[Youth-list] High Costs of Child Poverty

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The Economic Costs of Child Poverty
     
 
 
Testimony Before the U.S. House Committee on Ways  and Means
Author(s): _Harry Holzer_ (http://www.urban.org/HarryHolzer) 
 (http://www.urban.org/url.cfm?ID=901032&renderforprint=1)  
Posted to Web: January 24, 2007
Permanent Link:  http://www.urban.org/url.cfm?ID=901032
 
The nonpartisan Urban Institute publishes studies, reports, and  books on 
timely topics worthy of public consideration. The views expressed  are those of 
the authors and should not be attributed to the Urban  Institute, its trustees, 
or its funders. 
Harry Holzer is a Visiting Fellow at the Urban Institute and a  Professor of 
Public Policy and Associate Dean at Georgetown Public Policy  Institute.  
____________________________________
  
Abstract
In testimony before the U.S. House Ways and Means Committee, visiting  fellow 
Harry Holzer says the costs to the United States associated with  childhood 
poverty total about $500 billion per year, or the equivalent of  nearly 4 
percent of GDP. This suggests that investing significant  resources in poverty 
reduction might be more cost-effective than  previously thought.  
____________________________________
  
Testimony
Mr. Chairman,  
Thank you for inviting me to speak today on the economic costs of  poverty to 
the United States.  
I'd like to share with all of you some recent findings of a paper I  
coauthored with several colleagues for the Task Force on Poverty of the  Center for 
American Progress. The paper attempts to estimate the economic  costs of child 
poverty in the United States.  
Most arguments for reducing poverty in the United States, especially  among 
children, rest on a moral case for doing so—one that emphasizes the  unfairness 
of child poverty and how it runs counter to our national creed  of equal 
opportunity for all.  
But there is also an economic case for reducing child poverty. When  children 
grow up in poverty, they are more likely as adults to have low  earnings, 
which in turn reflect low productivity in the workforce. They  are also more 
likely to engage in crime and to have poor health later in  life. Their reduced 
productive activity generates a direct loss of goods  and services to the U.S. 
economy. Any crime in which they engage imposes  large monetary and other 
personal costs on their victims and on the  taxpayer of administering our huge 
criminal justice system. And their poor  health generates illness and early 
mortality that requires large health  care expenditures, impedes productivity, and 
ultimately reduces their  quality and quantity of life.  
In each case, we reviewed a range of rigorous research studies that  estimate 
the average statistical relationships between growing up in  poverty, on the 
one hand, and one's earnings, propensity to commit crime,  and quality of 
health later in life, on the other. We also reviewed  estimates of the costs that 
crime and poor health per person impose on the  economy. Then we aggregated 
all of these average costs per poor child  across the total number of children 
growing up in poverty in the United  States to estimate the aggregate costs of 
child poverty to the U.S.  economy. We had to make a number of critical 
assumptions about how to  define and measure poverty, what level of income to use as 
a non-poverty  benchmark, and which effects are really caused by growing up 
in poverty  and not simply correlated with it. Wherever possible, we made 
conservative  assumptions, in order to generate lower-bound estimates.  
Our results suggest that the costs to the United States associated with  
childhood poverty total about $500 billion per year, or the equivalent of  nearly 
4 percent of GDP. More specifically, we estimate that childhood  poverty each 
year: 
    *   Reduces productivity and economic output by about 1.3 percent of  
GDP;  
    *   Raises the costs of crime by 1.3 percent of GDP; and  
    *   Raises health expenditures and reduces the value of health by 1.2  
percent of GDP.
If anything, these estimates almost certainly understate the true costs  of 
poverty to the U.S. economy. For one thing, they omit the costs  associated 
with poor adults who did not grow up poor as children. They  ignore all other 
costs that poverty might impose on the nation besides  those associated with low 
productivity, crime, and health—such as  environmental costs and much of the 
suffering of the poor themselves.  
What does all of this imply for public policy? The high cost of  childhood 
poverty to the United States suggests that investing significant  resources in 
poverty reduction might be more cost-effective over time than  we previously 
thought. Of course, determining the effectiveness of various  policies requires 
careful evaluation research in a variety of areas. But a  range of policies—
such as universal pre-kindergarten (or pre-K) programs,  various school reform 
efforts, expansions of the earned income tax credit  (EITC) and other income 
supports for the working poor, job training for  poor adults, higher minimum 
wages and more collective bargaining,  low-income neighborhood revitalization and 
housing mobility, marriage  promotion, and faith-based initiatives—might all 
be potentially involved  in this effort. Given the strong evidence that 
already exists on some of  these efforts (like high-quality pre-K and the EITC), 
some investments  through these mechanisms seem particularly warranted.  
At a minimum, the costs of poverty imply that we should work hard to  
identify cost-effective strategies of poverty remediation, and we should  not 
hesitate to invest significant resources when these strategies are  identified. In 
the meantime, we should also experiment with and evaluate a  wide range of 
promising efforts. 
The views expressed are those of the author and should not be  attributed to 
the Urban Institute, its trustees, or its  funders.




 
Janice M. Gruendel, Ph.D.
Governor's Senior Advisor on Early  Childhood
Co-Chair, CT Early Childhood Education Cabinet
Senior Youth  Consultant
United Way of CT & Office for Workforce  Competitiveness
Home office: 203-481-9940
Blackberry: 203-824-4766
Mail  to: 28 Juniper Point
Branford, CT 06405

"...I hope  you never fear those mountains in the distance, Never settle for 
the path of  least resistance..And when you get a chance to sit it out or 
dance, I hope you  dance..." Lee Ann Womack. I Hope You'll Dance
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