Good question.
It certainly is the case that cohabiting couples who have children tend to be less educated, poorer, and less committed to their relationship than couples who have children in marriage.
So one reason that children are less likely to thrive in cohabiting families than in intact, married families is that their parents, or the adults in their lives, have fewer of the resources that they need to be good parents.
But the best research on cohabitation and child well-being controls for factors like income, education, and race/ethnicity. And even after you control for these factors, you still find that children in cohabiting families are significantly more likely to suffer from depression, delinquency, drug use, and the like.
For instance, one study from the University of Texas at Austin found that teens living in a cohabiting stepfamily were more than twice as likely to use drugs, compared to teens living in an intact married family--even after controlling for differences in income, education, race, and family instability.
In fact, children in cohabiting stepfamilies did worse on this outcome than children in stable single-parent families.
Research like this suggests to me that cohabitation has an independent negative impact on children, above and beyond the factors that make some Americans more likely to cohabit with children in the first place.
So the answer, I think, is for the nation to improve our children's home environments in a variety of ways--from improving our nation's educational system to improving job opportunities to discouraging parents from cohabiting.