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Manhattan Institute

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False Poverty Prophets


False Poverty Prophets

October 5, 2003
Urban PolicyOther

ECONOMIC news during a downturn never brings much cheer, and Census Bureau income figures for 2002 prove no exception: More Americans were poor, and overall they were earning less. But looking beyond these expected trends, you find something truly remarkable: Single mothers and their children, the group most likely to suffer increases in poverty during earlier economic downturns, have escaped relatively unscathed during this one.

This is an exceedingly important development. Child poverty has been the most recalcitrant and troubling of our economic problems. A disproportionate number of poor people are under 18: Though children represent only about a quarter of the total population, they make up more than one-third of the poor.

During bad economic times, the number of poor children historically rises - often substantially. According to the Brookings Institute's Gary Burtless, in the two recession years following 1979, child poverty rose by 3.4 percent. The downturn of the early 1990s saw child poverty bump up 2.2 percent.

The recession of 2001-2 broke that pattern. True, child poverty did rise in 2002 - but only by 0.5 percent, small enough for the Census Bureau to consider it "unchanged from 2001." Even after two years of a limping economy, the rate of child poverty stood at 16.7 percent, quite close to the low point reached in 2000 after the strong economy of the mid and late 1990s.

Even more striking, however, are the trends among poor black kids. In previous recessions, black children have taken the hardest hits. But in 2001, the first year of the downturn, black child poverty not only did not rise, it plunged to its lowest level in the nation's history.

And while in 2002 the rate of black child poverty did not maintain its descent, it did not go up. In other words, during the recession year of 2002, black child poverty remained within a hair's-breadth of its historic low.

What's made the difference in the child-poverty rates? The big answer: welfare reform. At-risk children are less likely to be poor in 2001 than they were in 1991 or 1981 because their mothers are more likely to have jobs - and they are more likely to have jobs because the 1996 Temporary Assistance to Needy Families Act requires them to work.

In 2002, for just about the first time during a bad economy, the poverty rate for single mothers held steady. By contrast, the Census Bureau reports that the poverty rate among married couples increased from 4.9 to 5.3 percent. Meanwhile, welfare caseloads continued their historic decline; by 2002, the rolls were well over 50 percent lower than they were in pre-welfare reform days.

Opponents predicted that welfare reform would cast a million children into poverty even in a relatively strong economy; a recession, they claimed, would result in a Dickensian catastrophe. But things have turned out very differently.

Welfare reform isn't the whole explanation, of course. For one thing, this recession was relatively mild. Unemployment never went much above 6 percent, compared with over 7 percent during the early 1990s. Lower-income workers have also benefited from the Earned Income Tax Credit, which boosts their take-home pay.

Despite the good news about former welfare mothers and their children, moreover, there is still plenty to worry about in the Census Bureau report. Despite the improved prospects for single mothers, their children remain at a far higher risk of poverty than children in married couple families. And there's not much heartening news on that front: While the out-of-wedlock birth rate is no longer soaring upwards, it has flattened out at 33 percent, near its all-time high.

Future welfare reformers have their work cut of for them.