Chapter 2: Children, Teens, and Money

FAMILY INCOME
CHILDREN IN POVERTY
CHILD SUPPORT
TEENS AND MONEY

FAMILY INCOME

Almost all children are financially dependent on their parents, with their financial condition directly dependent on how much their parents earn. Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith of the U.S. Census Bureau report in Income, Poverty, and Health Insurance Coverage in the United States: 2007 (August 2008, http://www.census.gov/prod/2008pubs/p60-235.pdf) that real income rose throughout the 1990s and then declined in the early twenty-first century. The median (half were higher and half were lower) household income in 2007 was $50,233, up 1.3% from the previous year. (See Table 2.1.) For married-couple families, the median household income was $72,785, up 1.5% from the previous year.

DeNavas-Walt, Proctor, and Smith find that single-parent families, particularly those headed by single mothers, fared worse than other households in 2007. Families with female heads-of-household and no husband present had a median income of $33,370, up 2% from the previous year, whereas male-headed households with no wife present had a median income of $49,839, 2.9% higher than the year before. (See Table 2.1.)

According to DeNavas-Walt, Proctor, and Smith, the median income varied greatly by race and ethnic group. Asian-American households had the highest median income, at $66,103, followed by non-Hispanic white households at $54,920. (See Table 2.1.) The median income for Hispanic households was $38,679, and the median income for African-American households, at $33,916, was the lowest of any reported race or ethnic group, even though it had risen 3.2% over the previous year, the largest increase of any group.

The Cost of Raising a Child

Since the 1960s the Family Economics Research Group of the U.S. Department of Agriculture (USDA) has provided estimates on the cost of rearing a child to adulthood. The estimates are calculated per child in a household with two children and are categorized by the age of the child using different family income levels. Attorneys and judges use these estimates in determining child-support awards in divorce cases as well as in cases involving the wrongful death of a parent. Public officials use the estimates to determine payments for the support of children in foster care and for subsidies to adoptive families. Financial planners and consumer educators use them in helping people determine their life insurance needs.

INCOME LEVELS . Estimated annual family expenditures for a child vary widely depending on the income level of the household. The estimated amount a family spends on a child also tends to increase as the child ages. The USDA estimates that in 2007 married-couple households that earned less than $45,800 per year spent amounts ranging from $7,830 for very young children to $8,830 for 12- to 14-year-olds. (See Table 2.2.) Estimates for middle-income, married-couple families ranged from $10,930 for 9-to 11-year-olds to $12,030 for 15- to 17-year-olds. Estimates for married-couple families with incomes above $77,100 ranged from $15,980 to $17,500, depending on the age of the child.

Estimated annual expenditures for single-parent families that earned less than $45,800 per year spent slightly less than those of two-parent families, most likely because their average incomes were lower ($19,700 for single-parent families and $28,600 for two-parent families). (See Table 2.3 and Table 2.2.) The USDA estimates that in 2007 these single parents spent an annual average of $6,490 to $8,960, depending on the age of the child. Single-parent families that earned $45,800 or more spent $14,940 to $17,760 per child, slightly more than the middle-income, two-parent families.

Even though the USDA estimates that in 2007 the highest-income households spent about twice the amount on their children than the lowest-income households, this difference varied by the type of expense. For example, the estimated food expenditure for children aged 15 to 17 in the

highest-income husband-wife families was $2,970, compared to $2,080 in the lowest-income group. (See Table 2.2.) The estimated annual expense for education and child care for children aged 15 to 17 in these high-income families ($2,120) was nearly four times that for a child the same age in the lowest-income families ($580). These variations among income groups by type of expense held true for single-parent households as well. (See Table 2.3.)

AGE OF CHILD. The 2007 estimates of family expenditures on a child generally increased with the child's age, except for housing, education, and child care. (See Table 2.2 and Table 2.3.) Households with young children are more likely to have recently purchased homes at higher prices and with higher interest rates, which helps explain the higher housing estimates for young children. Estimates for education, child care, and related expenses were also highest for preschoolers (under the age of six) in all income groups. Many women with children this age are in the labor force and must pay for child care. Once children enter school, the child care costs decrease. As school-age children grow up, the need for after-school and summer care also decreases. The estimates do not include expenses related to college attendance, which typically do not occur until the child is at least 18.

FUTURE COSTS . The USDA also estimates the total cost of raising a child born in 2007 who will reach the age of seventeen in 2024, incorporating an average annual inflation rate of 3.1% (the average annual inflation rate over the previous twenty years). The total family expenses for raising a child born in 2007 were estimated to be $196,010 for the lowest-income group, $269,040 for the middle-income group, and $393,230 for the highest-income group. (See Table 2.4.)

CHILDREN IN POVERTY

Children are the largest group of poor in the United States. In 1975 they replaced the elderly as the poorest age group. (See Figure 2.1.) DeNavas-Walt, Proctor, and Smith state that in 2007 the poverty rate for all children younger than 18 years of age was 18%, or 13.3 million children, which was up from 17.4%, or 12.8 million children, in 2006. Children under 18 years old made up a quarter (24.8%) of the population of the United States, but they made up over one-third (35.7%) of the people living below the poverty line. (For population estimates for July 1, 2007, by age, see the Census Bureau's National Population Estimates—Characteristics [April 30, 2008, http://www.census.gov/popest/national/asrh/NC-EST2007-sa.html.]) Children under the age of six are particularly vulnerable to poverty. According

to DeNavas-Walt, Proctor, and Smith, in 2007 the poverty rate for families with children under the age of six was 20.8%, which was higher than the overall rate of child poverty. In addition, over half (54%) of children younger than the age of six living with a single mother were in poverty, which was more than five times the rate of poverty for children younger than the age of six living in married-couple families (9.5%).

The child poverty rate declined between 1995 and 2000, but the rate of children living in poverty (100% of the poverty line or below) and in low-income families (100% to 200% of the poverty line) began to rise again in 2000. By 2007, 39.1% of children lived in low-income or poor families. (See Figure 2.2.) In Basic Facts about Low-Income Children: Birth to Age 18 (October 2008, http://www.nccp.org/publications/pdf/text_845.pdf), Ayana Douglas-Hall and Michelle Chau of the National Center for Children in Poverty note that even though the largest group of low-income children in 2007 were white (38%), Hispanic and African-American children were disproportionately poor. (See Figure 2.3.) The majority of both African-American children (60%) and Hispanic children (61%) lived in low-income or poor families. Preschoolers were particularly likely to live in low-income families (43%), including poor families (21%). (See Figure 2.4.) Another trend in child poverty emerged in the twenty-first century. The Children's Defense Fund notes in The State of America's Children 2005 (2005, http://www.childrensdefense.org/site/DocServer/Greenbook_2005.pdf?docID=1741) that the number of children living in extreme poverty (below one-half of the poverty level) increased by 20% between 2000 and 2004, almost twice as fast as the number of children in poverty overall. According to Kathy R. Thornburg, Jacqueline L. Scott, and Hailey Stout of the Center for Family Policy and Research, in “The State of Children and Families: 2008” (February 2008, http://mucenter.missouri.edu/MOchildfam08.pdf), approximately 5.5 million children lived in extreme poverty in 2006.

Government Aid to Children

Many programs exist in the United States to assist families and children living with economic hardship. Some of these programs are federally run, and others are run at the state level. In many cases the programs are mandated at the federal level and administered by the states, which can make tracking them complicated.

TEMPORARY ASSISTANCE FOR NEEDY FAMILIES . Under the Temporary Assistance for Needy Families (TANF) program, states receive a fixed amount from the federal government to provide “welfare” to residents with few federal constraints on how they manage the funds. The Administration for Children and Families (ACF) of the U.S. Department

of Health and Human Services (January 8, 2009, http://www.acf.hhs.gov/programs/ofs/data/2006/tableA_spending_2006.html) indicates that the total federal funds spent on TANF expenditures for fiscal year (FY) 2006 were $20.5 billion.

Under TANF each state decides what categories of children receive aid. TANF requires that an adult recipient work in exchange for time-limited assistance. In Temporary Assistance for Needy Families Program (TANF): Seventh Annual Report to Congress (December 2006, http://www.acf.hhs.gov/programs/ofa/data-reports/annualreport7/TANF_7th_Report_Final_101006.pdf), the ACF notes that in FY 2003, the latest year for which detailed data are available, 22.9% of adult TANF recipients were employed, down from 25.3% the year before.

The size of families receiving public assistance was decreasing in 2003. According to the ACF, the average number of people in a TANF family was 2.5 in 2003, down from an average of 2.8 in 1996. Half of TANF families in 2003 included only one child recipient, whereas only 10% had four or more children. More than one-third (38.6%) of TANF families were child-only cases, including no adult recipients.

The amount of government assistance provided to individuals and families was down sharply in the first years of the twenty-first century. The average monthly benefit per

TANF recipient in 2005 was $157, down from a high of $228 (in 2005 dollars) in 1978 under the old Aid to Families with Dependent Children program. (See Figure 2.5.) Benefits included cash and work-based assistance, child care, and transportation assistance. In addition, the number of families receiving income assistance continued to decline in 2006. (See Figure 2.6.) In response to the economic recession that began in 2008, Congress allocated additional contingency funds of $5 billion to help states that see increases in families needing TANF assistance. Liz Schott of the Center on Budget and Policy Priorities explains in “An Introduction to TANF” (March 19, 2009, http://www.cbpp.org/cms/index.cfm?fa=view&id=936) that when TANF comes up for reauthorization in 2010, Congress will likely examine the extent to which TANF assistance programs responded to increased need during the recession and have questions about how well the program prepares families to overcome employment barriers.

Reductions in welfare rolls and expenditures may actually harm poor children. Olivia Golden (1955–), the assistant secretary for children and families in the U.S. Department of Health and Human Services under President Bill Clinton (1946–), states in “Welfare Reform Mostly Worked” (Orlando Sentinel, July 24, 2005) that she believes the welfare-to-work model “mostly worked” in the sense that welfare caseloads had dropped and that most low-income parents began working to support their families. However, this very success brought about additional problems. She notes, “In less than a decade, welfare has faded as a means of support for impoverished families. Many of these families are working long hours despite low wages, shrinking health-insurance coverage and serious trade-offs between work and decent care for their children. Yet, neither our politics nor our policies have adjusted to our success at bringing more of these parents into the labor force.”

THE SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM . The Supplemental Nutrition Assistance Program, known previously as the food stamp program, which is administered by the USDA, provides low-income households with electronic benefit cards that can be used at most grocery stores, much like debit cards, in place of cash. This assistance is intended to ensure that recipients have access to a nutritious diet. It is available to households that have a gross monthly income of no more than 130% of the poverty line and a net monthly income at or below the poverty line. According to the USDA's Food and Nutrition Service (FNS), in Characteristics of Food Stamp Households: Fiscal Year 2007—Summary (September 2008, http://www.fns.usda.gov/oane/menu/Published/snap/FILES/Participation/2007CharacteristicsSummary.pdf), almost nine out of ten (87%) households that received food stamp benefits in 2007 lived in poverty.

The amount of money a family receives on its benefit card is based on the USDA's estimate of how much it costs to provide households with nutritious, low-cost meals, called the thrifty food plan. This estimate changes yearly to reflect inflation. In FY 2007 the FNS indicates that the maximum monthly benefit for a family of four was $506. The average monthly benefit for all households in FY 2007 was $212. Supplemental Nutrition Assistance Program households containing children received an average of $312 in benefits per month, in part because households with children tended to be larger (3.3 people) than households in general (2.2 people). (See Table 2.5.) Because funds provided to nutritional assistance programs are extremely likely to be spent, such funds are considered economic stimulus. On February 17, 2009, President Barack Obama (1961–) signed the American Recovery and Reinvestment Act into law in response to the severe economic recession that began in 2008. The legislation provided an additional $500 million to support participation in the State Nutrition Action Plan and to increase benefits up to 113.6% of the value of the thrifty food plan.

According to Kari Wolkwitz and Joshua Leftin, in Characteristics of Food Stamp Households: Fiscal Year 2007 (September 2008, http://www.fns.usda.gov/oane/menu/Published/snap/FILES/Participation/2007Characteristics.pdf), the majority of households that received supplemental nutrition assistance in FY 2007 contained children—51.3%, or 5.9 million households. One-third (32.1%) of all Supplemental Nutrition Assistance Program households were single-parent households, most of them headed by single mothers.

THE SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS, AND CHILDREN . The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) provides food assistance and nutritional screening for low-income pregnant and postpartum women and their infants and children under the age of five. This program can help women and young children with household incomes that are too high to receive food stamps. In “Frequently Asked Questions about WIC” (October 2008, http://www.fns.usda.gov/wic/FAQs/FAQ.HTM), the FNS explains that income eligibility guidelines for the period July 1, 2007, to June 30, 2008, required applicants to have an income at or below 185% of the poverty level and be nutritionally “at risk,” meaning that to be eligible an individual must have medically or diet-based risks. The income eligibility guidelines state that a family of one (in other words, a single, pregnant woman) could earn up to $1,604 per month and still qualify for WIC. A family of four could earn $3,269 per month and participate in WIC. The FNS states in WIC Participant and Program Characteristics, 2006 Summary (December 2007, http://www.fns.usda.gov/oane/menu/Published/WIC/FILES/PC2006Summary.pdf) that two-thirds (67.4%) of WIC participants in 2006 had household incomes below the poverty line.

According to the FNS, in April 2006 nearly 8.8 million women and children participated in WIC, an increase of 2.2% since April 2004. Twenty-six percent of WIC participants were infants, 49% were children aged one to four years old, and 25% were pregnant, postpartum, or breast-feeding women. Recipients receive food items or vouchers for purchases of certain items in retail stores. The WIC program is federally funded but administered by state and local health agencies. In “WIC Program Participation and Costs” (December 30, 2008, http://www.fns.usda.gov/pd/wisummary.htm), the FNS states that in FY 2008 the WIC program's estimated food cost was $4.5 billion and its estimated administrative costs were $1.6 billion, for a total cost of $6.2 billion.

SCHOOL NUTRITION PROGRAMS . School nutrition programs offer food assistance to school-age children. The programs provide millions of children with nutritious food each day. Children whose families earn no more than 185% of the poverty level are eligible for reduced-price school meals; children whose families earn no more than 130% of the poverty level are eligible for free school meals. The FNS reports in “Federal Cost of School Food Programs” (December 30, 2008, http://www.fns.usda.gov/pd/cncosts.htm) that in FY 2007 the U.S. government spent $10.9 billion on school nutrition programs, including the National School Lunch Program, the School Breakfast Program, and the Special Milk Program. In that year 30.5 million children took part in the school lunch program. (See Table 2.6.)

CHILD SUPPORT

Children living in single-parent families are far more likely to be poor than children living in two-parent households, and the number of children living with only one

parent—usually the mother—is increasing. According to Timothy S. Grall of the Census Bureau, in Custodial Mothers and Fathers and Their Child Support: 2005 (August 2007, http://www.census.gov/prod/2007pubs/p60-234.pdf), in the spring of 2006, 13.6 million parents had custody of 21.2 million children under the age of 21 whose other parent lived elsewhere. Mothers accounted for 83.8% of all custodial parents; 16.2% of custodial parents were fathers. These proportions have not changed significantly since 1994.

Grall indicates that 7.8 million (57.3%) of the 13.6 million custodial parents in 2006 had a child support agreement with the other parent. Most of these agreements required child support payments from the noncustodial parent. In 2005, 77.2% of custodial parents due support received at least some payments. (See Figure 2.7.) Almost half (46.9%) received all the payments they were due, up from only a little more than a third (36.9%) in 1993. Grall also notes that noncustodial parents who had either joint custody agreements or visitation rights to their children were more likely to pay child support (84.6% and 77.6%, respectively) than parents who did not have any visitation rights at all (61.5%).

Differences existed in the child support arrangements for custodial mothers and custodial fathers. In 2005 custodial mothers were much more likely than custodial fathers to be awarded child support (61.4% and 36.4%, respectively). (See Table 2.7.) On average, custodial mothers were due $5,660 in child support in 2005, and received $3,660. Custodial fathers were due, on average, $4,895 and actually received $3,491. As noted earlier, fewer than half of all custodial parents actually received the full child support due them; only 47.3% of custodial mothers and 46.2% of custodial fathers received the total amount due.

Grall explains that receipt of child support payments made a significant difference in the household incomes of single-parent families. In 2005 the average family income of custodial parents who received at least some of the child support due them was $29,500, and the child support represented 10.7% of the total household income. Child support represented 18.8% of the total household income for those parents who received all of the child support due them. In contrast, custodial parents who had child support agreements but received none of the child support due had an average income of only $26,000.

Government Assistance in Obtaining Child Support

As demonstrated earlier, inadequate financial support from noncustodial parents contributes to the high incidence

of poverty among children living in single-parent families. When custodial parents are not paid the child support due them, their families suffer financially and often must turn to public welfare. Therefore, government agencies have an interest in recovering child support from delinquent parents.

In 1975 Congress established the Child Support Enforcement (CSE) Program, a collaborative effort among local, state, and federal agencies, to ensure that children received financial support from both parents. Under the Child Support Recovery Act of 1992, noncustodial parents delinquent on child support due in another state can be prosecuted. CSE services are automatically provided to families receiving assistance under TANF; any support collected usually reimburses the state and federal governments for TANF payments made to the family. Child support services are also available for a small application fee to families not receiving TANF.

Provisions in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 strengthened and improved child support collection activities. The law established a National Directory of New Hires to track parents across state lines, made the process for establishing paternity faster and easier, and enacted tough new penalties for delinquent parents, including expanded wage garnishment and suspension or revocation of driver's licenses. The law also required single-mother TANF applicants to disclose the paternity of their children and to assign any child support payments to the state. According to the ACF, in Child Support Enforcement FY 2006 Preliminary Report (March 2007, http://www.acf.hhs.gov/programs/cse/pubs/2007/preliminary_report/), these efforts have paid off; in FY 2006 CSE handled 15.8 million cases and collected nearly $24 billion.

TEENS AND MONEY

Teen Employment

The Bureau of Labor Statistics (BLS) reports in the press release “The Employment Situation: November 2008” (December 5, 2008, http://www.bls.gov/news.release/pdf/empsit.pdf) that in November 2008, 6.5 million (38.3%) people aged 16 to 19 were employed or looking for work.

The unemployment rate in this age group was 20.4%, up from 16.4% from the year before. Job loss continued to be heavy in early 2009 due to the global financial crisis. In the press release “The Employment Situation: February 2009” (March 6, 2009, http://www.bls.gov/news.release/pdf/emp sit.pdf), the BLS indicates that by February 2009 the rate of unemployment among teenagers had increased to 21.6%; the overall rate for all workers was 8.1%. Employment rates among young people are highest during the summer months, when many full-time students are out of school. For example, in the press release “Employment and Unemployment among Youth—Summer 2008” (August 28, 2008, http://www.bls.gov/news.release/pdf/youth.pdf), the BLS states that the employment of youth between the ages of 16 and 24 increased by 1.9 million between April and July 2008.

Most teens are employed as hourly workers, and they make low wages compared to other age groups. The BLS reports in Characteristics of Minimum Wage Workers: 2007 (May 7, 2008, http://www.bls.gov/cps/minwage2007tbls.htm) that in 2007, 6.9% of 16- to 19-year-olds earned the federal minimum hourly wage ($5.15 before July 24, 2007, and $5.85 thereafter), compared to only 1.5% of workers aged 25 years and older.

HOW DOES WORKING AFFECT ACADEMIC ACHIEVEMENT? In “Employment during High School and Student Achievement” (Journal of Educational Research, vol. 95, no. 1, 2001), Kimberly J. Quirk, Timothy Z. Keith, and Jeffrey T. Quirk present the results of a longitudinal study examining the effects of high school student employment on academic achievement. The researchers conclude that “working displayed a moderate, significant, and negative effect on high school grades.” However, smaller amounts of work (12 hours or less per week) seemed to slightly improve grades. Quirk, Keith, and Quirk also find that the lower a student's grades were, the more likely he or she was to get a job. Nancy F. Weller et al. note in “School-Year Employment among High School Students: Effects on Academic, Social, and Physical Functioning” (Adolescence, vol. 38, no. 151, 2003) that students who worked longer hours had lower grade-point averages. The researchers state that “in light of our findings and those of other studies, we believe that parents and professionals involved with youth should supervise the number of weekly hours that adolescents work while attending school.”

The BLS finds in “The Relationship of Youth Employment to Future Educational Attainment and Labor Market Experience” (Report on the Youth Labor Force, November 2000) a correlation between teen employment and future college education. Adults who had worked one to 20 hours per week as 16- and 17-year-olds were more likely than other adults to have completed at least some college education by age 30. In contrast, less than half of adults who had not worked at all or who had worked more than 20 hours per week had completed some college education.

These findings suggest that working a limited number of hours during the junior and senior years of high school has a positive effect on educational attainment.

Teens as Consumers

By the last decades of the twentieth century, teens had a big influence on the economy—from affecting major family purchases to buying groceries. In Spending Power of the Teen Consumer (September 2006, http://www.marketresearch.com), the Mintel International Group indicates that teens had an estimated spending power of $153 billion in 2006. However, the spending power of teens had declined 12% from 2003 to 2006, probably reflecting the economic downturn of the early twenty-first century. The report also examines teens' spending habits. Even though teens were attracted to the youthful image of retailers such as Abercrombie & Fitch, they actually spent their money in more affordable stores such as Old Navy and Target.

Chapter 2
Children, Teens, and Money

FAMILY INCOME

Almost all children are financially dependent on their parents, with their financial condition directly dependent on how much their parents earn. In Income, Poverty, and Health Insurance Coverage in the United States: 2005 (August 2006, http://www.census.gov/prod/2006pubs/p60-231.pdf), Carmen DeNavas-Walt, Bernadette D. Proctor, and Cheryl Hill Lee report that real income rose throughout the 1990s and then declined in the early twenty-first century. The median (half were higher and half were lower) household income in 2005 was $46,326, up 1.1% from the previous year. For married-couple families the median household income was $66,067, not statistically different from the previous year.

DeNavas-Walt, Proctor, and Hill Lee find that single-parent families, particularly those headed by single mothers, fare worse than other households. Families with female heads-of-household and no husband present had a 2005 median income of $30,650, slightly down from the previous year, whereas male-headed households with no wife present had a median income of $46,756, slightly higher than the year before.

DeNavas-Walt, Proctor, and Hill Lee also find that median income varied greatly by race and ethnic group. They used three-year average medians to compare income between groups. Asians had the highest median income, at $59,877, followed by non-Hispanic whites, at $50,677. (See Table 2.1.) The median income for Hispanics was $35,467, whereas the median income for African-Americans, at $31,140, was the lowest of any race or ethnic group.

Cost of Raising a Child

Since the 1960s the Family Economics Research Group of the U.S. Department of Agriculture (USDA) has provided estimates on the cost of rearing a child to adulthood. The estimates are calculated per child in a household with two children and are categorized by the age of the child using different family income levels. Attorneys and judges use these estimates in determining child-support awards in divorce cases as well as in cases involving the wrongful death of a parent. Public officials use these estimates to determine payments for the support of children in foster care and for subsidies to adoptive families. Financial planners and consumer educators use them in helping people determine their life insurance needs.

INCOME LEVELS

Estimated annual family expenditures for a child vary widely depending on the income level of the household. The estimated amount a family spends on a child also tends to increase as the child ages. The USDA estimates that in 2005 married-couple households that earned less than $43,200 per year spent amounts ranging from $7,300 for young children to $8,290 for fifteen- to seventeen-year-olds. (See Table 2.2.) Estimates for middle-income, married-couple families ranged from $10,220 for infants and young toddlers to $11,290 for fifteen- to seventeen-year-olds. Estimates for married-couple families with incomes above $72,600 ranged from $15,190 to $16,390, depending on the age of the child.

Estimated annual expenditures for single-parent families that earned less than $43,200 per year were slightly less than those of two-parent families, most likely because their average incomes were lower ($18,100 for single-parent families and $26,900 for two-parent families). The USDA estimates that in 2005 these single parents spent an annual average of $6,080 to $8,440, depending on the age of the child. (See Table 2.3.) The single-parent families that earned $43,200 or more spent $14,000 to $16,670 per child, slightly more than the middle-income, two-parent families.

Although the USDA estimates that in 2005 the highest-income households spent about twice the amount on their children than the lowest-income households, this difference varied by the type of expense. For example, the estimated food expenditure for children aged fifteen to seventeen in the highest-income husband-wife families was $2,790, compared with $1,960 in the lowest-income group. (See Table 2.2.) However, the estimated annual expense for education and child care for children aged fifteen to seventeen in these high-income families ($1,890) was nearly four times that for a child the same age in the lowest-income families ($510). These variations among income groups by type of expense hold true for single-parent households as well. (See Table 2.3.)

AGE OF CHILD

The 2005 estimates of family expenditures on a child generally increased with the child's age, except for housing, education, and child care. (See Table 2.2 and Table 2.3.) Households with young children are more likely to have recently purchased homes at higher prices and, until recently, with higher interest rates, explaining the higher housing estimates for young children. Estimates for education, child care, and related expenses were also highest for preschoolers (under the age of six) in all income groups. Many women with children this age are in the labor force and must pay for child care. Once children enter school, the child care costs decrease. As school-age children grow up, the need for after-school and summer care also decreases. The estimates do not include expenses related to college attendance, which typically do not occur until the child is at least eighteen.

FUTURE COSTS

The USDA also estimates the total cost of raising a child born in 2005 who will reach the age of seventeen in 2022, incorporating an average annual inflation rate of 3.04% (the average annual inflation rate over the previous twenty years). Total family expenses for raising a child born in 2005 were estimated to be $182,920 for the lowest-income group, $250,530 for the middle-income group, and $366,020 for the highest-income group. (See Table 2.4.)

CHILDREN IN POVERTY

Children are the largest group of poor in the United States. In 1975 they replaced the elderly as the poorest age group. (See Figure 2.1.) In 2005 the poverty rate for all children younger than eighteen years of age was 17.6%, or about 12.9 million children, which was statistically unchanged from the previous year. In that year children under eighteen years old made up one-quarter (24.8%) of the population of the United States, but they made up over one-third (34.9%) of the people living below the poverty line. (For population estimates for July 1, 2005, by age, see the Census Bureau's National Population Estimates—Characteristics [May 10, 2006, http://www.census.gov/popest/national/asrh/NC-EST2005-sa. html]). DeNavas-Walt, Proctor, and Hill Lee note that children under the age of six are particularly vulnerable to poverty. In 2005 the poverty rate for families with children under age six was 20%, which was higher than the overall rate of child poverty. In addition, over half (52.9%) of children younger than the age of six living with a single mother were in poverty, over five times the rate of poverty for children younger than age six living in married-couple families (9.9%).

Overall, the child poverty rate declined between 1995 and 2000; however, the rate of children living in poverty (100% of the poverty line or below) and in low-income families (100% to 200% of the poverty line) began to rise again in 2000. (See Figure 2.2.) Even though Figure 2.3 shows that the largest group of low-income children in 2005 was white (39%), Hispanic and African-American children were disproportionately poor. Ayana Douglas-Hall, Michelle Chau, and Heather Koball of the National Center for Children in Poverty report in Basic Facts about Low-Income Children: Birth to Age 18 (September 2006, http://www.nccp.org/media/lic06b_text.pdf) that the majority of both African-American children (61%) and Hispanic children (61%) lived in low-income or poor families in 2005. Another trend in child poverty emerged in the twenty-first century. The Children's Defense Fund notes in The State of America's Children 2005 (2005, http://www.childrensdefense.org/site/DocServer/Green book_2005.pdf?docID=1741) that the number of children living in extreme poverty—below one-half of the poverty level—increased by 20% between 2000 and 2004, almost twice as fast as the number of children in poverty overall.

Government Aid to Children

Many programs exist in the United States to assist families and children living with economic hardship. Some of these programs are federally run, and others are run at the state level. In many cases the programs are mandated at the federal level and administered by the states, which can make tracking them complicated.

TEMPORARY ASSISTANCE FOR NEEDY FAMILIES

In 1996 Congress enacted the Personal Responsibility and Work Opportunity Reconciliation Act to reform the country's welfare system. The primary goal of the legislation was to get as many people as possible into the paid labor force and off welfare rolls. The law set limits on how long welfare recipients could receive assistance, encouraging them to seek gainful employment. Under Temporary Assistance for Needy Families (TANF), states receive a fixed amount from the federal government with few federal constraints on how they manage the funds. According to the Administration for Children and Families of the U.S. Department of Health and Human Services (HHS), in TANF Financial Data (January 2007, http://www.acf.hhs.gov/programs/ofs/data/2005/tableA_ spending_2005.html), the total federal funds spent on TANF expenditures for fiscal year (FY) 2005 were $20.7 billion.

Under TANF each state decides what categories of children receive aid. TANF requires that an adult recipient work in exchange for time-limited assistance. In Temporary Assistance for Needy Families Program (TANF): Seventh Annual Report to Congress (December 2006, http://www.acf.hhs.gov/programs/ofa/annualreport7/TANF_7th_Report_Final_101006.pdf), the HHS reports that in FY 2003, 22.9% of adult TANF recipients were employed, down from 25.3% the year before.

The size of families receiving public assistance is decreasing. According to the HHS report, the average number of people in a TANF family was 2.5 in 2003, down from an average of 2.8 in 1996. Half of TANF families in 2003 included only one child recipient, whereas only 10% had four or more children. More than a third (38.6%) of TANF families were child-only cases, including no adult recipients.

The amount of government assistance provided to individuals and families under current welfare regulations is down sharply. The average monthly benefit per TANF recipient in 2004 was $150, down from a high of $221 (in 2004 dollars) in 1978 under the AFDC program. (See Table 2.5.) The average monthly benefit per family was $360, down from a high of $793 (in 2004 dollars) in 1969. Benefits included cash and work-based assistance, child care, and transportation assistance.

The reduction in the welfare roles and expenditures may actually harm poor children. Olivia Golden, the assistant secretary for children and families in the HHS under President Bill Clinton, states in "Welfare Reform Mostly Worked" (Orlando Sentinel, July 24, 2005) that she believes the welfare-to-work model "mostly worked" in the sense that welfare caseloads had dropped and that most low-income parents were now working to support their families. However, this success brought about additional problems. She notes, "In less than a decade, welfare has faded as a means of support for impoverished families. Many of these families are working long hours despite low wages, shrinking health-insurance coverage and serious trade-offs between work and decent care for their children. Yet, neither our politics nor our policies have adjusted to our success at bringing more of these parents into the labor force."

FOOD STAMP PROGRAM

The Food Stamp Program, which is administered by the USDA, provides low-income households with electronic benefit cards that can be used at most grocery stores, much like debit cards, in place of cash. Food stamps are intended to ensure that recipients have access to a nutritious diet. They are available to households that have a gross monthly income of no more than 130% of the poverty line and a net monthly income at or below the poverty line. In Characteristics of Food Stamp Households: Fiscal Year 2005 (September 2006, http://www.fns.usda.gov/oane/menu/Published/FSP/FILES/Participation/2005Characteristics.pdf), Allison Barrett indicates that almost nine out of ten (88%) of all households that received food stamp benefits in 2005 lived in poverty.

The amount of money a family receives on its benefit card is based on the USDA's estimate of how much it costs to provide households with nutritious, low-cost meals. This estimate changes yearly to reflect inflation. According to the USDA, in Food Stamps Make America Stronger (September 2006, http://www.fns.usda.gov/fsp/outreach/Translations/English/313Brochure-06.pdf), between October 1, 2006, and September 30, 2007, the maximum monthly benefit for a family of four was $518. The average monthly benefit for all households in FY 2005 was $209. (See Table 2.6.) Food stamp households containing children received an average of $300 in benefits per month, in part because households with children tended to be larger (3.3 people) than households in general (2.3 people).

Barrett mentions that most households that received food stamps in 2005 contained children—53.8%, or 5.8 million households. A third of all food stamp households (33.5%) were single-parent households, most of them headed by single mothers.

SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS, AND CHILDREN

The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) provides food assistance and nutritional screening for low-income pregnant and postpartum women and their infants and children under the age of five. This program can help women and young children with household incomes that are too high to receive food stamps. In "Frequently Asked Questions about WIC" (March 13, 2007, http://www.fns.usda.gov/wic/FAQs/FAQ.HTM), the USDA's Food and Nutrition Service reports that income eligibility guidelines for the period July 1, 2006, to June 30, 2007, required applicants to have an income at or below 185% of the poverty level and be nutritionally "at risk," meaning that to be eligible, an individual must have diet- or medically based risks. The income eligibility guidelines stated that a family of one (in other words, a single, pregnant woman) could earn up to $1,511 per month and still qualify for WIC. A family of four could earn $3,084 per month and participate in WIC. Furthermore, Susan Bartlett et al., in WIC Participant and Program Characteristics, 2004 (March 2006, http://www.fns.usda.gov/oane/MENU/Published/WIC/FILES/pc2004.pdf), note that two-thirds (66.9%) of WIC participants in 2004 had household incomes below the poverty line.

According to Bartlett et al., in April 2004 about 8.6 million women and their children participated in WIC, an increase of 7% since April 2002. Twenty-six percent of WIC participants were infants, another 49% were children aged one to four years old, and 25% were pregnant, postpartum, or breastfeeding women. Recipients receive food items or vouchers for purchases of certain items in retail stores. The WIC program is federally funded but administered by state and local health agencies. In "WIC Program Participation and Costs" (March 27, 2007, http://www.fns.usda.gov/pd/wisummary.htm), the Food and Nutrition Service notes that in FY 2006 the WIC program's estimated food cost was $3.6 billion and estimated administrative costs were $1.4 billion, for a total cost of $5 billion.

SCHOOL NUTRITION PROGRAMS

School nutrition programs continue food assistance to school-age children. The programs provide millions of children with nutritious food each day. Children whose families earn no more than 185% of the poverty level are eligible for reduced price school meals; children whose families earn no more than 130% of the poverty level are eligible for free school meals. The Food and Nutrition Service reports in "Federal Cost of School Food Programs" (March 27, 2007, http://www.fns.usda.gov/pd/cncosts.htm) that in FY 2006 the U.S. government spent $10.2 billion on school nutrition programs, including the National School Lunch Program, the School Breakfast Program, and the Special Milk Program. In that year 30.1 million children took part in the school lunch program, up from 28 million in 2002. (See Table 2.7.)

CHILD SUPPORT

Children living in single-parent families are far more likely to be poor than children living in two-parent households, and the number of children living with only one parent—usually the mother—is increasing. According to Timothy S. Grall, in Custodial Mothers and Fathers andTheir Child Support: 2003 (July 2006, http://www.census.gov/prod/2006pubs/p60-230.pdf), in the spring of 2004, 14 million parents had custody of 21.6 million children under the age of twenty-one whose other parent lived elsewhere. Mothers accounted for 83.1% of all custodial parents; 16.9% of custodial parents were fathers. These proportions have not changed significantly since 1994.

Grall notes that six out of ten (60%) of the fourteen million custodial parents in 2003 had a child support agreement with the other parent. Most of these agreements required child support payments from the noncustodial parent. In 2003, 76.4% of custodial parents due support received at least some payments. (See Figure 2.4.) Almost half (45.3%) received all the payments they were due, up from only a little more than a third (36.9%) in 1993. Grall also mentions that noncustodial parents who had either joint custody agreements or visitation rights to their children were more likely to pay child support (85.9% and 76.2%, respectively) than parents who did not have any visitation rights at all (62.5%).

Differences existed in the child support arrangements for custodial mothers and custodial fathers. Custodial mothers were much more likely than custodial fathers to be awarded child support (64.2% and 39.8%, respectively). (See Table 2.8.) On average, custodial mothers were due $5,175 in child support in 2003 and received $3,579. Custodial fathers were due, on average, $4,471 and actually received $2,797. As noted earlier, fewer than half of all custodial parents actually receive the child support due them; in 2003 only 45.2% of custodial mothers and 46.2% of custodial fathers received the total amount due.

Grall notes that receipt of child support payments made a significant difference in the household incomes of single-parent families. In 2003 the average family income of custodial parents who received at least some of the child support due them was $28,600, and the child support represented 9.2% of the total household income. Child support represented 19.3% of the total household income for those parents who received all of the child support due them. In contrast, custodial parents who had child support agreements but received none of the child support due had an average income of only $23,400.

Government Assistance in Obtaining Child Support

As demonstrated earlier, inadequate financial support from noncustodial parents contributes to the high incidence of poverty among children living in single-parent families. When custodial parents are not paid the child support due them, their families suffer financially and often must turn to public welfare. Government agencies, therefore, have an interest in recovering child support from delinquent parents.

In 1975 Congress established the Child Support Enforcement (CSE) Program, a collaborative effort among local, state, and federal agencies to ensure that children received financial support from both parents. Under the Child Support Recovery Act of 1992, noncustodial parents delinquent on child support due in another state can be prosecuted. CSE services are automatically provided to families receiving assistance under the TANF program; any support collected usually reimburses the state and federal governments for TANF payments made to the family. Child support services are also available for a small application fee to families not receiving TANF.

Provisions in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 strengthened and improved child support collection activities. The law established a National Directory of New Hires to track parents across state lines, made the process for establishing paternity faster and easier, and enacted tough new penalties for delinquent parents, including expanded wage garnishment and suspension or revocation of driver's licenses. The law also required single-mother TANF applicants to disclose the paternity of their children and to assign any child support payments to the state. According to the report Child Support Enforcement, FY 2005: Preliminary Report (May 2006, http://www.acf.hhs.gov/programs/cse/pubs/2006/reports/preliminary_report/) by the HHS's Administration for Children and Families, these efforts have paid off; in FY 2005 the CSE Program handled 15.9 million cases and collected more than $23 billion, up 5.2% from the previous year.

TEENS AND MONEY

Teen Employment

The U.S. Bureau of Labor Statistics (BLS) finds in The Employment Situation: December 2006 (January 5, 2007, http://www.bls.gov/news.release/archives/empsit_ 01052007.pdf) that in December 2006, 7.3 million people aged sixteen to nineteen, or a little less then half of the population that age (43.4%), were employed or looking for work. The unemployment rate in this age group was 15.2%. Employment rates among young people are highest during the summer months, when many full-time students are out of school. For example, in the press release "Employment and Unemployment among Youth—Summer 2006" (August 25, 2006, http://www.bls.gov/news.release/pdf/youth.pdf), the BLS reports that employment of youth between the ages of sixteen and twenty-four increased by 2.5 million between April and July 2006.

Studies find that the rate of teens in the labor force is correlated with family income; as a household's income rises, the likelihood that a teen within the household will work also rises. In March 2002 only 17% of teens aged fifteen to seventeen from families with a household income of less than $15,000 were in the labor force, compared with 28% of teens from families with a household income of more than $50,000. (See Figure 2.5.)

Most teens are employed as hourly workers, and they make low wages compared with other age groups. The BLS reports in Characteristics of Minimum Wage Workers: 2005 (May 19, 2006, http://www.bls.gov/cps/minwage2005tbls.htm#1) that in 2005, 8.9% of sixteen- to nineteen-year-olds earned the minimum hourly wage of $5.15 or less, compared with only 1.5% of workers aged twenty-five years and older.

HOW DOES WORKING AFFECT ACADEMIC ACHIEVEMENT?

In "Employment during High School and Student Achievement" (Journal of Educational Research, September 2001), Kimberly J. Quirk, Timothy Z. Keith, and Jeffrey T. Quirk present the results of a longitudinal study examining the effects of high school student employment on academic achievement. The researchers conclude that "working displayed a moderate, significant, and negative effect on high school grades." However, smaller amounts of work (twelve hours or less per week) seemed to slightly improve grades. Quirk, Keith, and Quirk also find that the lower a student's grades were, the more likely he or she was to get a job.

The U.S. Department of Labor, in "The Relationship of Youth Employment to Future Educational Attainment and Labor Market Experience" (Report on the Youth Labor Force, November 2000), finds a correlation between teen employment and future college education. Adults who had worked one to twenty hours per week as sixteen- and seventeen-year-olds were more likely than other adults to have completed at least some college education by age thirty. In contrast, less than half of adults who had not worked at all or who had worked more than twenty hours per week had completed some college education. The findings suggest that working a limited number of hours in the junior and senior years of high school has a positive effect on educational attainment.

Teens as Consumers

By the last decades of the twentieth century teens had a big influence on the economy—from affecting major family purchases to buying groceries. According to the Mintel International Group, in Spending Power of the Teen Consumer (September 2006, http://www.market research.com), teens had an estimated spending power of $153 billion in 2006. However, the spending power of teens had declined 12% from 2003 to 2006, probably reflecting the economic downturn of the early twenty-first century. The report also examines teens' spending habits; although teens were attracted to the youthful image of retailers such as Abercrombie & Fitch, they actually spent their money in more affordable stores such as Old Navy and Target.