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Families, Not Government, Can Reduce Generational Poverty

May 7, 2014 - 4:23pm CDT

I have previously written in these pages (“Black Leaders Say Personal Responsibility Key to Economic Opportunity,” July 2013) about the mayor of a great city, a prize-winning economist, and an award-winning actor who all speak about the need for stable families.

Just last month I discussed the inner-city woes of an “F” school in Tulsa and how the administration was attempting to deal with the behavioral problems the children brought with them to the classroom (“Family Intactness, Parental Participation, and Student Performance,” April 2014). Teachers and administrators commented that it was the unstable family life experienced by the children which was a primary factor driving the children’s undesirable behavior.

The mainstream notion about disadvantaged youth is that coming from a low-income family determines the effects on those disadvantaged children in adulthood. It is this notion that propels government anti-poverty policies. In a 2007 National Bureau of Economic Research working paper, economists Rajeev Dehejia, Thomas DeLeire, Erzo Luttmer, and Joshua Mitchell state: “Many studies have documented the correlation between poverty and youth outcomes. Growing up in poverty is related to having worse physical health, lower levels of cognitive ability, lower levels of school achievement, and a greater level of emotional or behavioral problems.”

The authors also state that evidence shows that it is improbable that low income is the cause for all these adverse outcomes.

In addition to income, there is a significant amount of evidence that having an unmarried parent can help explain these effects. Economists Sara McLanahan and Gary Sandefur argue that “growing up with only one biological parent frequently deprives children of important economic, parental, and community resources, and these deprivations ultimately undermine their chances of future success.”

For instance, the highest percentage of single-headed households is among black mothers. In an interview with President Barack Obama, television host Bill O’Reilly stated that 72 percent of black babies are born out of wedlock. He asked the president why he and Mrs. Obama haven’t explicitly addressed this very serious problem.

According to federal health statistics, 24.6 percent of births to non-whites were to single mothers in 1964. (This includes blacks, Hispanics, and Asians—so the percentage of blacks was even lower than 24.6 percent.)

Fast forward to 2012, almost 50 years since LBJ’s War on Poverty began, and the percentage of births to unmarried black mothers was 72 percent. Despite 50 years of LBJ’s War on Poverty and $20 trillion spent, we are presented with one of the many perverse results of welfare policy. Clearly, the intent of welfare policy in 1964 was not to rip apart the structure of the American family.

In groundbreaking research in 1985, Harvard economist Richard Freeman found that the background factors that most influence who escapes inner-city poverty are churchgoing, whether other members of the family work, and whether the family is on welfare.

In Oklahoma, 62 percent of children are born on Medicaid. The percentage nationwide ranges from a whopping 71 percent in Louisiana to a low of 27 percent in Virginia (with a median value of 45 percent). Unfortunately, Oklahoma is in the very high range, at fourth-highest in the country. In absolute numbers, that represents, on average, approximately 30,000 babies that are born into Oklahoma’s welfare system each and every year. 

Unfortunately, as Scott Moody and I recently pointed out in these pages (“The Negative Impact of Multi-Generational Welfare,” February 2014), this suggests Medicaid will continue to swell, as this next generation of newborns is very likely to be remain dependent on the program into adulthood like their parents. Economist Carolyn Moeling’s 2004 research is a forewarning to those Oklahoma policymakers flirting with expanding public assistance: “States that offered the most generous benefits to single mothers were the states that experienced the largest increases in single motherhood.”

Largely missing from mainstream conversation about what factors influence disadvantaged individuals’ ability to improve their financial trajectory is church going—despite robust evidence. Dehejia, et al.’s empirical results “show that religious organizations play an important role in shaping the lives of disadvantaged youth by mitigating at least some of the long-term consequences of disadvantage.” More specifically, the results are strongest when disadvantage is measured by maternal education or youth’s level of education.

Similarly, Byron Johnson finds that church attendance has been found to influence youth’s inclination whether to commit serious crimes. In other words, when youth are actively involved in church, the linkage between neighborhood disorder and serious crime diminishes (where neighborhood or social disorder is characterized by visible cues like hanging out, drinking, taking drugs, and creating a sense of danger on the streets).

Research which confirms that welfare policy contributes to the ongoing existence of intergenerational poverty abounds—whereas factors like two-parent households and churchgoing have been shown to ameliorate intergenerational poverty. For liberal policymakers and media to argue that intact marriages and religion have negligible effects on the health of a community and an economy is to blatantly ignore the facts.

OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator (with J. Scott Moody) of the Tax Foundation’s popular “State Business Tax Climate Index.” She blogs at PhDMomDropout.com.