Children in lower-income households do less well in school and have worse health than their better-off peers in part because they are poorer, researchers from the London School of Economics and Political Science (LSE) have found.

While it is well established that children in lower-income households do less well than their more wealthy peers, it has to date been unclear whether low income is itself a cause of lower achievement, or simply correlated with other key factors such as lower parental education. The report, published by the Joseph Rowntree Foundation today (Tuesday 22 October), finds that low income directly affects measures of a child's wellbeing and development.

Kerris Cooper and Kitty Stewart from LSE's Centre for Analysis of Social Exclusion (CASE) reviewed 34 studies from OECD and European Union countries with strong evidence about whether money affects children's health, social, behavioural and cognitive outcomes. All the studies use methods that allow researchers to be confident that they are investigating causal relationships, not just associations.

The review found strongest evidence of an income effect in relation to children's cognitive development and school achievement, followed by their social-behavioural development. Income also affects outcomes indirectly impacting on children, including the home environment, maternal mental health and parenting behaviours such as smoking during pregnancy.

A given sum of money makes significantly more difference to children in low-income than better-income households, the researchers identify. An increase in household income for children in receipt of free school meals (FSM) by £7,000, which would raise them to the average income for the rest of the population, might be expected to eradicate around half the gap in Key Stage 2 outcomes between FSM and non-FSM children, the report states.

Dr Kitty Stewart said: "Many of the studies that met the criteria for our review are from the USA, but the reasons why money appears to matter are likely to apply equally in the UK. One key mechanism relates to the stress and anxiety caused by low income, which makes it more difficult for parents to give children time, attention and positive support. The evidence that income affects rates of maternal depression is an illustration of this mechanism at work."

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Kerris Cooper said: "Protecting households from low income ought to be a central part of Government efforts to promote children's opportunities and life chances. The impact of increases in income on cognitive outcomes appears to be comparable with the effects identified for spending on early childhood programmes or education. However, income influences many different outcomes at the same time, including maternal mental health and children's anxiety levels and behaviour. Few other policies are likely to affect such a range of outcomes at once."

Of the 34 studies, only five found no evidence of a money effect on any of the outcomes examined, and the researchers believe that in four of the cases there are methodological reasons that may have affected the conclusion.

Download: Does Money Affect Children's Outcomes?

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