Jun 17, 2023 - Economy

How to break the poverty cycle

Poverty rate among young adults who <span style="background:#835bff; padding:3px 5px;color:white;">experienced childhood poverty</span> and <span style="background:#ff942f; padding:3px 5px;color:white;">those who didn't</span> in select countries
Data: Zachary Parolin, Rafael Pintro Schmitt, Gosta Esping-Andersen, Peter Fallesen; Note: National surveys are Panel Study of Income Dynamics (U.S.), British Household Panel Survey & U.K. Household Longitudinal Study (U.K.), Household Income Dynamics (Australia), Socio-Economic Panel (Germany), Statistics Denmark Register Data (Denmark); Chart: Danielle Alberti/Axios

If you're between 25 and 35 and grew up in poverty, there is a greater-than-even chance that you are in poverty yourself. As a result, all the children who live with you are also growing up in poverty — and so the cycle of intergenerational poverty persists.

Why it matters: The U.S. poverty rate among young adults — which is to say, the demographic most likely to be parents to young children — is a sobering 17.9%, much higher than in other rich countries. (It's 9.8% in Germany, for instance.) But the intergenerational poverty rate is vastly higher.

Between the lines: In a sense, that's good news, because it shows that the problem is fixable. An important new paper considers and rejects a series of possible explanations for the extreme amount of intergenerational poverty, and concludes that one cause eclipses all others — the lack of government transfers to the poor.

What they found: "The strength of intergenerational poverty is not systematically related to the extent of childhood poverty," the authors found — which is to say, intergenerational poverty in America isn't high just because poverty in general is high.

  • Access to higher education, neighborhood effects and even racial effects are all negligible.
  • Also ruled out: "wealth, home ownership, physical health, union membership or past incarceration."

The bottom line: It all comes down to fiscal policy. "Direct income transfers from the state are among the most powerful interventions in addressing poverty and inequality," conclude the authors.

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