Our aim in this paper is to resolve a paradox. Despite declining real earnings among young adults, there has been no secular rise in child poverty. We show that the relative stability in child poverty is a result of two factors. First, the decline in market income in young families with children has been offset by rising transfers. Since the 1970s, social transfers have replaced earnings as the main source of income among low-income families with children. Second, changes in the fertility and labour market behaviour of young adults have sharply reduced the risk of young children growing up in low-income households. Thus, the upward pressure on low income among children stemming from the labour market has been offset by social transfers, changes in family formation, and the labour market behaviour of young adults. Whether these offsetting patterns will continue in the late 1990s remains to be seen.
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