child care - Digital Library Collections

FAMILY
INCOME
school. Yet these ills are preventable. To the extent
that family income can be increased, outcomes for
children improve.
When families were provided with a guaranteed
minimum income for at least 18 months in
federally funded experiments in the 1970s and
early 1980s (the Seattle and Denver Income
Maintenance Experiments, or SIME/DIME),
school enrollment among the 2,000 16- to 21-yearolds
studied increased from 42 percent to 51 percent.
More recently, Duncan and others found
that a $10,000 annual increase in family income
during the first five years of life was linked to
nearly a full year's increase in completed
schooling.
When poor children drop out of school (and
they are twice as likely to do so as middle-income
youths), their future earnings are limited. For
example, Census Bureau data show that in 1996,
40 percent of families with children headed by a
high school dropout were poor, compared with 3
percent of families headed by a college graduate.
CDF estimates that for every year that 14.5 million
children remain poor, the diminished productivity
that results will cost a total of $130 billion in lost
future economic output.
Wall Street economist John Mueller, a selfdescribed
"conservative Reagan Republican,"
notes that human capital investments, including
such investments in children as school funding and
family expenditures on children's development,
bring a real rate of return of 12.5 percent in the
business economy. This compares favorably to
other capital investments such as business equipment,
which have a 10.4 percent rate of return,
Mueller observes. Investing in children pays off.
Legislative Progress in 1997
Several notable developments last year will help
children. The minimum wage increased,
changes in the tax laws included a credit for
children in low- and moderate-income families, and
a new welfare-to-work grant program was funded to
help families moving into the work force.
Minimum wage bike. The second installment
of the minimum wage increase enacted in 1996
took effect in September 1997, raising the minimum
wage to $5.15 per hour. The increase stili
leaves full-time, year-round minimum wage employment
at only 82 percent of the 1998 poverty level
Figure 1.3
Income Sources for Poor Families
Earnings provide Where the average poor family with children got its income, 1996
poor families with
mare than twice as
much income as
welfare does.
Work
59.4%
Means-tested
cash benefits
24.2%
Source: U.S. Deportment of Commerce, Bureau of the Census. Calculations by Children's
Defense Fund.
CHILDREN'S DEFENSE FUND 5