Sources of Support and Income Inequality Among America's Children

Gregory Acs, Megan Gallagher

Assessing the New Federalism Discussion Paper No. 99-15

Assessing the New Federalism is a multiyear Urban Institute project designed to analyze the devolution of responsibility for social programs from the federal government to the states, focusing primarily on health care, income security, employment and training programs, and social services. Alan Weil is the project director. Researchers monitor program changes and fiscal developments. In collaboration with Child Trends, the project studies changes in family well-being. The project aims to provide timely, nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively.

Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute's Web site. This paper is one in a series of discussion papers analyzing information from these and other sources.

The project has received funding from the Annie E. Casey Foundation, the W.K. Kellogg Foundation, the Robert Wood Johnson Foundation, the Henry J. Kaiser Family Foundation, the Ford Foundation, the John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, the David and Lucile Packard Foundation, the McKnight Foundation, the Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, the Fund for New Jersey, the Lynde and Harry Bradley Foundation, the Joyce Foundation, and the Rockerfeller Foundation.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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Contents

Introduction

Data and Definitions

Income Levels
    Median Family Income by Family Type
    Sources of Support by Family Type

The Distribution of Income
    Sources of Income Inequalit

The Link between Inequality and Child Poverty

Summary and Conclusion

Appendix

References

About the Authors

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Introduction

While U.S. poverty rates have fallen from 15.1 percent in 1993 to 13.3 percent in 1997, poverty rates among children remain high. Nearly one out of every five children lived in poverty in 1997; indeed, children are twice as likely to be poor as adults (U.S. Bureau of the Census 1998). Many factors affect children's material well-being—for example, children living with both parents, on average, have greater financial resources available to them than children living in single-parent families. Location also matters: one-third of the children in Mississippi were poor in 1996, compared to just over one out of 10 in Wisconsin (Gallagher and Zedlewski 1999). Clearly, children's material well-being varies considerably across family types and across states.

In this paper, we take a closer look at the disparity in the familial financial resources available to children across states and family types. Using data from the National Survey of America's Families (NSAF), we document differences in average incomes available to children based on their living arrangements and states of residence. In addition, we take differences in family size into account by examining disparities in income relative to the poverty line (income-to-needs ratios).¹ Because conventional definitions of "family" may fail to recognize all the resources available to a child, such as income from a nonrelated adult living in the same household, we also examine differences in "social family" income. Beyond differences in average income, we document differences in the sources of support for children living in different types of families.

The resources available to children also differ within states and within family types. That is to say that while, on average, children living with both parents are materially better off than children living with a single parent, some children in two-parent families are poor, and some in one-parent families are wealthy. Consequently, we examine how equally (or unequally) the income available to children is distributed in the U.S., as well as how income is distributed within states and family types. We also assess how much of overall inequality can be accounted for by observable differences in family structure and location.

It is important to consider inequality in the distribution of resources available to children and not just differences in average incomes and the proportion in poverty. While state poverty rates indicate the extent of need and how it varies across states, they do not allow us to infer whether or not states themselves have the resources to address the needs of low-income children. If high-poverty states also have high inequality, they may be able to improve the material well-being of children by relying on state resources. We find that, in general, high-poverty states also have high levels of inequality and that differences between states account for very little of overall inequality in the U.S.

In the following section, we discuss the NSAF data used in our analysis as well as our definitions of income, income sources, and family types. We then proceed to document differences in the resources available to children by family type. In the next section, we examine the distribution of income across states and identify the sources of income inequality. We conclude with a summary of our findings.

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Notes

1. The federal poverty line reflects the amount of income a family requires to meet its basic needs—food, clothing, shelter, and so forth. The poverty line varies by family composition, reflecting both the fact that larger families require more income to meet their needs and that individuals living together can share resources. For example, the poverty line for a single nonelderly person in 1997 was $8,350, and the poverty line for a single parent with one child was $11,063; while the two-person family requires more income to meet basic needs than the single individual, its needs are not double those of the single individuals. Thus, examining a family's income relative to its needs takes into account differences in family size (U.S. Bureau of the Census 1998).

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