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Journal Issue: Children and Poverty Volume 7 Number 2 Summer/Fall 1997

Child Poverty Can Be Reduced
Robert D. Plotnick

Lessons from Abroad

How does the extent of child poverty in the United States compare with that in other industrialized societies? A study of 18 developed nations reports that the U.S. child poverty rate of 21.5% was by far the highest.43 Australia had the second-highest rate, 14.0%. Three others were between 11% and 14%. The other 13 countries all had child poverty rates under 10%; eight had rates under 5%.

On a pretransfer basis, two countries had more child poverty than the U.S. level of 25.9%. Three others also had rates exceeding 20%; and nine had rates between 11% and 20%. It appears that common social and economic factors lead to significant rates of pretransfer poverty among children in these industrialized nations.

What distinguishes the United States from the other nations is their more generous transfer and tax policies. American policies took only 17% of pretransfer poor children out of poverty. This tied Italy for the smallest reduction.44 Four nations eliminated between 25% and 50% of the child poverty generated by markets, six eliminated between 50% and 75%, and five others eliminated 75% or more.

Several features of U.S. policy explain its relatively high rate of pretransfer poverty and the low antipoverty impact of its taxes and transfers.43 The United States devotes a smaller portion of its economic output to government social welfare spending than other Western societies. While high value is placed on earning one's way out of poverty, public commitment is tepid for government spending to foster more work and earnings, such as adult education, job training and other public employment services, job creation subsidies, subsidized child care, and paid parental leaves. The EITC, unique to this country, is an important exception.

There is also much less public income support in America for low-income families with both working and nonworking parents. Welfare and unemployment insurance benefits are low. Of the 17 societies studied, the United States is the only one without a child allowance, a cash grant available to all families with children, regardless of income, that guarantees modest support for all children. Nor, in contrast to several European nations, does the United States guarantee child support for families with absent parents.

The combined package of American employment and income support policies does less to reduce pretransfer poverty and to supplement pretransfer incomes, and so results in a higher level of child poverty than in the other affluent countries. Their records demonstrate that more effective antipoverty policy mixes than that found in the United States are feasible.

At the same time, in the 1990s other nations have begun to cut back their social safety nets in response to concerns about burgeoning costs, high taxes needed to finance them, and the negative economic consequences, such as declining labor flexibility and slow job growth, which may result from generous safety net programs. If such developments continue, the antipoverty effectiveness of other nations' policies will erode.