Net Worth Poverty and Child Well-being: Black-White Differences

• In Event: Beyond Income: Economic Contexts and Children's Development

Abstract

This study provides the first analysis as to how net worth poverty and its subcomponents, debt poverty and asset poverty, predict reading and math achievement and behavioral outcomes for White and Black children. Net worth poverty is an overlooked manifestation of economic fragility that may pose risks for children’s positive development. Net worth poverty refers to households whose net worth (or wealth) is less than one-fourth of the federal poverty line, or less than $6,869 in wealth for a family of four in 2021. In 2019, 58% of Black households with children experienced net worth poverty (either alone or in conjunction with income poverty), relative to only 23% of White households with children. Net worth poverty may affect child well-being via several mechanisms. It diminishes parents’ investments in their children, makes it difficult to smooth consumption in the face of a financial shock or emergency such as an unexpected medical expense, increases stress and anxiety for both parents and children, and lowers parents’ and children’s expectations for future success. These theoretical mechanisms complement, but do not completely overlap with, those for income poverty, explaining why net worth poverty, by itself, may pose a risk for child well-being.
Data come from the 2002–2019 waves of the Panel Study of Income Dynamics and its Child Development Supplement. We use linear regression models of 8,908 observations of children ages 3 to 17 to estimate how net worth poverty and income poverty are associated with reading and math achievement and with internalizing and externalizing behavioral outcomes. We consider two poverty classifications. The first is a joint measure of income and net worth poverty status, where households were divided into one of four mutually exclusive categories: no poverty; income poverty but not net worth poverty; net worth poverty but not income poverty; and both income poverty and net worth poverty. The second type of poverty category is a mutually exclusive, three-category division of net worth poverty status: no net worth poverty; asset poverty; and debt poverty. Households in asset poverty are those whose assets are insufficient to bring them above the net worth poverty line (these households may or may not have debts). Households in debt poverty have assets that exceed the net worth poverty threshold, but their debts bring them below the threshold.
Preliminary results indicate that, after adjusting for income poverty and other demographic covariates, White children who experienced net worth poverty, either alone or in conjunction with income poverty, showed diminished outcomes relative to White children who were not experiencing poverty. Net worth poverty was not significantly predictive of outcomes for Black children, but that was because asset and debt poverty had offsetting effects: with debt poverty demonstrating positive correlations with outcomes, and asset poverty demonstrating negative correlations. Black children experiencing debt poverty had better outcomes than Black children who were not experiencing income or wealth poverty. This study underscores the importance of wealth deprivation and shows that the negative effects of net worth poverty differ between White and Black children.

Authors

• Christina Gibson-Davis, Duke Univeristy
  Presenting Author

• Lisa Keister, Duke University

• Lisa Gennetian, Duke University