Income Support Associated With Improved Health Outcomes for Children, Many Studies Show

Income significantly contributes to opportunities for good health.^[1] People with higher incomes can more easily afford to meet the full range of their children’s needs, from nutritious food and quality housing to medicine, transportation to the pediatrician, and healthy recreational activities, and they are more likely to live in neighborhoods with high-quality schools. Conversely, families struggling to purchase the basics not only can afford fewer of their children’s needs but may experience high — even unhealthy — levels of stress as a result. Their children tend to do worse in school, earn less as adults, and have worse health outcomes overall.^[2]

Opportunities for good health are not distributed equally across communities. Across all racial and ethnic groups, Americans who are paid low wages have poorer self-reported health status.^[3] A history of structural racism and income and wealth inequality have contributed to particularly poor health outcomes for people of color, who are likelier to report their health as fair or poor than are white people.^[4] (See Figure 1.)

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More generous income assistance is linked with healthier birth weights, lower maternal stress, better childhood nutrition, higher school enrollment, higher test scores, higher high school graduation rates, and higher rates of college entry.

Economic security programs such as refundable tax credits, food assistance, and housing subsidies — which bolster income, help families afford basic needs, and keep millions of children above the poverty line — also are associated with improved health for children, families, and communities now and in the long term, a congressionally chartered report issued in 2019 by a National Academy of Sciences (NAS) panel on child poverty explained. “The weight of the causal evidence does indeed indicate that income poverty itself causes negative child outcomes, especially when poverty occurs in early childhood or persists throughout a large portion of childhood,” concluded the panel. More generous income assistance, they noted, is linked with healthier birth weights, lower maternal stress (measured by reduced stress hormone levels in the bloodstream), better childhood nutrition, higher school enrollment, higher reading and math test scores, higher high school graduation rates, less use of drugs and alcohol, and higher rates of college entry, among other outcomes.^[5]

Refundable tax credits such as the Earned Income Tax Credit (EITC) and Child Tax Credit are a particularly important way to increase economic security for struggling families. Both credits are offered at the federal level; also, 29 states, Washington, D.C., and Puerto Rico have EITCs and several states have a child tax credit. Both credits boost families’ refunds at tax time, which helps them better meet their basic needs. (For 2021, the federal Child Tax Credit will be disbursed monthly from July to December as part of the American Rescue Plan’s tax credit expansions.) Research suggests that the additional income these tax credits provide may lead to:

• Significant improvements in health, including in maternal and infant health, consistent with increased access to healthy food and reduced food insecurity;
• Children in families receiving the credits doing better and completing more years of education (which itself is associated with better health); and
• Less stress on families struggling on low incomes.

The EITC, which has existed longer than the Child Tax Credit, has been studied extensively. According to the NAS committee, “Periodic increases in the generosity of the Earned Income Tax Credit program have improved children’s educational and health outcomes.” Although few studies focus on the Child Tax Credit, it shares key features with the EITC — including a focus on supplementing income through tax refunds for families with children and low earnings — that make it likely to share the EITC’s effects on children.

Investing more deeply in these tax credits and other economic security programs, as the federal government has done through the American Rescue Plan and as a number of states are considering, would improve both short- and long-term health outcomes for low-income children and bolster economic opportunity.^[6]

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Income Improves Maternal and Child Health

Refundable credits are associated with better maternal health and healthier birth weights, a number of studies find. (See Figure 2.) For example, researchers at the University of California at Davis compared changes in birth outcomes for mothers who likely received the largest increases in their EITCs when the credit was expanded during the 1990s and mothers who likely received the smallest increases.^[7] They found that mothers who likely received the largest increases were likelier to receive prenatal care, including care before the critical third trimester. Infants born to mothers who likely received the largest increases had the greatest improvements across a number of health indicators, such as fewer low-weight births and premature births.^[8] Some research suggests that these reductions may have been greater for Black mothers.^[9]

Research has found that more generous state EITCs are associated with improved birth outcomes, and that states with refundable EITCs — where the full credit is available to families, no matter what they owe in taxes — had the greatest reductions in low-birth-weight infants and largest increases in birth weights.^[10] Researchers are still exploring why living in a state that recently enacted or enlarged a state EITC is associated with significant improvements in low birth weight, with possible reasons including reductions in mothers’ mental stress and increased access to private insurance and prenatal care.^[11]

Additional Income Cuts Food Insecurity, Improves Nutrition, With Positive Health Effects

The positive EITC findings are consistent with a larger literature of research that suggests government income assistance for struggling families leads to health gains. Low-income families that participate in other economic security programs have similarly tended to show both immediate and longer-term improvements in their children’s health.

For instance, refundable tax credits and other economic security programs may improve health by supporting better nutrition.^[12] As the Food Stamp Program (now called the Supplemental Nutrition Assistance Program, or SNAP) gradually expanded nationwide, children born in counties with access to food stamps had better health outcomes as adults — including lower rates of heart disease and obesity — than children without access to the program.^[13] Likewise, children of immigrants with lawful immigration status who benefitted from food stamp eligibility expansions in the late 1990s and early 2000s saw significant improvements in their health, including the share reported to be in “excellent” or “very good” health, and a reduction in overnight hospitalizations.^[14]

Poor nutrition in early childhood has been linked with a lifelong shift in the body’s metabolism and a cluster of chronic metabolism-related illnesses, including diabetes, as well as high blood pressure and heart disease. That connection may help explain the lasting effect of food assistance access in childhood on reducing these illnesses in adulthood, researchers say.^[15] The findings suggest that income boosts such as refundable tax credits may confer similar benefits, especially if they are paid on a periodic basis as is the temporary expansion of the federal Child Tax Credit that was enacted in the American Rescue Plan.

Many parents struggling with low incomes face the challenge that healthier, more nutritious food is often also more expensive. Along with dedicated food assistance such as SNAP, the income provided by refundable tax credits can help reduce food insecurity for families and lower barriers to buying more nutritious food.

Refundable tax credits can enable families to spend more money on food, particularly on healthful food, studies suggest. One study suggested that families increased the amount they spent on food eaten at home after receiving an increased EITC in their tax refund.^[16] Another reviewed how families spend their once-yearly EITC refunds, finding that households eligible for the credit spent more on healthy items including fresh fruit and vegetables, meat and poultry, and dairy products during the months when most refunds are paid.^[17] And a 2014 study using data from the National Health and Nutrition Examination Survey connected receipt of the EITC to improvements in sufficient food consumption and sufficient money for food for both women and men.^[18]

Income Boosts Educational Opportunities

Research suggests that people who have completed more education tend to be healthier, in part because they can get better jobs and are likelier to have higher earnings, to live in neighborhoods with more green space and less pollution, and to have more resources to invest in healthier foods and opportunities to be active. Studies have also found that students who are healthy are more likely to succeed in school, possibly because they are less likely to miss class due to health problems, and to have fewer problems with vision, hearing, paying attention, and behavior.^[19] Additional income, such as from refundable tax credits, as well as other economic security programs, can help children do better and complete more K-12 schooling and higher education.

Additional income, such as what the EITC and other assistance programs provide, has been linked to better educational outcomes while children are in school. Students living in households with additional income from the EITC had significantly larger combined math and reading test scores, according to a study of nearly two decades’ worth of data on mothers and children.^[20] Another study, examining a series of federal and state EITC expansions, found that in years and states when lawmakers increased the EITC, children’s test scores rose — particularly in math — in both elementary and middle school.^[21] Likewise, a study that matched tax records with school performance for 2.5 million students in grades 3 to 8 reported an association between income from the EITC and Child Tax Credit and higher reading and math scores.^[22] The EITC may play a particularly important role in helping children of color improve their math achievement and complete high school, some studies suggest.^[23]

Other programs that help families with children afford their basic needs, like cash assistance pilot programs, have also been linked to stronger academic achievement, including higher test scores and increased high school graduation rates, and to increased earnings later in life.^[24]

Income assistance programs may also improve higher education access and outcomes, research suggests, not only by improving educational attainment, but also by making college more affordable. According to one study, children in families eligible for the largest EITC expansions in the early 1990s were more likely to complete high school by age 19 and to complete one or more years of college by age 19.^[25] Another estimates that for a high school student whose family makes around the amount needed to qualify for the maximum EITC, as little as $1,000 in tax refunds received in the spring of senior year (in 2015 dollars) is linked to an increase of about 2 percent in the relative likelihood of entering college the following year (or just over 0.4 percentage points, compared to a 21 percent national entry rate). The authors note suggestive evidence that that these positive enrollment effects last for four years after high school.^[26]

As economists Austin Nichols and Jesse Rothstein summarize in a 2015 review of the literature on the EITC: “Taking all of the estimates together, there is robust evidence of quite large effects of the EITC on children’s academic achievement and attainment, with potentially important consequences for later-life outcomes.”^[27]

Additional evidence of the positive effects of income support comes from a series of cross-program comparisons of several anti-poverty programs and pilots aimed at helping people move from cash assistance to work in the United States and Canada in the 1990s. When programs provided more generous income assistance, the comparisons consistently showed better academic performance among young children starting school. The more the programs raised participating families’ incomes, the more their children’s academic achievement rose, relative to peers assigned to a traditional, less generous assistance program. (See Figure 3.) The five most generous programs raised average income by $1,700 a year.^[28] In a related earlier study of several of the same interventions, participation in the more generous programs raised low-income children’s average test scores from the equivalent of the 25^th percentile to the 30^th percentile.^[29]

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Income Eases the Damaging Stress of Hardship

Intense worry about meeting a family’s urgent needs can preoccupy parents or other caregivers, hindering them from giving the kind of steady and reassuring parenting that helps children thrive. When that happens, children tend to fare worse in school and on a range of emotional and behavioral outcomes.^[30]

Moreover, when a parent’s stress is strong and sustained early in their child’s life or in pregnancy, it may result in what is known as “toxic stress” for the child, which is associated with later reduced health and other poor outcomes.^[31] One study found that temporary spells of low income in pregnancy tended to coincide with a rise in the mother’s stress hormone cortisol. High cortisol in pregnancy, in turn, was associated with “a year less schooling, a verbal IQ score that is five points lower and a 48 percent increase in the number of chronic [health] conditions” for the exposed children by age 7, compared to their own siblings born when the family had lower stress (and, usually, higher income).^[32] High childhood stress has been linked to a host of inflammatory diseases later in life, such as early-onset arthritis.^[33]

Income support appears to help reduce the stress on families struggling on low incomes. Mothers targeted by the 1993 expansion of the EITC showed signs of reduced stress such as less inflammation and lower diastolic blood pressure.^[34]

Researchers continue to explore why more adequate family income helps children over the long term. The added income may help, for example, by reducing severe poverty-related stress or by helping families afford better learning environments from child care through college.

Important gains for children have been found both in programs that boost income by raising parental employment and in programs that raise income without an increase in parental employment. Overall, the evidence suggests that the additional income provided by economic security programs and refundable tax credits can contribute to better health outcomes for children in the short and long term.