
Originally Posted by
archibaldcrane
What you start to get into is what are called "welfare cliffs" where, for example, a $17/hr worker doesn't want the promotion to $20/hr manager because the added income makes them lose the child allowance for her 3 kids. You see this a lot with Medicaid.
Poverty reduction is the most important immediate benefit of a child allowance, but more broadly it should be understood as a policy to accomplish "income smoothing" over a life cycle, instead of putting acute financial pain on parents early in their careers and then alleviating it as they get into their peak earning years. Most parents don't earn money when they need it the most, and a child allowance shifts money from higher childless earners to lower earners with children - usually in the same lifespan.