Psychological Costs of Growing Up Poor


Address for correspondence: Eric Dearing, Ph.D., Counseling, Developmental, and Educational Psychology, Lynch School of Education, Boston College, 140 Commonwealth Ave., Chestnut Hill, MA 02467. Voice: 617-552-1477.


This chapter provides a synopsis of the extensive empirical and theoretical literatures on the psychological development of youth growing up poor. Low family income has statistically and practically significant costs for children's psychological development in cognitive and social–emotional domains, as shown by high rates of academic failure and mental health problems among youth growing up poor. These psychological costs are incurred primarily because poverty limits children's access to developmental stimulation and heightens their exposure to stress in both their physical and psychosocial environments. Yet, convergent evidence from experimental and nonexperimental studies also indicates that improving the economic well-being of poor families translates into improved psychological well-being for poor youth.

Growing up poor poses pervasive risks for children's psychological development, with costs to the individual and society at large. For the individual, few domains of psychological development are impervious to harm; children and adolescents living in poverty often display dysfunction and delay in their cognitive, language, and social–emotional growth.1–3a In turn, these developmental problems in early life contribute to reduced earnings, involvement in crime, and mental health problems across the life span.4–6 As a result, the economic costs of childhood poverty in the United States may be as high as $500 billion per year, or about 4% of the U.S. gross domestic product.4

In general, developmental dysfunction and delay are most likely to occur and are most severe when youth live in extremely poor conditions for relatively long periods.2,7 Yet, mental health problems also emerge for some children after relatively brief episodes in poverty.8–11 Much has been learned about the means through which poverty may harm children's psychological well-being, with most evidence pointing to both the physical and psychosocial conditions of these children's homes, schools, and neighborhoods. Determining the causal effects of family income per se remains challenging, however.

Psychological Development in the Context of Poverty

Most of what we know about psychological development in the context of poverty comes from nonexperimental work comparing children who are poor with children who are middle class or more affluent.1 That is, how does the psychological development of youth growing up poor compare, on average, with that of youth growing up in wealthier families? Researchers have also considered variations in psychological outcomes across the income distribution. Given incremental differences in family income, are there incremental differences in child outcomes? Recently, attention has turned to naturally occurring mobility in family economics, as well as natural experiments whereby family income has been increased for entire communities. These studies of mobility are aimed at determining whether increased family economic well-being results in improved child well-being and, in particular, whether children can recover from the harm of poverty.

Achievement, Cognitive, and Language Outcomes

Differences between poor children and their more affluent peers often appear most striking for achievement, cognitive, and language development, especially when children have been poor for extended periods.2,3,12 On average, children who are persistently poor from birth through age 4 years may score as much as 40%–60% of a standard deviation lower on intelligence tests than children who live in families that are never poor during this developmental phase.13,14 Furthermore, on tests of achievement and intelligence, children living in extreme poverty (i.e., <50% of the U.S. Census Bureau's official poverty threshold) may score as much as one-half of a standard deviation lower than children living just above the poverty line.14 Depth of poverty has also proven important for considering variations in child achievement across the family income distribution, using more precise estimates of income level than poor versus not poor. Specifically, the association between family income and child achievement often appears nonlinear, such that incremental differences in family income predict the largest differences in child outcomes for the poorest youth.15–17

Even among the poorest youth, however, the size of estimated income effects on achievement test scores is generally modest in absolute magnitude.16–19 On the other hand, effect sizes for income compare favorably to effect sizes for important family characteristics, such as parent education and parent intelligence.16,19 For poor children's cognitive development, in fact, effect sizes for family income have proven to be statistically significantly larger than effect sizes for maternal verbal intelligence.16 Comparisons between the estimated effects of income and the estimated effects of comprehensive early intervention programs further indicate the practical importance of family income. Taylor et al. estimate that, for the first 3 years of life, improvements in the achievement of poor children given an additional $13,108 in family income would be nearly identical to improvements produced through participation in Early Head Start, a surprisingly similar value to the per-child costs of this comprehensive early intervention program (i.e., $13,970).16,20

The size of estimated income effects are also startling for real-life indicators of achievement. For completed schooling, for example, youth growing up in families with little income (i.e., <$15,000 per year) may be nearly 12 times less likely to graduate from high school than youth whose families are near the national median on income (i.e., between $35,000 and $49,999).15 Also, consistent with the nonlinear relations observed between income and achievement test scores, the effects of incremental differences in family income for years of completed schooling are nearly 90% larger for youth in families with less than $20,000 in annual income than those in families with more than $20,000.15

The developmental timing of poverty experiences, however, may determine the severity of its effects on performance tests and real-life achievements. For example, given children's exceptional needs for developmental stimulation during early childhood (i.e., birth to about 3 years), studies have addressed whether poverty has exceptionally detrimental effects during this time.6 Some researchers have found that low performance on achievement tests and real-life academic failures are most likely to occur if youth experience poverty during early childhood.7,15,21,22 Others, however, have found contemporaneous poverty experiences in middle childhood to be more detrimental than poverty during early childhood.12 Regardless, persistent deprivation from early childhood through adolescence appears more likely to limit children's cognitive potential than does transient deprivation at any one developmental stage.12,23

Social–Emotional Outcomes

According to the observations of parents, teachers, and youth themselves, children growing up poor are more likely than middle-class children to display social–emotional problems in two broad areas: (1) externalizing interpersonal problems, such as aggression, destructive behavior, and hyperactivity, and (2) internalizing intrapersonal problems, such as anxiety, depression, and fearfulness.2,3,7,11,16,17,24–27 Also, compared with middle-class and more affluent children, children growing up poor display fewer positive social behaviors and lower levels of competence in their relationships with peers and adults.16,19,28 Although only a small percentage of children who demonstrate social–emotional problems continue on a path toward serious disorder, the social–emotional costs of poverty may extend beyond short-lived problems to more serious dysfunction for some children.29 With regard to psychiatric diagnoses, for example, poverty is a risk factor for the development of oppositional defiant and conduct disorders as well as anxiety and depressive disorders, although this risk may be greater for poor white youth than for poor youth of other ethnicities.30,31 Also, recent evidence on the association between family income and adolescent criminality suggests that the rate of serious crimes committed by youth living in low-income families may be more than 10% greater than this rate for youth in middle-class families, a difference that is similar in size to gender differences in serious crimes rates.32b

To determine which children are most likely to develop serious disorders, poverty researchers have asked whether long-term, persistent exposure to impoverished family economic conditions has greater costs for children's social–emotional development than does intermittent or transient poverty.8–11,33,34 The answer to this question has varied across domains of children's social–emotional development. Persistent poverty appears more likely to result in internalizing problems than does transient poverty, but transient poverty may be more likely to result in externalizing problems than persistent poverty.8–11

Why might the psychological costs of persistent versus transient poverty experiences vary by problem subtype? Youth may be especially prone to externalizing problems after intermittent poverty, because behavior problems, such as aggression and hyperactivity, are common responses to temporary disruptions and changes in children's lives.29 More specifically, volatile family economics may make for volatile and unpredictable family lives (e.g., inconsistent parenting practices) and, in turn, emotionally and behaviorally volatile youth who are attempting to adapt to their changing developmental context.8,35 On the other hand, persistent poverty may be particularly likely to result in internalizing problems, primarily because of the effects of chronic adversity on children's neurobiological stress systems (e.g., the hypothalamic–pituitary–adrenocortical system). Chronic stress exposure during childhood can lead to long-term dysfunction in neurobiological stress responses, resulting in exceptional risk for the development of anxiety and depressive disorders.36–39 In fact, consistent with the more general literature on chronic adversity and neurobiological development, youth living in poverty are more likely to exhibit neuroendocrine markers of chronic stress than youth who are not poor.40,41

The association between family income and social–emotional outcomes, however, may be nonlinear. The estimated negative effects of low income on social–emotional functioning are greatest at the low end of the income distribution, with the poorest children having the most problems and fewest competencies.16,42 At the highest end of the income distribution, however, affluent youth appear to have some of the same vulnerabilities and social–emotional problems as their poor peers, perhaps because the time and energy demands of high-paying jobs limit wealthy parents' time with and emotional responsiveness to their teens.43 Together, findings on affluent youth and variations in poverty effects across social–emotional problem subtypes raise a more general question: What mechanisms account for associations between family economic well-being and youth psychological well-being?

Proximal Mechanisms of Harm

For children's psychological development, family income per se is unlikely to have much, if any, direct effect. Instead, most of the effects of family income are probably indirect, transmitted to youth through their physical surroundings and psychosocial experiences. In delineating proximal mechanisms that may help explain the consequences of family income for children's psychological development, theorists and researchers point out that the lives of poor youth are often characterized by (1) a scarcity of developmentally stimulating and supportive resources and (2) an abundance of proximal and distal stressors. Economists have, in general, emphasized the constraints that poverty places on families' investments in material (e.g., books) and psychosocial (e.g., parent time) resources that might promote positive youth outcomes.44–47 Developmental psychologists, on the other hand, have emphasized the consequences of poverty for parent stress and, in turn, the parent–child relationship; economic pressures associated with poverty are believed to impair parent mental health, thereby limiting positive parenting behaviors (e.g., warmth and responsiveness) and increasing negative parenting behaviors (e.g., harsh and/or inconsistent responses).35,48 Child development scholars have also called attention to the more general chaotic living conditions of poor youth, the potential harm of this chaos for children's physiological responses to stress, and, in turn, the negative consequences of dysfunctional stress response for psychological development.49,50

There is, in fact, considerable evidence that the developmental contexts of youth growing up poor are often defined by (1) few material and psychosocial investments to stimulate development; (2) unresponsive, harsh, and/or inconsistent care; and (3) exposure to chaotic surroundings inside and outside the home. In their homes, for example, children and adolescents living in poverty have limited access to materials, such as books, age-appropriate toys, and computers.51 Parents who are poor also spend less time, on average, talking with their children or engaged with their children in learning-related and school activities than do parents who are not poor.51–53 Also, parents living in poverty are, on average, less likely to be highly responsive to their children's emotional needs and are more likely to be punitive with their children than are other parents.11,51

In their schools, poor youth are more likely than youth who are not poor to encounter unsafe school conditions, teacher shortages, high teacher turnover rates, and teachers assigned to topics they are not qualified to teach.54–58 Poor youth also are less likely to encounter empirically informed instruction, such as cooperative learning and instructional conversations.59,60 Also, teacher–student relationships for poor children are, on average, characterized by few positive interactions.58 Poor youth are also more likely than other youth to experience relational and physical victimization, a lack of prosocial interactions, and an oppositional peer culture in school.61–64

In their communities, youth in poverty encounter a variety of environmental toxins and stressors, including high levels of air and water pollutants (e.g., sulfur oxides), overcrowding, poor municipal services, and few merchants or retail stores.25 Through peer relationships in their neighborhoods, poor children and adolescents are also more likely than youth who are not poor to be exposed to antisocial and deviant behavior, as well as violence.65–67 Furthermore, poor youth are less likely than middle-class and wealthier youth to attend before- and after-school programs or to engage in organized extracurricular activities, such as clubs, music lessons, and sports.68–71

Interestingly, the psychological costs of this wide array of risk factors appear targeted and specific regarding the developmental domains affected. Within home environments, for example, two distinct indirect pathways of association linking poverty and children's psychological development appear to exist, as depicted in Figure 1.27,72,73 Consistent with economic theory, poverty is associated with limited material (e.g., books) and psychosocial (e.g., parents' time spent reading with their children) investments in the home-learning environments of youth, which is in turn associated with reduced cognitive performance and achievement. Also, consistent with developmental psychology theory, poverty is associated with youth social–emotional problems via a four-step chain of processes: (1) Poverty predicts heightened parent stress, (2) heightened parent stress predicts heightened parent mental health problems (e.g., depressive symptoms), (3) heightened mental health problems predict less warm and more punitive parenting practices, and (4) these parenting practices are associated with increased youth social–emotional problems. Indeed, controlling for these two indirect pathways within the home environment has explained at least half of the association between income and youth outcomes, often reducing the rendering direct effects of income on youth cognitive performance and social–emotional functioning undetectable.27c

Figure 1.

Two distinct home environment pathways linking poverty with youth cognitive and social–emotional functioning, respectively.

Taking the study of mechanisms one step further, researchers have also begun estimating models that integrate children's experiences within home, school, and community contexts as potential indirect links from family economic well-being to child well-being.24,74,75 In short, the collective lack of opportunities for learning enrichment and developmental stimulation in the home, school, and community help explain the lower achievement and cognitive performance of poor youth than those of middle-class and wealthier youth. Also, punitive parenting practices combined with deviant peers in the neighborhood and school, as well as more general neighborhood problems (e.g., high crime), helps explain heightened social–emotional problems among poor youth.

However, studies of proximal mechanisms are, like poverty studies more generally, overwhelmingly based on nonexperimental, between-family comparisons. As with the poverty literature at large, therefore, our ability to make causal inferences from this literature is limited, primarily because of concerns over potential omitted-variable bias and our inability to disentangle direction of effects among multiple co-occurring (and statistically correlated) phenomena. Consider that parent depression might statistically account for associations between poverty and youth social–emotional functioning due to social causation (i.e., poverty causes parent depression and, in turn, parent depression causes youth social–emotional problems via parenting practices) or social selection (i.e., parent depression increases the likelihood of family poverty and youth social–emotional problems, but poverty and youth social–emotional problems are otherwise unrelated to one another). Although they are less common, randomized experiments, natural experiments, and within-family studies of economic change have proven useful for addressing such concerns.

Evidence from Randomized Experiments, Natural Experiments, and Nonexperimental Studies of Family Economic Mobility: Do Income Gains Matter for Poor Families and Youth?

For both science and policy, determining the causal implications of family income per se for children's development is critical. Indeed, given the multitude of developmental risk factors that commonly accompany poverty (e.g., low parent education and single parenthood), researchers and policy makers alike have questioned the meaningfulness of family income per se in the lives of children.18,76,77 Unfortunately, the most common means of estimating associations between family income and child psychological development are not well suited to answer this question. Most research in this area has relied on nonexperimental comparisons of children raised in families with relatively less money and children raised in families with relatively more money, using statistical controls for sets of child and family characteristics that are often correlated with family income. Estimated income and poverty effects from these studies are susceptible to bias caused by unobserved between-family heterogeneity as well as simultaneity (i.e., reciprocal causation).

However, evidence from randomized experiments, natural experiments, and within-family studies of naturally occurring economic mobility has proven to be consistent with the hypothesis that family income per se influences family investments in children, family stress processes, and, in turn, children's psychological development. Consider a series of negative income tax experiments completed in several states during the 1970s.78 Rather than paying income tax on their earnings, randomly selected families who fell below predetermined income thresholds (e.g., 150% of the federal poverty threshold) were “negatively taxed” (i.e., given an income allowance), thereby increasing these families' incomes. Youth in the experimental group had better school attendance, classroom conduct, and achievement test scores, as well as more years of completed schooling, than did youth in control group families who did not receive a negative income tax.

More recently, Costello et al. took advantage of a natural experiment to study the effects of family income gains on youth mental health.79 Studying youth on an American Indian reservation, these authors observed youth psychiatric disorder prevalence before and after the opening of a casino that provided income supplements to all tribal members. As a whole, American Indian youth experienced decreases in externalizing symptoms associated with conduct and oppositional defiant disorders when their families moved out of poverty because of income supplements from the gambling casino. Youth internalizing symptoms associated with anxiety and depressive disorders demonstrated less response to income gains, however.

Taking advantage of the fact that income is often in flux for most families, especially for families at the low end of the income distribution, within-family studies of naturally occurring economic mobility have provided results consistent with these randomized and natural experiments. More specifically, researchers have (1) compared developmental outcomes for nontwin siblings who experienced different levels of family economic prosperity during their childhoods by using the statistical method of sibling fixed effects and (2) compared developmental outcomes for the same child at multiple times when that child's family had relatively more or less money by using individual fixed effects.15,42 One value of sibling fixed-effect estimates is that they are not susceptible to bias caused by unmeasured characteristics of families that are constant across siblings and time. Individual fixed effects are not susceptible to bias caused by unmeasured characteristics of children or families that are constant over time. Unmeasured time-varying variables remain a concern for both methods, however.

Using sibling fixed effects, Duncan et al. demonstrated that children who grow up when their families have relatively little money complete fewer years of schooling than siblings who grow up when their families have relatively more money.15 Using individual fixed effects, Dearing et al. demonstrated that children had fewer externalizing problems when their families' incomes were relatively high than when their families' incomes were relatively low, especially when these children lived in chronically poor families.42 Also, consistent with between-family studies of family investment and family stress, within-family gains in income predict decreased maternal depressive symptoms, increased family investments in developmentally stimulating material resources for their children, and an improved emotional climate in the home.80,81 These effects on the home environment are particularly pronounced for poor families, especially when the home is extremely deprived and stressful before income gains.

Importantly, within-family studies can also provide insight into direction of effect. For example, predictive relations between changes in employment, income, and maternal depressive symptoms have proven most consistent with a pathway of social causation and not social selection: Employment changes predict income changes and, in turn, depressive symptom changes, but depressive symptom changes do not predict employment changes within families.81 Considered alongside evidence from randomized and natural experiments, these within-family studies of naturally occurring income changes help build a strong case for the causal effects of family income per se in the lives of youth.


The empirical literature on childhood poverty indicates that low family income has statistically and practically significant costs for children's psychological development in cognitive and social–emotional domains, as shown by high rates of academic failure and mental health problems among youth growing up poor. These psychological costs are incurred primarily because poverty limits children's access to developmental stimulation and heightens their exposure to stress in both their physical and psychosocial environments. Yet, convergent evidence from experimental and nonexperimental studies indicates that improving the economic well-being of poor families translates into improved psychological well-being for poor youth.

One important question remaining for future research, policy, and practice is how to best intervene.82,83 Our choices include, for example, (1) policies that might increase the income of poor families (e.g., the Earned Income Tax Credit) and thereby improve child psychological well-being, (2) interventions that more directly target processes relaying income effects to children (e.g., increased learning stimulation through high-quality early education and/or improved family emotional climate via parent training), or (3) some combination of these approaches. So far, the most efficient and effective choice remains a matter of debate.


  • a

    Of the studies I highlight in this chapter, most used the official U.S. Census thresholds to determine families in poverty. These thresholds are conventional indicators that researchers as well as advocacy groups and policy makers rely on. Based on family size and number of children in the household, these official thresholds estimate the minimum income necessary for a family to meet their financial needs. Families with incomes below these thresholds are identified as poor. There are several weaknesses associated with these official thresholds, however, including inadequate adjustments for child care, health care, and housing costs.84,85 In fact, compared with official thresholds, alternative measures result in several differences regarding who is and who is not considered poor in the United States. Black children, for example, constitute a smaller percentage and white (non-Hispanic) children constitute a larger percentage of the poor population, according to alternative measures instead of the official thresholds.85,86 Also, children whose parents are married and working full-time account for a greater percentage of the poor according to alternative measures.85,86 Nonetheless, preliminary evidence suggests that associations between family economic well-being and youth psychological well-being are statistically and practically significant across a variety of poverty threshold specifications.87

  • b

    On the basis of estimated coefficients across income quintiles, Bjerk compared youth in families with $25,000 in annual income with youth in families with $55,000 in annual income.

  • c

    Recent evidence suggests that the extent to which parent investments and family stress explain estimated income effects on youth outcomes may vary somewhat by ethnicity.73 Although these indirect pathways have been replicated and proven to be statistically and practically significant across ethnic groups, investment and family stress in the home environment may explain a greater proportion of estimated income effects for white youth than for black or Hispanic youth (Raver et al., 2007).