“These costs are clustered around the loss of economic productivity, increased health and crime costs, and increased costs as a result of child homelessness and maltreatment,” they write in the journal Social Work Research.
McLaughlin is a doctoral student at the George Warren Brown School of Social Work and a research associate at the Center for Social Development. Rank is the Herbert S. Hadley Professor of Social Welfare and is recognized as one of the foremost experts in the country on issues of poverty, inequality and social justice.
They determined that childhood poverty cost the nation $1.03 trillion in in 2015, representing 5.4 percent of the gross domestic product. For every dollar spent on reducing childhood poverty, the U.S. would save at least seven dollars, according to the study, “Estimating the Economic Cost of Childhood Poverty in the United States.”
Another way they gauged the magnitude of the costs of childhood poverty was to compare it with the total federal spending in 2015. According to the Congressional Budget Office, the federal government spent $3.7 trillion in 2015.
“This included the entire range of programs and agencies supported by the government, including Social Security, Medicare, defense spending, and so on,” McLaughlin and Rank write. They found that the annual cost of childhood poverty represents 28 percent of the entire budget spent by the federal government in 2015.
Pay now, or pay later
“The bottom line is that child poverty represents a significant economic burden to the United States. This is largely because living in poverty stunts the growth and undermines the potential of children,” they write.
Poor children grow up with fewer skills and are less able to contribute to the economy. They are also more likely to engage in crime and experience more frequent health care problems, according to the study.
“These costs are ultimately borne not only by the children themselves, but also by the wider society as well.”
A fundamental tenet of social policy is that the prevention of a problem is often a more cost-effective approach than programmatic solutions on the back end of a problem, the authors write.
“It is not a question of paying or not paying. Rather, it is a question of how we want to pay, which then affects the amount we end up spending. In making an investment up front to alleviate poverty, the evidence suggests that we will be repaid many times over by lowering the costs associated with a host of interrelated problems.”
They cite two recent analyses that indicate that “the cost of reducing childhood poverty is a fraction of what such poverty is costing us.” The Children’s Defense Fund, in conjunction with the Urban Institute, has estimated that childhood poverty could be reduced by 60 percent at a cost of $77 billion.
“This would be accomplished through expanding an array of programs that have been shown to be effective in reducing poverty such as the earned income tax credit, a higher minimum wage, child care subsidies, and so on.”
The second analysis estimated that by transforming the child tax credit into a universal child allowance, childhood poverty could be reduced by up to 50 percent, with extreme poverty eradicated, at a cost of about $70 billion.
“If we assume that childhood poverty could be roughly cut in half through an annual expenditure of $70 billion, that $70 billion would save us approximately half of the $1.0298 trillion that we project poverty costs us, or $515 billion.”