What Money Can’t Buy: Family Income and Children’s Life Chances

244 Pages·1997·2.85 MB·English

by  Susan E. Mayer

What Money Can’t Buy

Family Income
and Children’s Life Chances
Susan E. MAYER
Harvard UniversityPress
Cambridge,Massachusetts
London, England
1997
59 South Broadwe:
NyantREY 9OBE
Copyright© 1997bythePresidentandFellowsofHarvardCollege
Allrightsreserved
PrintedintheUnitedStatesofAmerica
LibraryofCongressCataloging-in-PublicationData
Mayer, SusanE.
Whatmoneycan’tbuy : familyincomeandchildren’slifechances /
SusanE.Mayer
p. cm.
Includesbibliographicalreferences(p. )andindex.
ISBN0-674-58733-2 (alk.paper)
1. Children—UnitedStates—Socialconditions. 2. Children—
UnitedStates—Economicconditions. 3. Socialmobility—United
States. 4. Income—UnitedStates. 5. Poorchildren—UnitedStates.
6. Poverty—UnitedStates. 7. Poor—UnitedStates. 8. Public
welfare—UnitedStates. I. Title.
HQ792.U5M39 1997
305.23'0973—dc20
96-34429
To my children,Fason DavidandElizabeth Lucille

Acknowledgments
Thisbookpresentedmewithdifficultmethodological,substantive,and
political issues. Any progress I have madein resolving theseissues has
invariablyresulted from the help ofcolleagues and friends.
The W. T. Grant Foundation provided the major financial support
forthisbook. FundingfromtheCarnegieCorporationmadeitpossible
forme to complete the workthatappears in Chapter8 ontheeffectof
welfare benefit levels on children’s outcomes.
Three people have made unusuallylarge contributions to thisbook.
David KnutsonandTimothyVeenstralaboredtirelesslyandbeyondall
reasonable expectations to do mostofthe data analysis. Theynotonly
spenttoomanynightsandweekendstetheredtothecomputer,butthey
also read and reread the manuscript, checking tables and otherinfor-
mation for accuracy. Their technical and substantive suggestions have
greatlyimproved this work.
ChristopherJencks has been a mentorand friend formore than ten
years. Nearly all ofour conversations over this time have in one way
oranotherhelpedshapemyapproachtosocialproblemsand,therefore,
the ideas in this book. Moredirectly, he read the entire manuscript,
muchofitmore thanonce, makingsuggestionsaboutthemethodology
used, the interpretation of the results, and the prose. I could not ex-
aggerate my debt to him.
AlthoughIpromisedthemanonymity,Iamverygratefultothemany
educators who took the time to talk to me. These interviews were in-
valuable in shaping my arguments. I found the dedication and deep
concern that these teachers, administrators, and counselors expressed
for the disadvantaged children in their charge deeplytouchingandin-
spiring. I thank Lynnie Case, Susan Greenwald, Vicki Krugman, and
Jan Mathis for helpingme arrange these interviews.
I have benefited immensely from the free trade in ideas atthe Uni-
versityofChicago’s IrvingB. Harris Graduate SchoolofPublicPolicy,
where I have been on the facultysince 1989. My colleagues Robert
——_ Vil om
ACKNOWLEDGMENTS
Michael, Charles Glaser, and LarryLynn provided especiallythought-
ful and detailed comments onanearlyversion ofthe manuscript.
I have also been lucky to maintain ties with faculty and students at
NorthwesternUniversity, where IreceivedmyPh.D.AtNorthwestern
I am especially indebted to Greg Duncan, who wasediting a book on
this same topic as Iwas finishingmymanuscript. Theworkthatheand
his colleagues were doing forced me to confront many issues that I
mightotherwisehaveignored.TomCookalsoprovidedespeciallyhelp-
ful comments on manyaspects of the book. Mary Driscoll provided
valuable feedbackonanearlierdraft. OthercurrentandformerNorth-
western students who provided data analysis and substantive critiques
ofmystatistical techniques include David Harris,Judy Levine, Mere-
dith Philips, ScottWinship, and David Rhodes.
Otherswhohavereadpartorallofearlierversionsofthismanuscript
and provided helpful comments include Andrew Cherlin, Chris Win-
ship, Mary Corcoran, Peter Gottschalk, and Larry Radbill.
As discussants at conferences and seminars, Amy Butler, Charles
Manski, and Frank Levy supplied very useful comments. Arloc Sher-
man shared valuable feedback, especiallyon the literature review. I am
also grateful to Greg Hanna for the hours he spent tracking down
books, articles, and data in the library. My son, Jason Ocken, shaped
many ofmy arguments by often disagreeing with my conclusions and
pressingme to defend myideas.
Finally, I thankmycolleagues and students, and mostofall myhus-
band, David, and my daughter, Elizabeth, who endured moreneglect
than wasfair while I wrote this book.
oe Vill om
Contents
1
Introduction 1
2
America’s Response to Poverty 16
FromMoralGuidancetoIncomeSupport 18
The CycleRepeats 23
Changesin GovernmentExpenditureson PoorChildren 30
3
HowRich and PoorChildren Differ 39
MeasuresofChildren’s Well-Being 40
HowLargeAretheDifferences? 41
WhyParentalIncomeMightBeImportant 45
A
Conventional Estimates ofthe Effect ofIncome 55
WhatOtherStudiesShow 56
Re-estimatingthe ConventionalModel 63
ChangesinParentalIncome 72
5
The “True” Effect ofIncome 79
TheSourceofIncome 80
Incomebeforeandafteran Outcome 85
6
Income and Material Well-Being 97
HowFamiliesSpendAdditionalMoney 99
IncomeandMaterialHardship 100
LivingConditionsandChildren’sOutcomes 110
CONTENTS
7
Income, Psychological Well-Being, and ParentingPractices 114
IncomeandParentalStress 114
IncomeandParentingPractices 120
8
More Evidence on the “True” Effect ofIncome 125
TrendsinParents’IncomeandChildren’sOutcomes 125
State WelfareBenefitsandChildren’sOutcomes 133
WhatSocialExperimentsShow 140
2
HelpingPoor Children 143
RaisingParentalIncome 143
HowMuchIsEnough? 148
ChangingParents’NoneconomicCharacteristics 152
Wherethe TroubleBegins 156
AppendixA
Description ofthe Samples and Variables 159
Appendix B
Conventional Estimates ofthe Effect ofIncome 167
Appendix C
The “True” Effect ofIncome 176
Appendix D
Index Construction 18]
Appendix E
More Evidence on the “True” Effect ofIncome 190
Notes 193
References 211
Index 223
1
Qaguouaqa a
Introduction
Ppchildrenhave morethantheirshareofproblems.Theyusually
weigh less than rich children atbirth and are morelikelyto die in
their first year of life. When they enter school, poor children score
loweron standardizedtests, and this remainstruethroughhighschool.
Poor children are also absent from school more often and have more
behavior problems than affluent children. Poor teenagers are more
likely than teenagers from affluent families to have a baby, drop outof
high school, and get in trouble with the law. Young adults who were
poor as children complete feweryears ofschooling, workfewerhours,
and earn lower wages than young adults raised in affluent families. As
a result, children raised in poverty are morelikely to end up poor and
in need ofpublic assistance when theybecome adults.
Nosocial scientist believes that income is the sole determinant of
how children turn out, but most believe that parental income has an
importantinfluence on children, and somebelieve itis the singlemost
importantinfluence onchildren’s life chances. Indeed, manyarguethat
other factors that increase the risk offailure among children, such as
growingupinasingle-parentfamily,arehazardousmainlybecausethey
decrease parental income. WhenI first began to write this book, I too
believed this. At one time I was a young single mother without much
money. I knowwhatit is like not to be ableto afford a pair ofjeans or
a birthday cake foryour child, to have to borrowmoneyto paya doc-
tor’sbill,andtoworryaboutachildlefthomealoneafterschoolbecause
there is no moneyfor child care. To paraphrase Sophie Tucker,I have
been poor and I have been notso poor and notso pooris better. But
mybeliefin the importance ofincometo children’swell-beingwasnot
i. 1 er,
INTRODUCTION
based on personalexperiences alone; itwas also based on a large body
ofsocial science research.
Although the empirical studies with which I was familiar did not
agree on how much influence parents’ income had on any particular
measureofchildren’swell-being,nonesuggestedthatitseffectwasneg-
ative, and the best evidence suggested that it was quite important for
manyoutcomes. Myownpreliminaryresearchalsoshowedthatparen-
tal incomehad large effect on teenage childbearing, droppingoutof
high school, and children’s eventual educational attainment, even after
Iheld constantcharacteristicssuchasparents’ race, education, andage.
Empirical evidence also suggested that the effect of income on chil-
dren’soutcomeswasusuallywhatstatisticianscall“nonlinear,”meaning
that an extra dollarwould help poor children more than itwould help
rich children. Ifthis were the case, transferring income from the rich
to the poor would usually help poor children more than itwould hurt
rich children.
I recognized, of course, that many Americans discounted the im-
portanceofincome, arguingthathowchildrenturnoutlargelydepends
on their parents’ moral character, social skills, intelligence, and other
characteristics. Ifthis were true, increasing the incomeoflow-income
families might not help their children. But the evidence I had seemed
to showthatincomehadagreatereffectonadults’ characterthanchar-
acter had on income. Furthermore, whereas mostAmericans now be-
lieve that incometransfers discourage work and marriage, myreading
ofthe research convinced methatsuch effectswere quite small. Com-
pared with other ways ofhelping low-incomechildren, increasingpa-
rental income through incometransfer, child tax credits, child support
payments, and the EarnedIncomeTaxCredit(EITC)seemedlikesim-
ple, effective, and efficient ways to help more children grow upto be
productive, law-abidingcitizens.
As itturned out, however,the relationship betweenparentalincome
and children’s outcomes is more complicated thanI first imagined. In
mostcases, additionalparentalincome doesimprovechildren’schances
for success. But parental incomeis not as important to children’s out-
comes as manysocial scientists have thought. This is because the pa-
rental characteristics that employers value and are willing to pay for,
such as skills, diligence, honesty, good health, and reliability, also im-
prove children’s life chances, independentof their effect on parents’
ee)