Path out of poverty?

Why do some children make it to the next rung of the ­economic ladder as adults, while others never escape the poverty that defined their childhood? A study published by a Harvard University research team in July set out to answer that question. The results suggested that parental employment is key to a child’s long-term economic improvement—most importantly, employment among the parents of a child’s schoolmates or friends.

Previous research has shown that children who grow up in poverty make less money than their peers in adulthood, and they experience worse outcomes in health and education. In the new study, published by Harvard’s Opportunity Insights, lead author Raj Chetty and his team used tax and census data to track the economic mobility of 57 million American children born between 1978 and 1992. They found that children made the greatest economic strides if raised in neighborhoods with high rates of employment among parents. That was true even if the child’s own parents didn’t have jobs—it was sufficient for his friends’ and neighbors’ parents to be working. Such children tended to earn more money as adults, achieved higher SAT and ACT scores, were more likely to be employed, and pursued more education.

Anthony B. Bradley, a distinguished research fellow at the Acton Institute who was not involved in the study, noted the research confirms other studies showing the power of a child’s social environment for long-term stability and economic success. “When that aspiration, that encouragement is embodied in another human being, that’s when it becomes a real possibility,” said Bradley. “Otherwise, it’s simply fiction.”

Even for kids with unemployed parents, having associations with people who are employed and success-­driven can instill “a sense of normalcy that you might not see in your own household,” Bradley said.

Cash infusion outcomes

A recent study funded by OpenAI and the National Bureau of Economic Research tested the results of a guaranteed income program, an increasingly popular approach to fighting poverty. The results were mixed at best: While the unconditional cash enabled participants to spend more on immediate needs such as healthcare and housing, the long-term consequences of the transfers were less promising.

The study, published online at OpenResearch, supplied 1,000 low-income adults with an extra $1,000 per month for three years. On average, recipients of the cash worked 1.3 to 1.4 fewer hours per week compared with a control group, and they reported using the extra time on leisure.

Excluding the stipend, participants’ annual incomes declined an average of $1,500 per year. Recipients spent about 22 cents of every transfer dollar to pay for leisure activities, and took on more debt. The increased borrowing lowered participants’ overall net worth, leading the study authors to conclude that “the transfer did not improve participants’ long-run financial position.” —A.O.