After Welfare Reform and an Economic Boom: Why is Child Poverty Still So Much Higher in the U.S. than in Europe?

Economic conditions in the United States were excellent during much of the 1990s., with low inflation and unemployment, and a budget surplus by 1999. Welfare reform in 1996, which required work of welfare recipients and limited the period of eligibility for cash benefits, increased the labor force participation rate of single mothers and decreased welfare caseloads over just a few years. Although wage rates increased as the labor market tightened, the 1999 average hourly earning rate (in constant dollars) still remained 7.5 below the 1973 rate. And although the U.S. child poverty rate fell during the 1990s, the 1999 rate was about the same as the 1967 rate. And although real per capita income was about twice as high in 1999 as in 1967, this income increase did not trickle down to the poor as earnings and income inequality increased dramatically during this period. How should these trends be interpreted? This paper examines Americans' tolerance and even preferences for poverty in explaining why child poverty in the U.S. is and will remain significantly higher than in most European countries.