Child Poverty in the Recession (2007-2010) and Recovery (2010-2013): Comparing the United States and the United Kingdom

Background

The US has the highest child poverty rate of comparable countries. The gap in rates between the US and comparable countries is mostly explained by social policy differences rather than demographics (Heuveline and Weinshenker, 2008; Gornick and Jäntti, 2012). However, most cross-national studies do not consider temporal variations in child poverty. To address this limitation, we examine child poverty during the recession (2007-2010) and recovery (2010-2013) periods. We focus on the US and UK – liberal welfare states characterized by reliance on means-tested social assistance, higher economic inequality, and less unionization. The purposes of the study are to (a) understand how poverty changed overall and for children in different life course family structures and (b) identity the economic and demographic forces shaping child poverty over this time period.

Method

We used the latest nationally representative survey data from waves VII, VIII, and IX of the Luxembourg Income Study (LIS), aligning with 2007, 2010, and 2013. Data were restricted to families with children with household head under 60 years of age. The relative poverty threshold was set at 50% of median equivalized disposable household income and anchored in 2007. Children in households with disposable household income below the threshold were considered poor. An 18 category typology of life course family structures was created based on age (above and below 35), education (LIS harmonized coding low, medium, and high) and marital status (single, cohabitating, and married). For each country, changes in poverty over two time periods were decomposed using the counterfactual method (Danziger & Gottschalk, 1995; Iceland, 2006). This method partitions the observed poverty rate change over time into three components: (1) changes in mean disposable household income, (2) changes in income inequality, and (3) changes in demographics (life course family structures).

Results

Across time 2007-2013 child poverty was relatively stable in the US (21.32 to 21.17) and decreased in the UK (14.11 to 11.99). Poverty rates across the three periods for the 18 family types are reported in the full paper. In the US over time, holding all else constant, rising inequality would have resulted in a child poverty rate increase of 4.4 percentage points (PP). Changes in disposable income – including transfers – reduced child poverty by 3.98. Changes in family structure had a relatively smaller influence (.80 PP). In the UK, changing inequality would have increased the child poverty rate by 2.01. However, changes in income and demographics offset the potential increase by reducing child poverty by 3.53 and .60 PP, respectively. 

Discussion

At least three research and policy implications for the US are worth noting. First, children in all US families have higher poverty rates than children in UK families, with the exception of married families with higher education. Second, inequality’s influence on child poverty is much higher in the US than the UK. Third, a combination of market earnings and transfers in the recovery has strongly reduced child poverty. Future cross-national research is needed to specify the magnitude of poverty reduction from social safety net and assistance policies.