The Transfer of Income to Poor Families with Children Can Be An Investment with Long Term Payoffs

January 19th, 2014 at 10:45 am

That’s the finding of an interesting, quick read in this AMs NYT.

It tells the results of a natural experiment wherein members of a North Carolina Cherokee tribe evenly split the profits from a new casino they ran.  Fortunately, an epidemiologist (Jane Costello) had already been doing research on poverty impacts on kids in the area, both Cherokee children and kids from other rural households.

Not only did Costello find relatively  quick-acting, positive results from the significant cash infusions:

…just four years after the supplements began, Professor Costello observed marked improvements among those who moved out of poverty. The frequency of behavioral problems declined by 40 percent, nearly reaching the risk of children who had never been poor. Already well-off Cherokee children, on the other hand, showed no improvement. The supplements seemed to benefit the poorest children most dramatically.

She also found, in follow-up work, that the benefits of the extra family income to the youngest, poorest children were still evident when the kids had aged into their early 20s.

My CBPP colleagues report on related findings here, both in terms of income receipt from anti-poverty programs, nutritional, and educational assistance.

What’s so interesting about these findings, particularly those regarding cash and nutritional assistance (versus, say, early childhood learning), is that even sympathetic poverty analysts have typically viewed these interventions as aiding immediate consumption, not as longer-term investments.   This newer, longitudinal research that follows kids into adulthood is thus revealing lasting impacts that not only go beyond the very short relief from income insecurity, but have payoffs later in life both for grown children and for the larger society, which saves resources in a benefit/cost calculus.

The study reported in the NYT, however, appeared to be have left unexplored an important aspect of the natural experiment: one wonders if the folks on the other end of the “transfers”–losers in casinos, which is pretty much the same group as “customers in casinos”–got hurt in ways that the beneficiaries of the “experiment” got helped.  Perhaps the losses were scattered among many but the gains were concentrated among a relative few.  But there’s an incidence analysis missing here.

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5 comments in reply to "The Transfer of Income to Poor Families with Children Can Be An Investment with Long Term Payoffs"

  1. PeonInChief says:

    This shouldn’t be any surprise. Middle class people are always nattering on about the culture of poverty, pathology of poverty and the like, attributing all manner of social failings to those who don’t have any money. But the real issue is that poverty is a stressful and draining experience, not to mention time-consuming. Removing those problems by giving people sufficient income to get out of poverty solves the problems in short order.


  2. doverby says:

    This is why I’m all for means testing Medicare and Social Security. Give more to low income families and less to high income families. The general structure of what this would look like would admittedly be difficult to figure out (and politically it’s pretty unpopular), but I think it would definitely be worth it.


    • PeonInChief says:

      The problem with that is simply: unless you declare high-income older households those making less than the median income in the US, you won’t save enough money to fill a thimble by doing that. At what point do seniors become “rich”–$32K, the point where Social Security benefits become taxable? At $50K, the median income? I live much closer to that income than most of the people who comment on this blog, and while I’m solvent, I’m certainly not rich. If you reduce Social Security for actual rich seniors, it would cost Social Security more for the means testing. If you look at Table 5 here (http://www.ssa.gov/policy/docs/ssb/v72n1/v72n1p37.html), you’ll find that only the richest quintile has much income other than Social Security. And even for many of those, Social Security still makes up a goodly proportion of their income.


  3. Dave says:

    Thank you for questioning gambling as the source of this good effect. We can do better than this. Just give them money. We have lots of money, and we should give some to them. The effects are so large with the. A little money goes a long way. Give them money.

    GIve them money.


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