Net worth poverty and child Well-being: Black–White differences

Abstract

Net worth poverty, defined as having wealth (assets minus debts) that is less than one-fourth the federal poverty line, can have negative associations with children’s development. Net worth poverty can reflect the lack of assets or the presence of debts, with the former posing greater developmental risks than the latter. Structural inequalities and racial discrimination have led to higher rates of asset poverty for Black than White families, suggesting that net worth poverty may pose disproportionate risks for Black children. To inform this hypothesis, this study examines how net worth poverty and its subcomponents of asset and debt poverty relate to Black and White children’s academic and behavioral outcomes. Data come from the Panel Study of Income Dynamics and its Child Development Study, which includes 3,164 Black and 3,578 White children aged 3–17 observed between 2002 and 2019. Regression models estimated the association between poverty (measured as net worth, income, assets, or debt) and four child outcomes: reading and math achievement and externalizing and internalizing behavior scores. In models that control for income poverty, among White children, net worth poverty, as well as asset and debt poverty, was associated with worse outcomes. Contrary to expectations, using the same set of covariates, net worth poverty among Black children was not a significant predictor of outcomes. For this racial group, asset poverty was negatively related to outcomes, but effects were roughly half the size as those found for White children. Additionally, debt poverty among Black children was not associated with either positive or negative effects. The small effect of asset poverty, when coupled with the lack of effects for debt poverty, mechanically explains why net poverty was not detrimental for Black children. This study underscores the importance of wealth deprivation in studies of poverty and shows that the negative effects of net worth poverty differ between White and Black children.