The downstream benefits of higher incomes and wages The downstream benefits of higher incomes and wages

By Anna Godøy and Ken Jacobs

Jobs that pay low wages result in many families struggling to make ends meet. Black workers face a dual crisis of higher unemployment and disproportionate employment in low-wage jobs. Policies that improve wages or otherwise raise family income can have long-term effects on a range of societal outcomes. Family income is highly correlated with mental and physical health, child development and school achievement, civic engagement, and many other dimensions of individual and social well-being. It can be difficult, however, to separate cause from effect and to disentangle confounding variables.

In this paper, the authors identify and discuss studies that have used natural experiments to measure downstream effects that are clearly caused by changes in family income, and thus provide firm grounding for policy evaluation. They find strong evidence of a causal effect of higher net income on child development, including math and reading test scores, educational attainment, birth weight, mental health, and health in adulthood. While more research is needed on differences by race and ethnicity, in general, the studies that include demographic analyses find that the effects are larger for Black and Hispanic children. The research has important implications for policies aimed at maintaining incomes during the COVID-19 crisis and efforts to address structural racism that results in lower earnings and incomes for Black workers.