The conservative case against child allowances

Winship makes the case against child allowance. This is largely a lit review, he basically finds that the evidence is neither overwhelmingly in favor or against the view that child allowances will reduce work and increase single parenthood. But there are plenty of reasons for concern, "....But the concerns of conservative antipoverty researchers are primarily about income effects. We worry that safety-net policy might make it easier for parents to not work or to be single......analysis is oblivious to income effects because he assumes away the complicated preferences and messy lives of real-life parents...In short, even the relatively short-term studies reviewed here provide reason to think that the introduction of child allowances could reduce employment rates among single mothers by 3 or 4 percentage points, and they are not well designed to assess longerterm effects.The research that has been cited to dismiss concerns about disemployment hardly should be reassuring. The correct interpretation of the evidence available is that it is ambiguous; different people with different priors can point to this or that study if they are intent on asserting a claim about the impacts of a novel program, but strong statements are not justifiable based on a comprehensive assessment of the literature…”

Core of his analysis using Brookings analysis of the negative income tax experiments, his conclusion here is worth quoting to describe the underlying dynamic of his concerns"...Burtless estimated the income elasticity at -0.18, indicating (roughly) that a 10 percent increase in income from the NIT benefits led to a 1.8 percent decline in hours worked among female heads of households with children. We can apply this estimate to contemporary figures for single-mother families to get a rough estimate of the potential impact of child allowances on their employment. Data from the Current Population Survey indicate that single mothers have an average of roughly 1.8 children under age 18 in their home. I estimate the average single-mother family would receive $500 per month from the child allowances, or $6,000 per year, given the mix of younger and older children they have and the more generous benefit for younger children. That ends up being about 16 percent of the median family income of female-headed families with children. The Burtless elasticity estimate suggests that this 16 percent increase in income would lead to a 2.7 percent reduction in hours worked. A 2.7 percent decline in hours worked is equivalent to a reduction among single mothers in the Current Population Survey of just one hour per week per worker. But rather than thinking of all single mothers working an hour less, we might worry instead that work would not decline among those who stay employed but that the employment rate of single mothers would fall by 2 percentage points, which would also produce that 2.7 percent drop in hours. This magnitude may still seem small to many readers, but the number of single mothers contained in those 2 percentage points is sizable relative to the changes in poverty the child allowance proposals would supposedly produce. If it reduced the share of single-mother families under the official poverty line by one-third, that would be 892,000 families; a two-point drop in employment would involve 167,000 single-mother families, about one-fifth as large. It would also be equivalent to 17 percent of the increase in employment among single mothers over the 30 years from 1989 to 2019...."

His basic takeaway, we have better options for reducing child poverty as welfare reform showed without the risk“…If a child allowance were the only way to reduce child poverty, then perhaps it would be worth rolling the dice. But we have many other options that would reduce poverty while encouraging opportunity and reinforcing values held by Americans at all income levels. We can do better than child allowances…In March 1979, 58 percent of single mothers were employed, and about half received AFDC at some point during the year. In 1992, the employment rate was still 58 percent, and half of single mothers still received AFDC. However, by 2000, after the 1996 welfare reforms took effect, 71 percent of single mothers were employed, and less than one-quarter received benefits under AFDC’s successor program, Temporary Assistance for Needy Families (TANF). Only 4.5 million children were in families receiving TANF in a typical month. By 2019, just 2.2 million were, or one in 33 children. And poverty among the children of single mothers was at an all-time low—lower by four or five million than if poverty had remained at its 1993 level, when welfare reforms were already in full swing in some states….”

Scott Winship, "The conservative case against child allowances," American Enterprise Institute, March 5, 2021, https://www.aei.org/research-products/report/the-conservative-case-against-child-allowances/