The Impact of Income Support Policies on Children’s Health

Natasha Pilauskas

Child poverty plays a role in both short- and long-term health and well-being. In her contribution to The Milbank Quarterly centennial anniversary issue, Natasha V. Pilkauskas, PhD, of the Gerald R. Ford School of Public Policy at the University of Michigan discusses what the evidence shows about the role of different types of income support policies in children’s health. Dr. Pilauskas highlights considerations for policymakers—and the many unanswered research questions that remain. This piece is the first of a series of Q&As with authors from the special issue, The Future of Population Health: Challenges and Opportunities.

How does child poverty affect health?

Child poverty affects health in many different ways. At the most basic level, we’re thinking about what access children have to various resources. If you don’t have sufficient income to get the medical care or medicines that you need, that can obviously affect child health. More broadly, children experience material hardships that affect their health like not having sufficient food or good housing. Children who are lower income are far more likely to live in areas that are highly polluted, which affects rates of asthma. There’s just so many things. You also need to work through material deprivation at the parental level. If parents are very stressed out or have mental health issues, they’re not going be able to be the kind of parents that we think are best for children.

What are the different types of income support policies?

Conditional cash transfers are income support policies that are conditional on some sort of behavior, such as getting a health check-up. Those are very common in Latin American countries but not in the United States. There are unconditional cash transfers, where cash is provided without any strings attached. Again, not that common in the United States. In the US, we tend to have what I think of as in-kind transfers, where we tie support to a specific thing. The Supplemental Nutrition Assistance Program (SNAP), or food stamps, is a good example. We know people need money for food, but rather than just giving them cash, we say here’s this benefit that allows you to go and purchase food. Or we have housing voucher policies. Work-contingent cash transfers are based on being in the labor force. The Earned Income Tax Credit (EITC) is one of the largest cash transfer programs in this country. If you’re working but you have low wages, the EITC provides a tax refund; it’s a little boost to your earnings.

Which policies did you choose to focus on in your research, and what did you find?

For this paper, I focused on in-kind and work contingent transfers, which are the biggest programs available to families with kids. There’s robust evidence that suggests that food stamps, or SNAP, reduces food insecurity for families, and that is associated with a lot of positive benefits for children. Similarly, Medicaid and the Children’s Health Insurance Program have been linked with child health and well-being; children are more likely to get their well visits and so forth. In contrast, there is not as much robust evidence regarding housing assistance. Not because we don’t think housing matters, but we don’t know for sure how it then translates to kids’ health outcomes.

I also looked at work contingent cash transfers: both the EITC, which is a refundable tax credit, and what we call welfare or TANF, Temporary Assistance for Needy Families. Since 1996, when we had massive welfare reform, basic cash assistance through welfare has really declined. When we think of anti-poverty policies, welfare is the first thing that comes to mind, so I felt like I needed to include it in the paper, but because we provide welfare to so few people, it doesn’t do very much to help families.

In comparison, there are loads of studies linking the EITC with positive outcomes for kids. It’s a much bigger cash transfer of about $3,500 a year for families with low incomes. If you are only making $10,000 a year, a $3,000 cash transfer is a huge increase in income. The EITC has been linked with reduced poverty and hardships, better housing security, better child health, less low birth weight. It reduces child maltreatment.

Did COVID relief have an impact on children’s health?

The 2021 there was a temporary revision to the Child Tax Credit. Under the American Rescue Plan Act, Congress dramatically expanded the credit. They removed the earnings requirements, so people without earnings could get the credit and made the credit much larger. It went from $2,000 per child to$3000 or $3,600 depending on the age of the kid. It was this massive influx of cash. It was very similar to European countries that have child allowances, which are essentially monthly cash payments to families to defray the costs of raising kids.

In the US, we provided a monthly credit for six months, and then half of the credit was distributed at tax time. This was a brief foray into an unconditional cash transfer for families. The evidence is still coming out, but we’ve found that very poor families with kids did better. It reduced food insecurity. There’s some evidence that it reduced housing insecurity as well. It also had some beneficial effects on maternal mental health, although that evidence is a bit less clear.

What’s the best way to administer income support policies?

Some states are considering, and some have implemented, state level child tax credits in addition to the federal one. There’s been local interest as well. It’s not clear which is the right approach. The advantage to local control is people can target policies to what their population needs. The disadvantage is then you start having vast inequalities across states.

Another consideration is universality versus targeted programs. Most of our social assistance is pretty targeted. It’s going to the folks who need it the most, but it also tends to get less political buy-in. Universal policies that are offered more widely tend to be preferred because everyone’s getting the benefit, and they’re less stigmatized.

We know low-income families tend to have low-income networks as well. I think the Child Tax credit was particularly effective because most families got it. When only one or two people are getting cash assistance within a network, it doesn’t go as far because it’s being spread across that extended network.

What research needs to be conducted to identify the most effective policies?

We think that people spend money differently if they get it in a lump sum versus a regular cash payment. They might spend a lump sum on housing or to pay off medical debt. If you’re thinking about a regular cash transfer like the Child Tax Credit, the evidence suggests that people used it for bills or food. But we don’t know yet what the right policy approach is.

The very low-income families that I have been studying have a lot of debt. It’s hard for them to pull themselves out of those situations even if they’re getting a monthly credit. I think we still need to understand if we need to be providing more lump sum transfers or regular cash transfers. There are questions about the right amount, and then the right approach. And who should the recipients be? There are still so many questions we need to answer.

Read the Centennial Issue Article