IPR Research Notes

New Perspectives on Poverty in America

Spring 2007, Volume 29, Number 1

Greg Duncan

Economist Greg Duncan, an IPR faculty fellow, recently concluded two projects that provide new perspectives on childhood poverty and the working poor. He is Edwina S. Tarry Professor in Education and Social Policy.

In a study of childhood poverty, Duncan and his co-authors found that its economic costs total about $500 billion per year—or nearly 4 percent of the nation’s gross domestic product (GDP). They linked a poor child’s average future earning potential, propensity to commit crime, and quality of health, adding up their average costs per child to arrive at an aggregate economic impact on the U.S. economy.

Specifically, they found that childhood poverty reduces productivity and economic output by about 1.3 percent of GDP, increases the costs of crime by 1.3 percent of GDP, and boosts health expenditures, reducing the value of health by 1.2 percent of GDP.

In another project that culminated in the book Higher Ground: New Hope for the Working Poor and their Children, Duncan and his co-authors report on their study of Milwaukee’s New Hope Program. It provides a blueprint for a national model built on the tenet that “if you work, you should not be poor.”

Launched in 1994, New Hope was not a welfare program but rather a menu of options offered to participants in exchange for their working 30 hours a week. These included subsidized child care, health care, and job assistance, tailored to meet each family’s specific needs. The program resulted from an unusual collaborative effort between the city’s business leaders and community activists.

The results have been extremely encouraging with a dramatic decline in poverty rates, increased employment and earnings for those not initially working full time, and better health outcomes for participants.

Though targeted at adults, the program also had a signif-icant impact on their children. The researchers found that school performance improved, especially for boys; behavior problems declined; enrollment in child care centers increased; and participation in out-of-school activities rose. Though the program ended in 1998, the families who participated continue to show improved life outcomes.

With approximately 12 million Americans in a working poor family and one in five American children living in poverty, these studies provide new approaches that could have a dramatic impact on poverty in the United States.

“The Economic Costs of Poverty: Subsequent Effects of Children Growing Up Poor” by H. Holzer, D. Whitmore Schanzenbach, G. Duncan, and J. Ludwig was released by the Center for American Progress at www.americanprogress.org/issues/2007/01/poverty_report.html.

Higher Ground: New Hope for the Working Poor and Their Children (Russell Sage Foundation, 2007) was written by G. Duncan, A. Huston, and T. Weisner. For more information on the book, please visit www.newhopebook.com.