Cogent analyses of household poverty

More fodder for the management notes:

Poverty in America is centered in the youth and small, single-parent households. The image I had from my own youth was that poverty was centered on the elderly and among large, two-parent families. My assumption stemmed from learning about why Social Security was created, i.e., to keep the elderly from being poor. And on the belief that large families tended to be found to be poor, while the wealthy tended to have fewer children. Of course, in those days, the number of elderly was much lower than today, about ten million over the age of 65 then, about 55 million today. So there are more elderly and they are richer than before. I long told my students that the demographic with the lowest net worth was the 23-30 year-old age group. Highest net worth? Over the age of 65.

This first chart gives you some idea of the impact of single-parent households and age of the householders in impacting your income quintile. For instance, 84% of single-parent households are in the lowest quintile. And while only 16.7 of the elderly are in the top quintile, the number of elderly in that quintile is almost the same as the total number of elderly in the entire country at the time Social Security came into being.

Before we look into details, let's go back three years. In February 2018, the American Enterprise Institute took the New York Times to task on their facile rejection of single-parent households as a driver of child poverty. The full text follows below the headline.

The article, although well-done and instructive, ends up conveying the wrong impression about the actual links between single parenthood and poverty, especially for children. Here are four [sic] problems with the idea that reducing single motherhood has virtually nothing to do with the fight against poverty.

1. Overall poverty isn’t the same thing as child poverty.

The New York Times article focuses on the connection between single parenthood and poverty among individuals in all kinds of working-age households — including single-person households. Given the fact that only a minority of households in America have children, this focus diverts our gaze from what most concerns us when we’re looking at single mothers: child poverty. Nobody, after all, is claiming that reducing the number of single-mother households will lead to lower poverty rates among elderly or childless men and women. The concern among poverty scholars has always been that single motherhood leads to higher rates of child poverty. And there is no denying the close connection between single parenthood and child poverty in America.

To begin with, children living in single-mother families are about five times as likely to be poor, compared with children living in married, two-parent families. This is clear in a recent analysis of trends in the official poverty rate from our colleague Ron Haskins at the Brookings Institution.

Moreover, research done by one of us, Isabel Sawhill, indicates that if the share of children in single-parent families had remained steady at the 1970 level, then the current child-poverty rate would be cut by about one-fifth, even after adjusting for the fact that single mother have different characteristics from married mothers. In other words, dramatic increases in single parenthood — from about 12 percent of children in 1970 to about 27 percent now — more recently have played an important role in fueling child-poverty rates.

Single parenthood is not the factor driving child poverty in America, but it is a factor. One obvious reason is that a family with only one breadwinner has only one potential source of income. Replacing a second income with benefits from a government program is extremely expensive.

2. Two is greater than one — even in Europe.

One could be left with the impression that single parenthood has almost nothing to do with poverty in Europe and America after reading the article by Brady et al. We have already shown this is not the case for child poverty in America. But what about child poverty in Europe?

Well, it turns out that even in Europe children are more likely to be poor if they are living in a family headed by a single parent. Research done by social scientists Janet Gornick and Markus Jäntti indicates that children being raised by a single parent are about three times as likely to be living in a poor family as children being raised by two parents, even after accounting for generous welfare policies in Europe.

In fact, this is true even in Scandinavia. Relative to children in two-parent families, children in single-mother homes are about three times as likely to be poor in Denmark and Sweden, more than four times as likely to be poor in Norway, and nearly five times as likely to be poor in Finland, after taking into account their welfare policies.

Now, it’s true that the levels of child poverty in Scandinavia are markedly lower than those in the United States — indeed, about 75 percent lower because of their social policies. And it’s also true that the unique poverty risk associated with single parenthood generally goes away when you control for other factors, such as age, education, and employment, as Brady and his colleagues have done. What that misses is that mother-headed families are more likely to be formed as the result of an unplanned birth outside of marriage or a committed relationship, and that these unexpected births tend to occur at young ages, to interrupt a young woman’s education, and to make it less likely that she will ever marry or form a stable partnership and have the second income that such a partnership makes possible.

In other words, even today, one reason that two parents are generally better than one parent, economically speaking, is that having two parents in the home dramatically increases the odds not only that at least one parent is working full-time but also that there are two parents working on behalf of the children. And this is true even in Europe.

3. Poverty begins at home.

Brady and his colleagues make much of the fact that three other factors — age of household head, education, and employment — are better predictors of overall poverty in America than is single motherhood. But what they don’t tell us is that these very factors are influenced by an adult’s family structure of origin. To wit: The social science tells us that children raised by single parents are significantly more likely to have children young, to drop out of high school, and to work less as young adults. Not surprisingly, the children of single-parent families are more likely to end up poor as young adults.

Indeed, new research from economists Melissa Kearney and Phillip Levine indicates that young adults are at least ten percentage points less likely to be poor at age 25 if they were born to married parents, as opposed to an unmarried mother. These effects are especially strong for children born to mothers in the middle of the educational and age distribution — that is, for “children of mothers with high school degrees and mothers in their early/mid-20s.” In other words, in America at least, the long arm of single parenthood seems to extend into adulthood, increasing the likelihood that children of single parents will be poor as adults, compared with adults who were raised in intact, two-parent families.

In their op-ed, David Brady and his colleagues remind us both that single motherhood is not the only driver of contemporary poverty and that social-welfare policy has dramatically reduced poverty in Europe — including for single mothers. But they obscure the economic disadvantages that children in single-mother families in America and even in Europe typically face. One need not “shame” single mothers to point out an obvious fact: It’s hard to replace the $30,000 man — that’s the approximate median salary for men who are high-school dropouts working full-time in America — or the $40,000 man — that’s the approximate median salary for men who are high-school graduates — even if the government rolls out a generous child allowance, subsidized child care, paid parental leave, and the like.

The bottom line: It’s useful to point out that family structure is not destiny. But the evidence suggests it remains important and shouldn’t be dismissed as one important factor affecting children in particular.

For further data, details and analysis as to the impact of household structure on potential for poverty, read this 2019 report. Summary follows.

Summary: Household demographics, including the average number of earners per household and the marital status, age, and education of householders are all very highly correlated with American’s household income. Specifically, high-income US households have more income-earners on average than lower-income households, and individuals in high-income households are far more likely on average than individuals in low-income households to be well-educated, married, working full-time, and in their prime earning years. In contrast, individuals in lower-income US households are far more likely than Americans in higher-income households to be less-educated, working part-time, either very young (under 35 years) or very old (over 65 years), and living in single-parent or single-member households.