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# The persistent risk of in-work poverty following the birth of a first, second, and third child across the life course

Emanuela Struffolino, Zachary van Winkle

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Emanuela Struffolino, Zachary van Winkle. The persistent risk of in-work poverty following the birth of a first, second, and third child across the life course. Journal of Family Research, 2023, 35, pp.345 - 356. 10.20377/jfr-910. hal-04059832

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# Research note: The persistent risk of in-work poverty following the birth of a first, second, and third child across the life course

Emanuela Struffolino¹ & Zachary Van Winkle²,³

¹ University of Milan, Italy, ² Sciences Po, Centre for Research on Social Inequalities (CRIS), CNRS, Paris, France, ³ Department of Sociology and Nuffield College, University of Oxford, Oxford, United Kingdom

Address correspondence to: Emanuela Struffolino, University of Milan, Department of Social and Political Sciences, Via Conservatorio 7, 20122 Milan, (Italy). Email: emanuela.struffolino@unimi.it

**Abstract**

**Objective:** The association between a first, second, and third childbirth and in-work poverty in the short- and medium-term were assessed across age groups in the US and Germany.

**Background:** Previous research on in-work poverty has concentrated on structural and ascriptive characteristics, while family processes – especially childbirths – received less attention. This gap was filled by adopting a processual life course approach.

**Method:** Longitudinal data from the US and Germany were applied to between-within random effects models to estimate within-individual change in the probability of in-work poverty up to six years following a first, second, and third childbirth across age groups.

**Results:** First, second, and third birth were associated with an immediate increase in the probability of in-work poverty (up to 10 and 5 percentage points in the US and in Germany, respectively). Among US adults aged 30 and younger probabilities increased in the medium term (from 9 to 15 percentage points for a first, 6 to 15 for a second, and 9 to 18 for a third birth), but remained unchanged for older adults in the US and all adults in Germany.

**Conclusion:** There was no recovery in risk of in-work poverty in the medium-term following childbirth in the US and Germany. Increasing the labor market participation of adult household members via more and low-cost childcare options remains crucial. However, higher levels of income support and child benefits may be needed to avoid poverty.

**Key words:** parenthood, poverty, cross-national, life course

<figure><img src="image_3.png" /></figure>
# 1. Introduction

Families with children have been disproportionately exposed to the consequences of economic restructuring and recessions, which has increased financial insecurity and lowered children's opportunities for social mobility (Cooper & Pugh, 2020). Although parents' employment is seen as a safe guard against child poverty (Baker, 2015), high and persistent in-work poverty rates challenge the idea that employment per se is as key path for reducing poverty and inequality.

In-work poverty – employed individuals living in households with incomes below the poverty line – is a matter of increasing concern across numerous countries. For example, in 2019 6.3 million of employed individuals were living in households with incomes below the federal poverty line in the United States (Semega et al., 2020). In the European Union, 20.5 million workers lived in households with incomes below 60% of the national median in 2017 (Peña-Casas et al., 2019).

Previous research has focused on the association between structural (e.g., education and social class) and ascriptive (e.g., gender and race) factors and in-work poverty (Andreß & Lohmann, 2008; Lohmann & Marx, 2018). Moreover, attention has been limited to the effect of between labor market status transitions and the risk of in-work poverty (Hick & Lanau, 2018; Vandecasteele & Giesselmann, 2018). The complex interactions between family demographic transitions, such as childbirth and union dissolution, labor market status transitions and the risk of in-work poverty are important (Struffolino et al., 2020; Struffolino & Mortelmans, 2018; Van Winkle & Leopold, 2021), but have been neglected so far (see Polizzi et al., 2022, for a review).

In this research note, we adopt a life course approach (Elder & Rockwell, 1979) and focus on the association between the transition to parenthood and higher parity births, and in-work poverty. The few studies that do adopt a life course approach to the relationship between children and in-work poverty (e.g., Filandri & Struffolino, 2019; Van Winkle & Struffolino, 2018) have yet to assess how the risk of in-work poverty changes directly following childbirth and in the following years as well as across the life course. It is however essential for scholars and policy makers to know whether childbirth represents a short-term challenge for parents or puts them at a persistent risk of falling into poverty despite employment.

We conceptualize the link between parity transitions and in-work poverty as the result of a complex interaction between changes in household resources and needs, life course dynamics, and the welfare state. Although the marginal costs of children decrease with parity, the overall cost of children to households continue to increase (Letablier et al., 2009). However, the means of adults in the households to meet those needs tend to decrease with higher parity births. Therefore, household members' risk of in-work poverty may increase and become more persistent with each additional parity transition despite employment. Further, the ability of household members to meet increasing household needs vary across the life course. As an example, the parity-specific motherhood wage penalties and fatherhood wage premiums vary starkly by age (Van Winkle & Fasang, 2020) and the association between children and the probability of in-work poverty is higher at younger ages (Barbieri et al., 2018; Van Winkle & Struffolino, 2018). Persons transitioning to parenthood later in life with established careers are likely more able to accommodate the financial needs of additional children. Finally, welfare states are an additional factor that may mitigate or exacerbate the link between parity transitions and in-work poverty across the life course.

This note addresses three research questions: First, what are the short- and medium-term associations between parity transitions and in-work poverty? Specifically, we assess the association between a first, second, and third birth and in-work poverty as well as how those associations change in the following six years when children begin compulsory primary education. Second, do those associations vary by the age at which childbirths occur? This is important to gain an initial understanding of whether younger parents are at a greater or a more persistent risk than older parents with established careers. Third, do those associations vary across welfare states?

We concentrate on the United States and Germany as ideal-typical representatives of a liberal and a conservative-corporatist welfare state, respectively. The German labor market is highly regulated, and German family policy is characterized by generous and universal income support for families with children and long parental leave. In contrast, the US labor market less regulated with flexible employment relationships. Moreover, long parental leave schemes are missing in the US. Family policy is residual and has been limited mostly to income tax credits and targeted relief for poor families with children, but with an increasingly strong emphasis on tying benefits with employment.
## 2. Data and Methods

### 2.1 Study Samples

We used data from two nationally representative household panels included in the Cross National Equivalent File (CNEF): the US Panel Study of Income Dynamics (PSID 1970-2015) and the German Socio-Economic Panel (SOEP 1984-2017). Three samples were constructed to analyse how the risk of poverty changes following the transition to a first, a second and a third birth. Each sample included individuals who were observed to make the given parity transition and individuals who were not. Samples were restricted to individuals working at least 1,040 hours in the previous year, corresponding with full-time employment for 26 weeks or part-time for a year irrespective of their poverty status.<fnref n="1" /> Observations below age 18 and above age 50 were excluded. All observations before and after a parity transition were included.

### 2.2 Analysis Variables

Following prevailing practices in international poverty research (Baker, 2015; Lohmann & Marx, 2018; Parolin, 2019), individuals with net equivalized household incomes under 60% of the national annual median were considered to be in relative poverty (Eurostat, 2020). Annual net household income was calculated as the sum income of all household members from labor earnings, asset flows, retirement income, private and public transfers, and pensions minus taxes. We equivalized income using the OECD equivalence scale, commonly used in previous studies (OECD, 1982), that gives additional adults in the household a weight of 0.7 and children in the household a weight of 0.5. It should be noted that the choice of equivalence scales, and in our case the weight assigned to children, may have considerable impacts on the findings. Smaller weights assigned to children will in turn diminish the impact of parity transition on in-work poverty.

To examine both short- and medium-term changes following the transition to a first, second, and third child, we included a binary and a continuous indicator. Our binary indicators took the value of zero before a parity transition and one following the transition. The continuous indicators counted the number of years following each parity transition and was zero before and in the year of the transition. When these variables were simultaneously included in the regression models, the binary indicators captured the initial change following the transition to a first, second, or third child, and the continuous indicator captured changes in the years following the respective transition. We applied a quadratic specification to the continuous indicators.

### 2.3 Analytical Strategy

We used between-within random effects linear regression models (Sjölander et al., 2013), also known as hybrid random effects regression models (Allison, 2009), with person-years nested in individuals to estimate the probability and the change in the probability of in-work poverty. Between-within random effects regressions consistently estimate within-person effects controlled for time varying and constant covariates as well as unobserved characteristics, while simultaneously estimating between-person effects. We estimated models for each parity transition separately.

A between-within random effects model were formulated as:

$$ (1) \quad y_{it} = \beta_0 + \bar{x}_i\beta^{BE} + (X_{it} - \bar{x}_i)\beta^{FE} + u_i + e_{it} $$

where in-work poverty, y, for an individual, i, at time point, t, was a function of time-constant predictors and their vector of between-individual coefficients, and time-varying predictors and their within-individual coefficients as well as an individual random intercept and idiosyncratic error term.

The association between a parity transition and in-work poverty was captured through four terms in the regression models: two derived from the binary parity transition indicator and two from the continuous measure for years after the parity transition.

<footnote n="1">¹ Note that parental leave does not contribute to the number of the working hours.</footnote>
$$ (2) \quad y_{it} = \beta_0 + \bar{P}_i \beta_{1a}^{BE} + (P_{it} - \bar{P}_i) \beta_{1b}^{FE} + \overline{Dur_i} \beta_{2a}^{BE} + (Dur_{it} - \overline{Dur_i}) \beta_{2b}^{FE} \\ + \bar{X}_i \beta^{BE} + (X_{it} - \bar{X}_i) \beta^{FE} + u_i + e_{it} $$

where $\beta_{1b}$ and $\beta_{2b}$ were our within-effects of interest, i.e. the association between the parity transition and in-work poverty, and its change as individuals progressed from one year after childbirth to the next, respectively. We included five additional terms to model life course variation:

$$ (3) \quad y_{it} = \beta_0 + \bar{P}_i \beta_{1a}^{BE} + (P_{it} - \bar{P}_i) \beta_{1b}^{FE} + \overline{Dur_i} \beta_{2a}^{BE} + (Dur_{it} - \overline{Dur_i}) \beta_{2b}^{FE} \\ + AGE_i \beta_3 + \bar{P}_i AGE_i \beta_{4a}^{BE} + (P_{it} - \bar{P}_i) AGE_i \beta_{4b}^{FE} + \overline{Dur_i} AGE_i \beta_{5a}^{BE} + (Dur_{it} - \overline{Dur_i}) AGE_i \beta_{5b}^{FE} \\ + \bar{X}_i \beta^{BE} + (X_{it} - \bar{X}_i) \beta^{FE} + u_i + e_{it} $$

where the within-effects $\beta_{4b}$ and $\beta_{5b}$ represented how the initial impact of a parity transition on in-work poverty risk and its change over time vary by age group. We measured age categorically (18-25, 26-30, 31-35, or 36-50) and allowed it to vary over time.

All models were adjusted for a sample indicator, average year of observation to account for period differences, years of education, marital status, occupational group, gender,<fnref n="2" /> number of earners in the household, hours worked, and the percentage distance from the poverty threshold in the year prior to childbirth for the transition group to account for baseline differentials in the probability of in-work poverty prior to each parity transition. For those who did not experience a transition, the distance to the poverty threshold variable was allowed to vary over time. For the United States we additionally controlled for race and for the region in Germany, because different structural inequalities lead to persistent disadvantages of non-White individuals in the US and residents in Eastern federal states in Germany (Akee et al., 2019; Baker et al., 2021; Dickey & Widmaier, 2021; Thiede et al., 2015). Results from robustness checks excluding these controls are highly consistent with those presented below. Summary statistics for our samples are displayed in Table A1 (see the Appendix).

## 3. Results

Predicted probabilities and within-individual change in the probability of in-work poverty in the year prior to and six years following the birth of the first, second, and third child are displayed in Figures 1-3 (see also Table A2 in the Appendix). As can be seen in the top panels of Figure 1, the transition to a first birth was associated with an estimated 7 percentage point increase in the probability of in-work poverty for US adults between the ages of 18 and 25. In the six following years, the probability of in-work poverty increased for young US adults from roughly 11 percentage points the year after a first birth to 16 percentage points. In contrast, a first parity transition had no immediate impact on young Germans' probability to enter in-work poverty, but this probability increased in the medium-term from roughly 2 percentage points after one year to 12 percentage points six years later. The overall probabilities (bottom panel), however, differed starkly between both countries: from 25 to 40 percent in the United States and from 10 to 25 percent in Germany.

The within-individual change in the probability of in-work poverty after a first child for adults between the ages 26 and 30 followed a similar pattern in both the United States and Germany (top panel). There was no immediate increase in the probability of in-work poverty, but this was followed by a 10 percentage points incline in the following six years in the US and 5 percentage points in Germany. Again level differences were large (bottom panel): between 15 and 25 percent in the US and 5 and 10 percent in Germany. While the transition to a first birth for our older age groups – aged 31-35 and 36-50 – was not statistically associated with a higher probability of in-work poverty in Germany, it grew by 5 percentage points over six years in the US.

<footnote n="2">² Although the country variation in gender differences is important to study, it is outside the scope of this research. Our outcome – measured at the household level – incorporates gendered processes such as selection into the sample of the working population and parents.</footnote>
<figure><img src="image_4.png" /><figcaption>Figure 1: Estimated change in probability and probability of in-work poverty following the transition to a 1st child across age groups</figcaption></figure>

Sources: PSID (1970-2015) and SOEP (1984-2017), authors' calculations
<figure><img src="image_5.png" /><figcaption>**Figure 2:** Estimated change in probability and probability of in-work poverty following the transition to a 2nd child across age groups</figcaption></figure>

Sources: PSID (1970-2015) and SOEP (1984-2017), authors' calculations

The top panels of Figure 2 show the change in the probability of in-work poverty across age groups following a second parity transition and display a number of important differences compared to the results for a first child. For example, the immediate change following a second child was roughly the same for the age groups 18-25, 26-30, and 31-35 in the US – and for the 18-25 and 26-30 age groups in Germany – a 5-percentage point increase. The medium-term trends however differed. In the US, the probability of in-work poverty continues to increase in the following 4 years for 18-25 year-olds and for the following six years for 26-30 year-olds. In contrast, there was no additional increase in the probability of in-work poverty following a second child for any age group in Germany. The difference in the overall probability of in-work poverty were very large, ranging from 35 to 50 percent of US adults aged 18-25, 20 to 40 percent for US adults aged 26-30, but only 20 percent for the youngest age group of German adults.
<figure><img src="image_6.png" /><figcaption>**Figure 3:** Estimated change in probability and probability of in-work poverty following the transition to a 3rd child across age groups</figcaption></figure>

Sources: PSID (1970-2015) and SOEP (1984-2017), authors' calculations

The predicted probabilities and within-individual change in the probability of in-work poverty in the year prior to and six years following a third parity transition are displayed in Figures 3. Note that we do not display the estimates for our youngest age group, but the estimates are provided in Table A2. A transition to a third child was associated with an immediate increase in the probability of in-work poverty across all age groups, expect for those aged 36-50 in Germany. In the US, the initial increase in the probability of in-work poverty was 9 percentage points for 26-30 year-olds, 5 percentage points for 31-35 year-olds, and 3 percentage points for 36-50 year-olds. In Germany, the initial increase was roughly 5 percent for adults in the 26-30 and 21-25 age groups. The probability of in-work poverty continued to increase up to 4 years following a third child to circa 18 percentage points among the 26-30 age group in the US. As for a first and second child, the difference in the overall probability of in-work poverty were large, ranging from 30 to 50 percent of US adults aged 26-30, 25 to 35 percent for US adults aged 31-35, and between 20 and 30 percent for the youngest age group of German adults.
## 4. Conclusions

Our findings have important implications. Focusing on age variation allowed us to identify groups – specifically young parents – that may need additional protection from the accumulation of risk and disadvantage. While increasing the labor market participation of adult household members remains crucial, it may not be sufficient to avoid poverty. If childcare is expensive or residual – such as in the US – full labor market participation will remain out of reach for at least one household member following childbirth. The structural disadvantage that mothers experience in the labor market around childbirth, e.g. wage penalties and career interruptions, continue to affect future income even as children age and enter school.

Therefore, expanding income support to working households and more universal child benefits and childcare may be pertinent irrespective of parental employment. This is especially relevant in the US income support for jobless families has been reduced over the past two decades to more strongly support working parents (Brady & Parolin, 2020; Moffitt, 2015). However, the large increase in the risk of in-work poverty for relatively young parents in Germany demonstrates that even generous parental leave and child benefits may not be sufficient to prevent in-work poverty, especially for those in precarious and low-pay jobs outside the core segments of the labor market. Ultimately, higher parity progression may not only increase households' risk of entering in-work poverty, but also the number of young children growing up in poverty and at risk of social exclusion. This holds true even when testing for the use of an alternative equivalence scale (results available from the authors) that attributes lower weights to children in the household: in Germany, while the transition to parenthood as such is no longer associated with in-work poverty, higher parities remain associated with an increase in the risk of in-work poverty.

To conclude, we showed that the transition to parenthood and family size are important for understanding inequality in the short- and long-term exposure to in-work poverty. However, it was out of the scope of this brief report to delve deeper into other factors that interact with childbirth and further stratify the risk of in-work poverty in a broad cross-country comparison. For example, existing inequalities across geographical regions, e.g., East and West Germany, or racialized groups, e.g., Black, Hispanic, and White Americans, may compound the association between childbirth and in-work poverty. Moreover, we limited our study to two countries that are considered as ideal types of the liberal and conservative-corporatist welfare states. Future research should elaborate on these findings and consider whether different welfare state arrangements mitigate or exacerbate the link between parity transitions and in-work poverty across the life course and across social groups.

## Acknowledgments

We thank the participants to the Workshop “Social-demography and Inequality” at WZB Berlin Social Science Center for insightful comments and suggestions. We are grateful to David Brady and Ulrich Kohler for sharing the WZB-PSID code for PSID data preparation. The authors have no relevant financial or non-financial interests to disclose. This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No. 681546 (FAMSIZEMATTERS) and from the Oxford/Berlin Research Partnership seed grant “Understanding Family Demographic Processes & In-Work Poverty in Europe How Marriage, Parenthood, and Divorce Affect the Risk of In-work Poverty across the Life Course”, grant number OXBER_SOC8.

## Data availability statement

The German Socio-Economic Panel (SOEP) data is available at https://www.diw.de/en/diw_01.c.678568.en/research_data_center_soep.html. The Panel Study on Income Dynamics (PSID) data is available at https://psidonline.isr.umich.edu/.
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# Information in German

## Deutscher Titel

Ein Forschungsbericht über das anhaltende Risiko der Erwerbsarmut nach der Geburt eines ersten, zweiten und dritten Kindes über den Lebensverlauf

## Zusammenfassung

**Fragestellung:** Der Zusammenhang zwischen einer ersten, zweiten und dritten Geburt und kurz- und mittelfristiger Erwerbsarmut wurde für verschiedene Altersgruppen in den USA und Deutschland untersucht.

**Hintergrund:** Frühere Untersuchungen zur Erwerbsarmut konzentrierten sich auf strukturelle und askriptive Merkmale, während familiäre Prozesse - insbesondere Geburten - weniger Beachtung fanden. Diese Lücke wurde durch einen prozessualen Lebensverlaufsansatz geschlossen.

**Methode:** Längsschnittdaten aus den USA und Deutschland wurden auf „Between-Within“ Regressionsmodelle angewandt, um die intraindividuelle Veränderung der Wahrscheinlichkeit von Armut trotz Erwerbstätigkeit bis zu sechs Jahre nach der ersten, zweiten und dritten Geburt in verschiedenen Altersgruppen zu schätzen.

**Ergebnisse:** Die erste, zweite und dritte Geburt war mit einem unmittelbaren Anstieg der Wahrscheinlichkeit der Erwerbsarmut verbunden (bis zu 10 bzw. 5 Prozentpunkte in den USA und in Deutschland). Bei Erwachsenen im Alter von 30 Jahren und jünger in den USA stieg die Wahrscheinlichkeit mittelfristig an (von 9 auf 15 Prozentpunkte bei einer ersten Geburt, von 6 auf 15 bei einer zweiten Geburt und von 9 auf 18 bei einer dritten Geburt), während sie bei älteren Erwachsenen in den USA und allen Erwachsenen in Deutschland unverändert blieb.

**Schlussfolgerung:** In den USA und in Deutschland hat sich das Risiko der Armut trotz Erwerbstätigkeit nach der Geburt eines Kindes mittelfristig nicht erholt. Die Erhöhung der Arbeitsmarktbeteiligung erwachsener Haushaltsmitglieder durch mehr und kostengünstige Kinderbetreuungsmöglichkeiten ist nach wie vor entscheidend. Um Armut zu vermeiden, wären jedoch höhere Einkommensbeihilfen und Kindergeld erforderlich.

**Schlagwörter:** Elternschaft, Armut, Ländervergleich, Lebensverlauf
JFR – Journal of Family Research, 2023, vol. 35, pp. 345–356.

doi: https://doi.org/10.20377/jfr-910

Submitted: January 10, 2023

Accepted: March 21, 2023

Published online: March 28, 2023

Emanuela Struffolino: https://orcid.org/0000-0002-6635-8748

Zachary Van Winkle: https://orcid.org/0000-0001-7756-6799

<figure><img src="image_7.png" /></figure>

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