• Chart of the Week
  • June 17, 2020

Breaking the poverty cycle

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Those born into poverty can feel the effects for a lifetime. 

It dampens prospects for higher education, employment, and earnings. And poverty’s legacy of weakened economic opportunities is passed down through generations.

Fortunately, there are interventions that may help break the cycle, according to a paper in the June issue of the American Economic Review: Insights.

Authors Adam Lavecchia, Philip Oreopoulos, and Robert Brown say programs that offer support like transportation assistance, counseling, tutoring, and financial aid can boost the long-term economic prospects for disadvantaged youth.

The authors examined the “Pathways to Education” program in Toronto and found that eligible high school students were more likely to graduate and enroll in college, find employment, and have higher earnings.

Founded in 2001, the non-profit program delivers comprehensive support to at-risk youth throughout their high school experience. It is defined by four pillars of support: counseling, financial, academic, and social. This includes being paired with a support worker who meets regularly with the student, free tutoring, mentoring activities, and several different types of short- and long-term financial assistance. 

 

 

 

Figure 2 from Lavecchia et al. (2020)

 

Figure 2 from their paper shows the impact that the program had on earnings for young adults. Eligibility initially lowers earnings for young adults between the ages of 19 and 23. A 19-year-old who went through the program earns about $1,470 less per year, partly because they are more likely to attend college and not able to work full time like their peers who aren't attending college. But that changes around the age of 24, and by 28 years old, participants earned 19 percent more than the average 28-year-old in their cohort.

The findings offer hopeful signs that comprehensive support programs for high school students can be an important part of the solution in breaking the cycle of poverty.