Stimulus Update: It's Not Just a Missing Child Tax Credit Boost That's Pushing Kids Into Poverty

Childhood poverty rates are a problem, but there are multiple contributing factors.

Childhood poverty is a major issue on a national scale. In January of 2022, the child poverty rate sat at 17%, according to data from Columbia University's Center on Poverty & Social Policy.

But the reality is that we're worse off from a child poverty standpoint now than we were in 2021. And a big reason has to do with the absence of the enhanced Child Tax Credit.

Prior to 2021, the Child Tax Credit maxed out at $2,000 per child under age 17. But in 2021, as part of the American Rescue Plan, the Child Tax Credit got a major boost that increased its maximum value to $3,600 for children under age 6 and $3,000 for children aged 6 to 17.

Just as importantly, the Child Tax Credit became fully refundable. Normally, only a portion of the credit is refundable. But this change allowed those eligible for the credit in 2021 to receive its full value, even if they had no tax liability.

Finally, half of the boosted Child Tax Credit was made available via monthly installment payments that hit bank accounts from July through December of 2021. That allowed parents to keep up with their bills and avoid heaps of credit card debt at a time when living costs were rising.

The fact that the Child Tax Credit hasn't gotten a boost beyond 2021 has clearly been detrimental to families with children. But a lack of an enhanced credit isn't the only reason child poverty rates are so high.

A combination of factors

In 2021, the child poverty rate dropped to 5.2% -- a notable decline from 9.7% in 2020. And the boosted Child Tax Credit is the leading reason, according to the Economic Policy Institute (EPI). In the absence of that enhancement, it's easy to see why so many children have slipped back into poverty.

But we can also point a finger at minimum wages -- and a lack of growth in that regard -- as another reason why child poverty rates aren't improving. The $7.25 federal minimum wage has not changed since 2009 -- even though living costs have risen substantially since then.

Now some states have taken steps to raise their own minimum wages. But of the 20 states that have failed to do so, 16 of them have more than 12% of their children living in poverty, according to a States Newsroom analysis of wage and poverty data.

Meanwhile, in a 2021 report, the EPI estimated that raising the federal minimum wage to $15 an hour in 2025 would lift up to 3.7 million Americans -- including 1.3 million children -- out of poverty. Yet so far, little progress has been made in that regard.

Lawmakers need to take action

Lifting children out of poverty should really be a priority for lawmakers. Now some might argue that issuing stimulus checks to those in need could be a viable solution there, as could restoring the boosted Child Tax Credit. But another option is to simply make it a law that workers need to be paid a more reasonable minimum wage.

Over the past year and a half alone, we've seen inflation soar, yet the federal minimum wage has held steady at $7.25 an hour outside of states with different rules in place. If lawmakers don't take action on the minimum wage front soon, we could, unfortunately, see child poverty levels continue to rise in a very big way.