What Are the Economic Costs of Child Poverty?
Child poverty remains prevalent in the United States, with important implications for our society and economy. Data shows that child poverty exceeds adult poverty in the United States, and is higher here than in other wealthy countries. Additionally, studies show that high child poverty has quantifiable economic costs, contributing to lower productivity, higher healthcare costs, and costs associated with crime, homelessness, and child maltreatment. This piece looks at child poverty trends in the United States and the associated economic and fiscal implications.
How Do We Measure Child Poverty?
There are two main measurements of poverty: the official poverty measure (OPM) and the supplemental poverty measure (SPM). The OPM only considers a household’s pre-tax cash income and family size; it excludes noncash transfers, tax credits, and necessary expenses. By contrast, the SPM uses after tax income and incorporates the value of benefits and tax credits while subtracting the costs of necessary expenses such as childcare, medical costs, and work expenses. This analysis uses the SPM because it accounts for a broader range of federal programs designed to assist low-income families by capturing changes in noncash assistance, tax policy and shifts in necessary expenses over the years.
Child Poverty Remains a Structural Challenge in America
Child poverty has remained relatively high in the United States for much of the past decade, with the SPM averaging 15.9 percent from 2010 to 2019. During the COVID-19 pandemic, child poverty briefly improved following the enactment of legislation including stimulus checks, enhanced Earned Income and Child Tax Credits, and increased benefits for the Supplemental Nutrition Assistance Program. According to the Urban Institute, federal expenditures on children rose during this period, climbing from $10,190 per child in 2020 to a peak of $11,690 in 2021. That assistance was largely responsible for a subsequent decline in child poverty, which fell in 2020 and 2021.
However, when the COVID-19 relief and targeted tax benefits expired in 2022, federal spending on children dropped to $10,190 per child and then to $8,990 in 2023 — a decrease of about $1,200 per child after adjusting for inflation. As a result, the child poverty rate more than doubled in 2022 and remained above the 2019 pre-pandemic level through 2024.
Child Poverty Exceeds Adult Poverty in the United States
In 2024, the poverty rate in the U.S. was 0.6 percentage points higher for children compared with those 18 years or older. Prior to the COVID-19 pandemic, child poverty was also above that of the adult population. Compared with the 2010 to 2019 average poverty rate of 15.9 percent for children, the average poverty rate for those 18 years or older was 14.1 percent over that same decade. Child poverty then dipped below the rate for adults during the pandemic due to targeted federal assistance for children. However, the expiration of that aid caused child poverty to rise above the rate for adults, returning to the pre-pandemic narrative. Generally, children experience higher rates of poverty than adults in the United States because of factors including the cost of caregiving and its responsibilities, transitions to a single parenthood household, unemployment of parents, and disabilities of family members.
Child Poverty Rates Vary Across Communities
National trends can mask substantial geographic and demographic variation in child poverty across the United States. Both where children live, and their racial background, significantly shape their likelihood of experiencing poverty.
Using the U.S. Census Bureau's three-year state averages, the SPM for the entire United States was 12.7 percent from 2022 to 2024. However, individual states experienced rates that ranged from 6.7 percent to 17.7 percent over that same period. The geographic distribution reveals significant regional patterns in child poverty across the United States. More than half the states in the Southern region had child poverty rates of 14.0 percent or higher. The Midwest and Northeast regions generally showed lower rates, with many states falling below the national average. The lowest child poverty rate was in Maine at 6.7 percent. Meanwhile, California and Louisiana had the highest rates, both at 17.7 percent. This substantial variation across states underscores how both national and local factors play a critical role in determining child poverty rates.
Child poverty rates also differ significantly across racial demographics. While the overall child poverty rate was 13.4 percent in 2024, rates were dramatically different across racial and ethnic groups. Non-Hispanic White children experienced the lowest poverty rate at 6.7 percent — half the national average — while African American and Hispanic children faced rates exceeding 20 percent, more than triple the rate for White children. These disparities underscore how child poverty in the United States reflects broader patterns of economic inequality that persist across geographic and demographic groups.
Child Poverty Is Higher in the United States Than in Other Wealthy Countries
According to the Organization for Economic Co-operation and Development (OECD), the United States has the highest rate of child poverty compared to other wealthy, developed nations. The OECD’s methodology for the child poverty rate is different from the SPM as it defines poverty as 50 percent of the median national income after governmental taxes and transfers. Using 2023 data (or the most recent data available for each country), the U.S. child poverty rate was 21.1 percent, while the average for similar countries excluding the United States was 11.3 percent. Ireland’s was the lowest rate in the comparison group at 6.8 percent in 2023.
The Economic Costs of Child Poverty
Researchers find that high levels of child poverty impose substantial economic costs on the United States. In 2018, a study by Michael McLaughlin and Mark R. Rank of Washington University in St. Louis measured the economic cost of child poverty by estimating the costs of lower economic productivity, higher healthcare costs, and costs associated with crime, homelessness, and child maltreatment. The authors note that other important costs exist — such as emotional harm to children — but they are not easily quantifiable.
The researchers find that child poverty reduced the size of the economy by an estimated $1 trillion, or 5.4 percent of gross domestic product, in 2015. The largest driver is increased crime and incarceration, representing 39 percent of the total burden. Children who experience poverty are more likely to engage in criminal activity as adults, imposing costs through both direct victimization and the broader expenses of incarceration and corrections. The second major cost is reduced future earning potential, accounting for 29 percent of the total economic impact. Childhood poverty disrupts education, limits skill development, and reduces lifetime productivity, resulting in lower earnings throughout adulthood. The third driver is poor health outcomes, comprising 19 percent of the total cost. Childhood poverty leads to chronic health conditions, higher medical expenses, and increased need for special education resources, which together diminish both individual well-being and economic output. Child homelessness and maltreatment contribute the remaining 13 percent of costs, reflecting the destabilizing effects of poverty on family stability and child safety.
The significant impact on economic activity has important implications for the nation's long-term fiscal outlook. Lower productivity reduces the tax base and possible government revenues, while associated costs in healthcare, criminal justice, and social services increase government expenditures. For each dollar spent to reduce poverty, McLaughlin and Rank estimated the government saves at least $7 on the future economic costs of poverty. However, these benefits accrue over decades while the federal resources spent on children represent an immediate investment.
Conclusion
Child poverty remains a significant structural problem in the United States with negative implications for our society, economy, and fiscal outlook. Understanding the costs of child poverty can help policymakers make informed decisions about the most efficient use of federal dollars for anti-poverty programs and initiatives.
Image credit: Photo by Spencer Platt/Getty Images
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