Report

The potential effects of the cost of living crisis on children’s outcomes

This report from UK think tank CEPEO looks at the impact the current cost of living crisis might have on children in poorer families.

The ongoing energy crisis and surge in inflation is likely to push more and more families into poverty and could leave three million more Britons under the absolute poverty line (Resolution Foundation, 2022). Parents’ purchasing power is reduced by higher prices. This not only causes immediate financial difficulties which families must endure, it may also have long-lasting “downstream” effects on child development. These can even persist even into adulthood and affect educational and employment opportunities and outcomes. The effects of poverty do not solely impact poor families and their children: lower educational and adult outcomes reflect a lower level of productivity, and hence a lower level of economic growth. Therefore, it is in the interests of all of society to avoid the scarring effects of poverty and ensure prosperity and growth for future generations. This briefing note explores the impact the current cost of living crisis might have on children in poorer families. We first discuss some of the reasons why relatively permanent differences in income between families might affect children’s educational (and later) outcomes, and the specific difficulty (and possible solutions) in separating a causal impact from a correlation or association. We then present some of the key evidence from studies of temporary changes in income which suggests that there are important links between fluctuations in family income or purchasing power and children’s outcomes across the lifespan with consequences relevant for the current cost of living crisis.