The Economic Cost of Growing Up Poor: Estimating the GDP Loss Associated with Child Poverty

Abstract

One of the motivations for the UK government's target to reduce (and eventually eliminate) child poverty is the perception of a significant long-term economic cost of growing up in poverty. This perception arises from the observation that individuals who experience poverty in their childhood earn less as adults, are less likely to be in employment, are more likely to engage in criminal or anti-social activities and are more likely to experience poor health and lower life satisfaction. This paper quantifies these effects, and expresses them in terms of GDP losses to the nation. We begin by focusing on lost earnings that arise from poorer skills and reduced employment opportunities, and then move on to the wider costs associated with the higher crime rates, poorer health and reduced well-being that are linked with growing up poor. We find a sizeable economic cost, with the cost of growing up in poverty amounting to at least 1 per cent of GDP. © 2010 The Authors Fiscal Studies © 2010 Institute for Fiscal Studies.