidence to prove this conclusively.
The authors offer examples of how policy makers could incorporate the findings they present to create more effective programs for families living in poverty. And they conclude with a warning: if a boost in income can help poor children, then a drop in income—for example, through cuts to social safety net programs like food stamps—can surely harm them.

Full text

Boosting Family Income to Promote Child Development
VOL. 24 / NO. 1 / SPRING 2014 99
Summary
Families who live in poverty face disadvantages that can hinder their children’s development in
many ways, write Greg Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal. As they
struggle to get by economically, and as they cope with substandard housing, unsafe neighbor-
hoods, and inadequate schools, poor families experience more stress in their daily lives than
more affluent families do, with a host of psychological and developmental consequences. Poor
families also lack the resources to invest in things like high-quality child care and enriched
learning experiences that give more affluent children a leg up. Often, poor parents also lack the
time that wealthier parents have to invest in their children, because poor parents are more likely
to be raising children alone or to work nonstandard hours and have inflexible work schedules.
Can increasing poor parents’ incomes, independent of any other sort of assistance, help their
children succeed in school and in life? The theoretical case is strong, and Duncan, Magnuson,
and Votruba-Drzal find solid evidence that the answer is yes—children from poor families that
see a boost in income do better in school and complete more years of schooling, for example.
But if boosting poor parents’ incomes can help their children, a crucial question remains: Does
it matter when in a child’s life the additional income appears? Developmental neurobiology
strongly suggests that increased income should have the greatest effect during children’s early
years, when their brains and other systems are developing rapidly, though we need more evi-
dence to prove this conclusively.
The authors offer examples of how policy makers could incorporate the findings they present to
create more effective programs for families living in poverty. And they conclude with a warning:
if a boost in income can help poor children, then a drop in income—for example, through cuts
to social safety net programs like food stamps—can surely harm them.
www.futureofchildren.org
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Greg J. Duncan, Katherine Magnuson, and
Elizabeth Votruba-Drzal

100 THE FUTURE OF CHILDREN
Greg J. Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal
Using a poverty line of about
$23,000 for a family of four,
the U.S. Census Bureau
counted more than 16 million
U.S. children—more than
one in five—living in poor families in 2012.1
Poor children begin school well behind their
more affluent peers and may lose even more
ground during the school years. On average,
poor U.S. children have lower levels of kin-
dergarten reading and math skills than their
more fortunate peers (figure 1). Moreover,
when compared with people whose families
had incomes of at least twice the poverty line
during their early childhood, adults who were
poor as children completed two fewer years
of schooling and, by the time they reached
their 30s, earned less than half as much,
worked far fewer hours per year, received
more in food stamps, and were nearly three
times as likely to report poor overall health
(table 1).2 Poor boys were more than twice
as likely to be arrested later in life, and poor
girls were five times as likely to bear a child
out of wedlock before age 21.
Poverty is associated with a cluster of disad-
vantages that may be harmful to children,
including low levels of parental education
and living with a single parent. To deter-
mine whether children would be helped by
a policy that is designed to increase fam-
ily incomes and nothing else, we focus on
distinguishing the effects of family income
from those of other sources of disadvantage.
In policy terms, this approach lets us answer
the following question: To what extent would
children’s development be affected by policies
that give low-income parents more income,
but do not directly target other character-
istics of parents or family environments? In
other words, would increasing family income
through policies such as the Earned Income
Tax Credit, food stamps, or the Child Tax
Credit lead to better child outcomes? If the
benefits are larger than the costs, income-
support programs for parents might consti-
tute a wise two-generation investment.
If income is beneficial for children, we also
need to know at what point in children’s
lives an income-support program for par-
ents would be most effective. But few stud-
ies of poverty’s effects have been able to
focus on the timing of economic hardship in
children’s lives, partly because such studies
rarely include children at a variety of child-
hood stages. Recent research in neuroscience
and developmental psychology suggests that
poverty early in a child’s life may be particu-
larly harmful. Not only does the astonishingly
rapid development of their brains leave young
children sensitive and vulnerable to environ-
mental conditions, but the family (as opposed
to school or peers) dominates their everyday
lives. Where we can, as we summarize the
evidence for income’s effects on children,
we pay attention to the timing of economic
deprivation. After reviewing both experimen-
tal and other evidence of the ways poverty
may affect children, we highlight emerging
research based on newly available data that
include measures of poverty recorded as early
as the prenatal year alongside adult outcomes
measured in the fourth decade of life.
The strongest evidence, drawn from social
experiments, has linked increases in fam-
ily income to increased school achievement
in middle childhood and greater school
attainment (for example, high school comple-
tion) in adolescence and early adulthood.
Although we have virtually no experimental
evidence of how economic deprivation affects
children in the first several years of life,
other kinds of evidence suggest that poverty
early in childhood may reduce adult earnings
and work hours.

Boosting Family Income to Promote Child Development
VOL. 24 / NO. 1 / SPRING 2014 101
We conclude with our thoughts about how
social policy makers might focus attention
on poverty occurring across childhood.
The weight of the evidence indicates that
increased income does indeed give children
a better chance to develop successfully,
although the likely impact of changes to
the family incomes of low-income children
appears to vary depending on the children’s
age and the form (cash versus in-kind) of the
income change.
People who advocate for income-support poli-
cies often emphasize the potential benefits
of increasing the incomes of low-income
families, and they point to studies of policy
changes that increased income support. But
evidence from these studies can suggest what
to expect not only from policies that increase
the generosity of programs such as the
Earned Income Tax Credit and food stamps,
but also from those that reduce income or
in-kind supports.
Why Poverty May Hinder Healthy
Development
We use the terms “poverty” and “low income”
synonymously. The official U.S. poverty
thresholds designate a set of income levels
below which families are considered “poor”
and above which they are not. These thresh-
olds let us consistently track poverty rates
over time and serve to determine who is
eligible for various programs. But there is no
evidence that these particular dollar thresh-
olds meaningfully differentiate families’
economic needs. Indeed, evidence indicates
that improving the incomes of families both
just below and just above the poverty line
will have similarly positive effects. But from
studies that consider links between income
and children’s development across a larger
spectrum of the income distribution, it is also
clear that income changes have larger effects
for low-income children than for children
from wealthier families.3 Accordingly, we
focus on evidence of how variations in income
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102 THE FUTURE OF CHILDREN
Greg J. Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal
affect children in poor families, rather than
on how such variations affect middle-class or
wealthy families.
What are the consequences of growing up in
a poor household? Economists, sociologists,
developmental psychologists, and neurosci-
entists emphasize different ways that poverty
may influence children’s development. Three
main theoretical frameworks describe these
processes: family and environmental stress,
resources and investment, and culture. Each
framework is grounded in a different schol-
arly discipline, and they differ in the extent
to which they focus on socioeconomic status
(SES) in general rather than on income,
poverty, or any other particular component
of SES (for example, parents’ education or
occupational prestige). Nevertheless, these
frameworks overlap and are complementary.
Family and Environmental Stress
As Ross Thompson explains in this issue of
Future of Children, economically disadvan-
taged families experience more stress in their
everyday lives than more affluent families
do, and this stress may affect children’s
development. Glen Elder Jr. first developed
the family stress model to document how
economic loss affected people during the
Great Depression.4 According to this perspec-
tive, poor families face significant economic
pressure as they struggle to pay bills and buy
important goods and services, and are forced
to cut back on daily expenditures. This eco-
nomic pressure, coupled with other stressful
events that are more prevalent in the lives of
poor families, creates high levels of psycho-
logical distress in poor parents, including
depressive and hostile feelings.5
Recent work in behavioral economics has
broadened the family stress model by show-
ing that poverty and scarcity not only create
psychological distress but also deplete impor-
tant cognitive resources.6 Studies conducted
mostly in developing countries have found
that making economic decisions under condi-
tions of scarcity reduces adults’ ability to
control their own behavior and renders them
less able to pursue longer-term goals.
Psychological distress spills over into mar-
riages and parenting. As couples struggle
to make ends meet, their interactions tend
to become more hostile and conflicted, and
they withdraw from each other.7 Parents’
psychological distress and conflict, in turn,
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Boosting Family Income to Promote Child Development
VOL. 24 / NO. 1 / SPRING 2014 103
are linked with parenting practices that are,
on average, more punitive, harsh, inconsis-
tent, and detached, as well as less nurturing,
stimulating, and responsive to children’s
needs. Such lower-quality parenting is likely
to elevate children’s physiological stress
responses, and ultimately to harm children’s
development.8
To fully understand environmental stress
as a pathway through which poverty may
affect individuals, we need to go beyond the
family to consider other sources of stress
that poor children encounter every day.
Compared with their more affluent peers,
poor children are more likely to live in hous-
ing that is crowded, noisy, and characterized
by defects such as leaky roofs, rodent infesta-
tions, or inadequate heating.9 Poor families
are more likely to live in neighborhoods
characterized by high crime rates, boarded-
up houses, abandoned lots, and inadequate
municipal services.10
The schools that low-income children
attend are more likely to be overcrowded
and have structural problems (affecting, for
example, noise, lighting, and ventilation).11
Economically disadvantaged children also
tend to be exposed to higher levels of air
pollution from parents’ smoking, traffic, and
industrial emissions.12 These environmental
conditions create physiological and emotional
stress in the lives of low-income children
that may impair their socioemotional, physi-
cal, cognitive, and academic development.
For example, poverty heightens a child’s risk
for lead poisoning, which has been linked to
health, behavior, and neurological problems
that may persist into adolescence and beyond.
Cognitive neuroscience has produced evi-
dence that chronically elevated physiological
stress may interfere with the development of
poor children’s stress response system and
health, as well as the regions of their brains
responsible for self-regulation (the ability to
regulate attention and emotions). Researchers
have documented that such stress harms
brain development in animals. Exposure to
stress, and increased levels of stress hormones
such as cortisol, diminish animals’ cognitive
functioning, leading to impairments in brain
structures such as the hippocampus, which
plays an important role in memory.13
What empirical evidence supports family
stress theory? Nonexperimental studies have
found that low-income children have sig-
nificantly higher levels of stress hormones
than their wealthier counterparts and that
early childhood poverty is associated with
increased allostatic load, a measure of the
physiological consequences of stress.14 Higher
levels of physiological stress have been linked
not only to poorer cognitive functioning, but
to poorer immunological functioning as well,
putting children at risk for a host of inflam-
matory diseases later in life.15 For example,
recent work connects the body’s stress system
to brain regions that support cognitive
skills, such as self-regulation and executive
functioning (the ability to plan and carry
out complicated tasks). Researchers have
also found that heightened salivary cortisol,
an indicator of an elevated stress response,
partially accounts for the fact that poverty is
associated with problems in both parenting
and children’s executive functioning.16 Thus
disparities in stress exposure and related
stress hormones may explain to some extent
why poor children have lower levels of cogni-
tive ability and achievement as well as poorer
health later in life.17
The biological links between low income and
stress are compelling, but no methodologi-
cally strong studies have linked poverty to

104 THE FUTURE OF CHILDREN
Greg J. Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal
elevated and prolonged stress reactions in
children. However, suggestive evidence has
linked receiving food stamps in childhood to
stress-related adult diseases.18 Moreover, some
rigorous studies have found poverty-stress
connections in mothers. One of these tied
expansions of the Earned Income Tax Credit
(EITC) to data from the National Health
Examination and Nutrition Survey.19 Between
1993 and 1996, the generosity of the EITC
increased sharply, particularly for mothers
with two or more children. If higher income
can reduce mothers’ stress, the change in
the EITC should have produced a bigger
improvement for children and mothers in
two-child low-income families than in single-
child low-income families. And, indeed, the
study found that when compared with moth-
ers with just one child, low-income mothers
with two or more children experienced larger
reductions in biological indicators of health
risks, and they reported better mental health.
A study of increases in the Canadian Child
Benefit also found that mothers’ mental
health improved. Evaluations of welfare and
anti-poverty programs that increased both
income and mothers’ employment did not
show similar improvements in mental health.20
Overall, the family stress perspective has
advanced conceptually and empirically in
recent years. On the conceptual side, a nar-
row focus on parents’ mental health and par-
enting has been broadened by neurobiological
evidence that too much stress can harm
both parents and children, and by research
in cognitive psychology that links stress,
information processing, and decision making.
Increasingly sophisticated studies suggest that
income support can reduce mothers’ stress.
This research should continue to benefit from
an explosion in neuroscience-based findings
that shed light on the connections among
poverty, stress, behavior, and development.
Resources and Investment
When economists think about how the family
influences children’s development, household
production theory plays a central role. Gary
Becker, in 1991’s A Treatise on the Family,
suggested that children’s development is “pro-
duced” from a combination of endowments
and parental investments. Endowments
include genetic predispositions and the values
and preferences that parents instill in their
children. Parents’ preferences, such as how
much they value education and their orienta-
tion toward the future, combine with their
resources to shape their investments.
Economists argue that time and money are
the two basic resources that parents invest in
their children. For example, investments in
high-quality child care and education, hous-
ing in good neighborhoods, and rich learning
experiences enhance children’s develop-
ment, as do investments of parents’ time.
Endowments and investments appear to affect
development differently in different domains
of children’s development (for example,
achievement, behavior, and health). Children’s
own characteristics also affect the level and
type of investments that parents make in
their offspring.21 For example, if a young child
is talkative and enthusiastic about learning,
parents are more likely to purchase children’s
books or take the child to the library.22
Household production theory suggests that
children from poor families lag behind their
wealthier counterparts in part because their
parents have fewer resources to invest in
them.23 Compared with more affluent par-
ents, poor parents are less able to purchase
inputs for their children, including books and
educational materials for the home, high-
quality child care and schools, and safe neigh-
borhoods. Poor parents may also have less

Boosting Family Income to Promote Child Development
VOL. 24 / NO. 1 / SPRING 2014 105
time to invest in their children, because they
are more likely to be single parents, to work
nonstandard hours, and to have less flexible
work schedules.24 This too may have negative
consequences for children. Evidence suggests
that the amount of cognitive stimulation in
the home environment varies with changes in
family income.25
Compared with wealthier children, poor
children have fewer child enrichment
resources—for example, books, comput-
ers, high-quality child care, summer camps,
and private schools—and the gap is growing
wider. Forty years ago, low-income families
spent about $880 (in 2012 dollars) per child
annually on such resources, while higher-
income families spent more than $3,700,
already a substantial difference (figure 2).26
By 2005–06, low-income families had
increased their expenditures to about $1,400,
but high-income families had increased theirs
much more, to about $9,400 per child. The
difference in spending between the two
groups had almost tripled in the intervening
years. The largest spending differences were
for activities such as music lessons, travel, and
summer camps.27
Nonexperimental studies suggest that differ-
ences between poor children and wealthier
children in the quality of their home environ-
ments account for a substantial portion of the
association between poverty and children’s
educational achievement.28 This is not sur-
prising, because we know that environmental
enrichment influences the structure and
functioning of a wide range of brain areas in
animals.29 Disparities in the cognitive devel-
opment of low- and middle-SES children are
most pronounced in brain regions that are
important for language, memory, and cogni-
tive control.30 These differences may stem in
part from differences in exposure to enrich-
ing environments.31
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106 THE FUTURE OF CHILDREN
Greg J. Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal
All in all, the resource and investment per-
spective provides a conceptual framework for
the interactions among family income, what
parents spend to enrich their children’s home
learning environments, and the develop-
ment of brain structures and functioning
associated with learning. In light of sharp
increases in both income inequality and the
gap between what poor and higher-income
parents spend on children’s enrichment,
the resource and investment perspective
suggests that we should expect that, in the
future, poor children will fall further behind
higher-income children in terms of their
school readiness.
Culture
In the 1960s, in his “culture of poverty”
model, Oscar Lewis developed a sociological
theory about how the norms and behavior of
poor families and communities affect chil-
dren.32 Drawing from fieldwork with poor
families in Latin America, he argued that
the poor were economically marginalized
and had no opportunity for upward mobility,
and that people responded to their margin-
alized position with maladaptive behavior
and values. The resulting culture of poverty
was characterized by weak impulse control
and an inability to delay gratification, as
well as feelings of helplessness and inferior-
ity. These adaptations manifested in high
levels of female-headed households, sexual
promiscuity, crime, and gangs. Although
Lewis acknowledged that these behaviors
emerged in response to structural factors,
he thought that such values and behaviors
were transmitted to future generations,
and therefore became a cause of poverty:
“By the time slum children are age six or
seven they have usually absorbed the basic
values and attitudes of their subculture
and are not psychologically geared to take
full advantage of changing conditions or
increased opportunities.”33
Cultural explanations for the effects of
poverty on children suggested that high
levels of nonmarital childbearing, jobless-
ness, female-headed households, criminal
activity, and welfare dependency among
the poor were likely to be transmitted from
parents to children. In the mid-1980s and
1990s, scholars expanded the scope of this
argument by paying closer attention to the
origins of cultural and behavioral differences.
For example, some emphasized the role of
individual choice in the face of the liberal
welfare state’s perverse incentives, which
rewarded single-mother households and
joblessness among men.34 Others stressed
structural and economic factors: the concen-
tration of neighborhood poverty, the social
isolation of poor inner-city neighborhoods,
and the deindustrialization of urban econo-
mies.35 They contended that these structural
factors undermine community norms and
influence the behavior of inner-city adults
and their children.
A common criticism of “culture of poverty”
explanations is that they fail to differenti-
ate people’s behavior from their values and
beliefs.36 Evidence suggests that poor people
Evidence suggests that poor
people hold many middle-
class values and beliefs, but
that circumstances make
it hard for them to behave
accordingly.

Boosting Family Income to Promote Child Development
VOL. 24 / NO. 1 / SPRING 2014 107
hold many middle-class values and beliefs,
but that circumstances make it hard for them
to behave accordingly. For example, one study
showed that poor women value marriage and
recognize the benefits of raising children in
a two-parent household.37 However, their low
wages, as well as black men’s high rates of
unemployment and incarceration, lead poor
women to conclude that marriage is out of
their reach. Notions of a unified culture of
poverty do not account for this sort of discon-
nect between values and behaviors.
Annette Lareau’s qualitative study of social
class and family life identifies other differ-
ences in the cultural childrearing repertoires
of high- and low-income families, including
the degree to which middle-class parents
“manage” their children’s lives, while working-
class and poor parents leave children alone to
play and otherwise organize their activities on
their own:
“In the middle class, life was hectic.
Parents were racing around from one
activity to another … Because there were
so many activities, and because they were
accorded such importance, child’s activi-
ties determined the schedule for the entire
family … [In contrast, in working-class
and poor families,] parents tend to direct
their efforts toward keeping children safe,
enforcing discipline, and, when they deem
it necessary, regulating their behavior in
certain areas. … Thus, whereas middle-
class children are often treated as a project
to be developed, working-class and poor
children are given boundaries for their
behavior and then allowed to grow.38”
Lareau called the middle-class pattern “con-
certed cultivation”—providing stimulating
learning activities and social interactions that
parents believe will promote their children’s
social and cognitive development. In con-
trast, the “natural growth” perspective of
working-class and poor parents often stops
at providing basic supports (for example,
food, shelter, and comfort). Such differences
in cultural repertoires give a distinct advan-
tage to middle-class children and contribute
to the intergenerational transmission of
social class.
These cultural theories extend the resource
and investment perspective. Class-related
differences in the parenting practices of
Lareau’s families arise, in part, from income
differences that let some parents support a
much broader range of activities for their
children. But some of the differences arise
from fundamentally divergent beliefs about
how children succeed and the best kinds of
parenting practices. Such beliefs are unlikely
to change in response to changes in family
income that might be brought about by
changes in policy.
Why Early Poverty May Matter
the Most
The timing of poverty during childhood and
adolescence may make a difference for how
it shapes children’s development. Emerging
evidence from human and animal studies
shows that during early childhood, the brain
develops critically important neural func-
tions and structures that will shape future
cognitive, social, emotional, and health
outcomes.39 Two recent neuroscience studies
show strong correlations between socioeco-
nomic status and important aspects of young
children’s brain function.40
Flavio Cunha and James Heckman propose
a model of the production of human capital
that allows for distinct childhood stages
during which investment may take place, as

108 THE FUTURE OF CHILDREN
Greg J. Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal
well as roles for the past effects and future
development of both cognitive and socioemo-
tional skills.41 In this model, children are born
with cognitive potential and temperament
that reflect a combination of heredity and the
prenatal environment. Cunha and Heckman
emphasize that skill building interacts with
investments from families, preschools and
schools, and other agents. Their model sug-
gests that we accumulate human capital in
two ways. One is “self-productivity,” in which
skills developed in earlier stages bolster the
development of skills in later stages. The other
is “dynamic complementarity,” in which skills
acquired before a given investment increase
that investment’s productivity. These two
principles combine to form the hypothesis
that “skill begets skill.” Cunha and Heckman’s
model predicts that economic deprivation in
early childhood creates disparities in school
readiness and early academic success that
widen over the course of childhood.
Intensive programs that provide early care
and educational experiences for high-risk
infants and toddlers offer evidence to sup-
port the idea that the early years are a fruitful
time to intervene. The best known are the
Abecedarian program, a full-day, center-
based educational program for children who
were at high risk for school failure, starting
in early infancy and continuing until school
entry, and the Perry Preschool program,
which provided one or two years of intensive,
center-based education for preschoolers.42
Both programs generated long-term improve-
ments in subsequent education, criminal
behavior, and employment, although other
early-childhood education programs have
shown more modest effects.
Income may matter the most for brain
development in the early years, but increased
income may also be beneficial for low-income
adolescents, particularly when they use it to
help pay for postsecondary schooling. The
sticker price of college has more than doubled
in the past 20 years.43 Although Pell Grants
and other sources of financial aid drive down
the net cost of college for low-income stu-
dents, the cost of enrollment in public four-
year colleges has risen faster than the amount
available from grants. In contrast, the cost of
attending a public community college has not
increased over the past two decades for stu-
dents from very low-income families because
the amount of aid has expanded to cover the
higher price. Of course, many low-income
students and their parents either don’t know
how much aid is available or are discouraged
by the extremely complex federal financial aid
application form.44
Assessing Causal Effects of Poverty:
Methods and Results
Studies that aim to estimate how income
influences children’s development differ in
their methodological rigor. At one end are
correlational studies that analyze associa-
tions between family income and children’s
outcomes, with few adjustments for con-
founding factors (that is, other important
family conditions that might be correlated
with income and child outcomes). These
studies are common, particularly in neuro-
science, but they are likely to be plagued by
biases that lead researchers to overestimate
income’s causal effects. On the other end are
experiments in which families are randomly
assigned to receive additional income or not.
If implemented correctly, experiments pro-
vide unbiased estimates of income’s effects.
But experimental studies are exceedingly
rare, and sometimes they condition income
support on behavior such as full-time work,
which may exert its own influence on chil-
dren’s development. Almost as trustworthy

Boosting Family Income to Promote Child Development
VOL. 24 / NO. 1 / SPRING 2014 109
as experiments are “quasi-experiments” in
which income changes are beyond the control
of the families involved. Examples are policy
changes that increase the generosity of pro-
grams like the EITC.
Our review of the evidence on how increases
in family income influence children and youth
distinguishes among effects on achievement,
attainment, behavior, and health. Readers
should bear in mind that the policy implica-
tions of income support programs rest on
collective impacts across all of these domains.
Small impacts in several different domains
of child functioning could add up to a total
benefit that exceeds costs, even if no single
component shows such a level of benefit.
School achievement, attainment,
and behavior
The strongest evidence relates income
increases to children’s test scores (achieve-
ment) and the number of years of schooling
they complete (attainment). The only large-
scale randomized interventions to alter family
income directly were the U.S. Negative
Income Tax experiments, which were con-
ducted between 1968 and 1982 with the
primary goal of identifying how guaranteed
income influenced parents’ participation in
the labor force. Three of the six experimental
sites (Gary, Indiana, and rural areas in North
Carolina and Iowa) measured achievement
gains for children in elementary school, and
two of the three found significant impacts.45
In contrast, adolescents showed no differ-
ences in achievement. Impacts on school
enrollment and attainment for youth were
more uniformly positive. Both Gary and
New Jersey—the only two sites that mea-
sured these outcomes—reported increases
in school enrollment, high school gradua-
tion rates, or years of completed schooling.
Second- through eighth-grade teachers rated
student “comportment” in the two rural sites;
results showed income-induced improve-
ments in one site but not the other.
Taken together, the Negative Income Tax
studies appear to suggest that income is more
important for the school achievement of
pre-adolescents and for the school attainment
of adolescents. None of the results offers evi-
dence to support the “early is better” hypoth-
esis, because no site tracked the achievement
of children who had not yet entered school
when the income “treatment” was being
administered.
Welfare reform programs undertaken dur-
ing the 1990s encouraged parents to work
by providing income support to working-
poor parents through wage supplements.
Moreover, evaluations of some of these
programs measured the test scores of at least
some children who had not yet entered school
when the programs began. One study ana-
lyzed data from seven random-assignment
welfare and antipoverty policies, all of which
increased parental employment, though only
some increased family income.46
The combined impacts on children’s school
achievement of higher income and more
work hours for mothers varied markedly by
the children’s age. Treatment-group chil-
dren who were between the ages of four and
seven when the programs took effect, many
of whom made the transition to elementary
school during the programs, scored sig-
nificantly higher on achievement tests than
their control-group counterparts. A sophisti-
cated statistical analysis of the data on these
younger children suggests that a $3,000 boost
in annual income was associated with a gain
in achievement scores of about one-fifth of
a standard deviation—a modest but still

110 THE FUTURE OF CHILDREN
Greg J. Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal
statistically significant increase.47 In contrast,
a boost in income had no effect on children’s
rate of behavior problems, whether reported
by parents or teachers.48
Elevated income did not appear to affect the
achievement of children from eight to 11, and
the achievement of children who were 12
and 13 seemed to be hurt by the programs’
efforts to increase family income and paren-
tal employment. Another study using the
same data examined very young children and
found positive impacts for some ages but not
others.49
Like the maternal stress study discussed
above, another recent study took advantage
of the increasing generosity of the EITC
between 1993 and 1996 to compare chil-
dren’s test scores before and after it was
expanded.50 Most of the children in this study
were between the ages of eight and 14, and
none was younger than five. The researchers
found improvements in low-income children’s
achievement in middle childhood that coin-
cided with the EITC expansion.
A study conducted in Canada took advantage
of variations in the generosity of the National
Child Benefit program across Canadian
provinces to estimate income’s effects on
children’s achievement.51 Among six- to
10-year-old children in low-income families,
policy-related income increases had a positive
and significant association with math scores
and a negative association with the likelihood
that a child would be diagnosed with a learn-
ing disability. Among four- to six-year-olds,
the income increases were associated with
higher scores on a test of receptive vocabu-
lary for boys, but not for girls. Turning to
behavior, higher income led to less aggression
among four- to 10-year-olds, but it did not
appear to affect other behaviors.
A third quasi-experimental study examined
what happened after a tribal government in
North Carolina opened a casino and began
distributing about $6,000 annually to each
adult member of the tribe.52 A comparison
of Native American youth with non-Native
American youth, before and after the casino
opened, found that receiving casino pay-
ments for about six years increased school
attendance and high school graduation rates
and decreased criminal behavior among poor
Native American adolescents. The data did
not include achievement test scores, nor any
information on children under age nine.
These experimental and quasi-experiment
studies offer three lessons. First, achievement
gains depend at least in part on how old the
children were when their families received
additional income. Children making the
transition to school and elementary school
students generally enjoyed the most consis-
tent achievement increases. For adolescents,
the school achievement picture was muddier,
with various studies finding positive, null, and
even negative effects. Second, among ado-
lescents, increased income appears to boost
educational attainments such as high school
graduation and completed years of schooling
rather than test scores. Given the high cost
of postsecondary education, it’s not surpris-
ing that higher family income leads to more
completed years of schooling. Third, we know
far more about how boosting income affects
achievement and schooling than we do about
its effects on behavior problems, including
childbearing and criminal activity.
Virtually none of the experimental literature
on income effects has been able to estimate
the impacts of changes in family income dur-
ing the earliest years of life, when children
are developing rapidly and may be especially
sensitive to family and home conditions. Nor

Boosting Family Income to Promote Child Development
VOL. 24 / NO. 1 / SPRING 2014 111
have these studies been able to examine how
income changes during childhood affect
outcomes measured in adulthood. This is
particularly unfortunate, because policies
directed at children often couch their goals
in terms of lifetime effects, such as a middle-
class standard of living or higher labor mar-
ket earnings.
Two recent nonexperimental studies, how-
ever, have linked early childhood income to
adult outcomes.53 Both use data from the
Panel Study of Income Dynamics (PSID),
focusing on children who were born in the
early years of the study. Adult outcomes
were collected when these children were
in their 30s. The PSID measures income
in every year of a child’s life from before
birth through age 15, making it possible to
measure poverty and family income early in
life (prenatal through the fifth year in one
study, prenatal through the first year in the
other) as well as later in childhood and in
adolescence. Among families whose average
income was below $25,000, one study found,
an annual boost to family income early in the
children’s lives (birth to age 5) was associ-
ated with an increase in adult work hours,
a rise in earnings, and a reduced likelihood
of receiving food stamps (women, however,
were no less likely to receive welfare). A
boost in family income at other stages in chil-
dren’s lives, however, was not significantly
related to the adults’ earnings and work
hours. For the most part, increased income at
any stage of childhood did not affect whether
the children would exhibit behavior problems
(arrests and incarcerations for males; non-
marital births for females).
Health
As Sherry Glied and Don Oellerich write
in this issue of Future of Children, growing
up in poverty is associated with poor health.
In one study, only 70 percent of poor chil-
dren were reported by their mothers to be
in excellent or very good health, compared
with 87 percent of wealthier children. Some
evidence suggests that, in Western indus-
trialized countries, economic disparities in
health tend to increase from early childhood
through adolescence.54 It may be that income
serves as a buffer, preventing early chronic
health conditions from producing pervasive
negative effects.55 But not all researchers have
found that the association between income
and health becomes stronger as children
grow older.56
In the United States, children from poor
households have higher rates of chronic health
conditions, such as asthma, diabetes, and
problems with hearing, vision, and speech.
According to reports from their parents, about
32 percent of poor children have at least one
such condition, compared with 27 percent of
wealthier children. Asthma is the most com-
mon chronic problem among poor children,
followed by mental health and behavioral
problems; attention deficit hyperactivity
disorder is the most common mental health
diagnosis. Finally, poor children are more
likely than their more affluent peers to suffer
from acute illness or to have health problems
that require them to limit their activities.57
Achievement gains depend
at least in part on how
old the children were when
their families received
additional income.

112 THE FUTURE OF CHILDREN
Greg J. Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal
Correlations between childhood poverty and
health are also found later in life. By age 50,
compared with people whose incomes were
twice the poverty line or greater, people who
experienced poverty in childhood are 46 per-
cent more likely to have asthma, 75 percent
more likely to have high blood pressure, 83
percent more likely to have been diagnosed
with diabetes, 125 percent more likely to
have experienced a stroke or heart attack,
and 40 percent more likely to have been
diagnosed with heart disease. Economic dis-
advantage in adolescence has been linked to
worse overall health and higher death rates
in adulthood.58 Adolescent poverty, mea-
sured from age 13 to 16, is associated with
heightened risk for several chronic diseases
in adulthood.59
Some studies have employed stronger sta-
tistical methods to reduce the influence of
possible confounding factors and produce
more trustworthy estimates of how income
is associated with child health.60 Specifically,
two studies uncovered large and significant
links between adolescent poverty and a
variety of health problems in adulthood.61
However, when the researchers compared
the health of siblings who shared the same
general family background but experienced
different economic conditions during child-
hood, they found much smaller associa-
tions. However, none of these health studies
measured income in early childhood, when,
as we’ve seen, the link between income and
health may be strongest.
Another group of researchers investigated the
associations between mean family income
in early, middle, and later childhood, on the
one hand, and adult Body Mass Index (BMI),
on the other. They found that, among poor
people, higher income during their mother’s
pregnancy and their first year of life was
associated with lower adult BMI, whereas
higher income later in childhood was not.62 A
companion study considered whether chronic
diseases in which the immune system plays
a role, such as arthritis, affect the associa-
tions between poverty very early in life and
adult economic outcomes.63 Concentrating
on families with incomes below $25,000,
the researchers distinguished among three
childhood stages—pregnancy through age
two, ages three to five, and ages six to 15—
and compared family income during each of
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Boosting Family Income to Promote Child Development
VOL. 24 / NO. 1 / SPRING 2014 113
these stages with the children’s own earn-
ings later in life. They found that increased
family income from pregnancy to age two was
significantly associated with higher earnings
and longer work hours when the children
reached ages 30 to 41, but family income
at other stages of childhood was not (table
2). Similarly, when children’s family income
increased from pregnancy through age two
(but not at the other stages of childhood),
they were less likely as adults to experience
high blood pressure, arthritis, or condi-
tions that limited their daily living activi-
ties. Moreover, their reduced susceptibility
to these three health problems partially
explained their higher earnings and longer
work hours as adults.
Despite the recent research that links income
to both children’s and adults’ health, it is hard
to show that these links are causal. Studies
that link income with health have been far
less rigorous than those that link income
with achievement and behavior. Moreover,
most studies that compare childhood fam-
ily income with adult health have measured
income during children’s adolescent years.
Although a few studies have suggested that
early-life income can strongly affect adult
health, the pattern of conflicting results pro-
duces more questions than answers.
Implications for Policy
Several recent rigorous studies suggest that
childhood income does indeed improve at
least some key child, adolescent, and adult
outcomes. But we need a better understand-
ing of how the timing of income boosts
affects children’s development, across a wide
range of outcomes. If the effects differ, then
policies that target specific stages of child-
hood or adolescence are likely to be more
efficient than those that do not.
If the evidence ultimately shows that poverty
early in childhood is most detrimental to
development during childhood and adoles-
cence, then it may make sense to consider
income-transfer policies that provide more
income to families with young children. In
the case of work support programs like the
EITC, this might mean extending more gen-
erous credits (or reallocating existing credits)
to families with young children. In the case
of refundable child tax credits, this could
mean providing larger credits to families with
young children.
Another step might be to ensure that sanc-
tions and other regulations embedded in wel-
fare policies do not deny benefits to families
with very young children. Not only do young
children appear to be most vulnerable to the
consequences of poverty, but mothers with
very young children are also least able to sup-
port themselves by working.
Assistance programs in several European
countries offer time-limited income supports
that depend on children’s age. In Germany,
a mother who works fewer than 20 hours per
week can receive a modest parental allow-
ance until her child is 18 months old. France
guarantees a modest minimum income to
most of its citizens, including families with
children of all ages. Between 1976 and 2009,
the Allocation de Parent Isolé (API) program
supplemented this income for single parents
with children under age three. In effect, the
API acknowledges that families have a special
need for income support during this period,
especially if a parent wishes to forgo income
from employment in order to care for very
young children. Once children turn three,
France’s state-funded child care system alle-
viates some of the problems associated with a
parent’s transition to the labor force.

114 THE FUTURE OF CHILDREN
Greg J. Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal
One way to deliver additional cash assistance
is through payments that depend on the
behaviors of parents and children. These
strategies receive support because they
encourage desirable behavior. The EITC is
such a program, because it goes only to par-
ents who work; unemployed parents do not
receive a refundable tax credit. Conditional
cash transfer (CCT) programs, used in a
number of developing countries, constitute
a more elaborate example. Mexico pio-
neered the CCT movement with a program
originally called Progresa and now known as
Oportunidades. This program gives parents
direct cash payments that are linked to
several positive behaviors, including whether
their children attend school and preventive
health care appointments, and whether they
adopt specific child nutrition practices.64
Although poor households in the program
make more use of health and education
services, evidence is mixed on whether the
program improves children’s health and edu-
cation.65 For example, school enrollment has
improved, but achievement test scores have
not. CCT programs have since been widely
adopted in other developing countries.
Evaluations show that some have improved
children’s health and nutrition, while others
have not.
Oportunidades inspired New York City’s
Family Rewards program, which operated
from 2007 to 2009 in the city’s highest-
poverty communities. Begun in the fall of
2007, the program tied cash rewards to chil-
dren’s education, families’ preventive health
care, and parents’ employment.66 As its cre-
ators hoped, the program reduced poverty
and hardship and increased families’ savings.
However, children’s results depended on
their age. Elementary and middle school stu-
dents whose families received the payments
did not improve their school attendance or
overall achievement. But better-prepared
high school students attended school more
frequently, earned more course credits,
were less likely to repeat a grade, and scored
higher on standardized tests.
Increased income support can also take the
form of in-kind benefits such as food stamps
or housing vouchers. One study took advan-
tage of geographic variation in the timing
of the rollout of the Food Stamp Program
(now called the Supplemental Nutrition
Assistance Program) in the 1960s and 1970s.
The researchers examined adult outcomes
of people whose families received food
stamps around the time they were born.67
They found that access to food stamps in
early childhood led to a significant reduction
in the incidence of “metabolic syndrome”
(obesity, high blood pressure, and diabetes)
and, for women, an increase in economic
self-sufficiency.
Though we emphasize that policies to boost
income in early childhood may be impor-
tant, we are not suggesting that this is the
only policy path worth pursuing. Obviously,
investments later in life and those that pro-
vide direct services to children and families
may also be well advised. Regardless of the
timing of the investment, economic logic
requires that we compare the costs and
benefits of the various programs that seek to
promote the development of disadvantaged
children throughout the life course. In this
context, expenditures on income-transfer and
service-delivery programs should be placed
side by side and judged by their benefits, and
by society’s willingness to pay for the out-
comes they produce, relative to their costs.
We conclude by noting again that the
research we have reviewed focuses on the
possible consequences for children and youth

Boosting Family Income to Promote Child Development
VOL. 24 / NO. 1 / SPRING 2014 115
of income changes, and not just income
increases. The wider discussion of policy has
been cast in the optimistic light of benefits
that might result from increasing the incomes
of low-income families, particularly fami-
lies with young children. It is important to
remember, however, that reductions in the
generosity of programs such the EITC can
be expected to reduce children’s success at
school and increase their mothers’ stress
levels and mental health problems. With
achievement and attainment gaps between
low- and high-income children larger than
any time in the past 40 years, we should think
twice about policy changes that would further
increase these gaps.

116 THE FUTURE OF CHILDREN
Greg J. Duncan, Katherine Magnuson, and Elizabeth Votruba-Drzal
ENDNOTES
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