The child in "The Ones Who Walk Away from Omelas" is significant as a scapegoat who bears the burden of misery for the community. This child also represents the dilemma of pragmatism.
With the subtitle of LeGuin's story as "Variations as a Theme by Williams James," the narrative addresses the Jamesian concept of Pragmatism. In the quasi-utopian society, then, the deprived, mean, and vulgar are accepted as a necessary part for the existence of the "greater good." This miserable child absorbs the ills of the society so that the others can live happily, so happily that "smiles have become archaic."
Those are the terms. To exchange all the goodness and grace of every life in Omelas for that single, small improvement: to throw away the happiness of thousands for the chance of happiness of one: that would be to let guilt within the walls indeed.
Pragmatism explains that the sacrifice of this one miserable creature is practical--for the greater good--as with its sacrifice the citizens of Omelas can celebrate life and not experience suffering. Truth, then, is what is useful. However, there are those who cannot feel guiltless in this state, and they are the ones who walk away. Others, although disturbed, accept the conditions because they are too comfortable to sacrifice this state for the improvement of just one creature.
Therefore, this miserable little creature, who is imprisoned in squalor, presents the moral dilemma of the idea that if a course of action has the desired effect, it is good, and is only wrong if it is not effective.