The Consequences of Poverty for Children and the Nation

Posted March 11, 2014, By the Annie E. Casey Foundation

Most people don’t realize the enormous economic price we pay as a country for having the highest level of child poverty in the developed world. Extended exposure to economic hardship can harm children’s development and have long-term negative consequences for individuals and families, but it also puts tremendous financial strain on all levels of government and weakens our nation’s competitiveness in the global economy. Providing all children with the opportunity to reach their full potential would strengthen the next generation and our country’s economic future.

How Poverty Threatens the Next Generation

Low family income can impede children's cognitive development and their ability to learn. It can contribute to behavioral, social and emotional problems, and it can cause and exacerbate poor health as well. Research has consistently shown that ongoing exposure to economic stress and hardship harms child development: parents invest less in their kids and experience higher levels of stress.

When parents are unemployed or their incomes are low, they may struggle to meet their children’s most basic needs for food, safe housing, medical care and quality child care. Being hungry, homeless or having untreated health problems pose tremendous obstacles for children to succeed in school. Low-income parents also struggle to provide the developmentally enriching books, toys, activities and early care and learning environments that are abundant in the lives of more affluent children.

Inadequate family income and economic uncertainty increase parent stress, which in turn can cause depression and anxiety and increase the risk of substance abuse and domestic violence, all of which compromise parenting. Although these problems are found in families at all income levels, they are more prevalent among low-income families, who have far less access to social supports and treatment options.

Deep, Long-Term and Young Child Poverty Pose the Greatest Risks

The effects of poverty on children’s health and development depend in part on the timing, duration and intensity of poverty in childhood. The risks posed by poverty are greatest for children who experience economic hardship when they are young and among those who experience persistent and deep poverty.

Economic hardship poses the greatest risk to young kids because a child’s earliest years, especially from birth to age 3, lay an important foundation for later development. Children’s brains are developing rapidly and the quality of their early relationships and environments can have lasting effects on their later development. As a result, cognitive, social and behavioral gaps among children of different socioeconomic backgrounds are evident early on and will persist without intervention. 

For example, at age 4, children who live in very low-income families are 18 months behind the developmental norm for their age, and by age 10, the gap is still present.

The negative effects of economic hardship on young children are troubling in their own right but also cause for concern because they are associated with difficulties later in life — dropping out of school, poor adolescent and adult health and poor employment outcomes.

Child Poverty: Everybody Hurts

High rates of child poverty also exact a serious toll on the U.S. economy. Before the recession, economists estimated that child poverty cost the United States $500 billion per year in lost labor force productivity, spending on health care and criminal justice. Each year, child poverty reduces productivity and economic output by about 1.3 percent of our gross domestic product. These costs are undoubtedly higher today given the increase in economic hardship.

The true costs of child poverty, however, go far beyond wasted dollars. Without making smart investments to expand opportunity for all children to reach their full potential, we can expect to see continued erosion in economic mobility and weakening of our nation’s competitiveness in the global marketplace.