Panel Paper: Unemployment and Private Safety Nets

Friday, November 9, 2012 : 10:45 AM
International B (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Natasha Pilkauskas, Columbia University

Low-income mothers and families rely on a number of support systems, both public and private, to survive. Since the passage of the Personal Responsibility and Work Opportunity Reconciliation Act and the development of Temporary Assistance for Needy Families, low-income parents have been less able to rely on welfare to support their families. A number of studies have documented the importance of private safety nets (defined here as cash, in-kind, or instrumental assistance) in helping low income families make ends meet (e.g. Edin and Lein, 1997; Henly, Danziger, & Offer, 2005). Another literature has tied the importance of these private safety nets to improved outcomes for families and children (e.g. Ryan, Kalil, & Leininger, 2009; Henly, 2002; Knox, Long, & Scott, 2003; Gordon, Chase-Lansdale, & Brooks-Gunn, 2004; Harknett, 2006).

One reason that families turn to private safety nets is unemployment. The resources a family has to draw upon, such as assets and savings, public transfer programs, or private safety nets can buffer the effect of unemployment on families. Families smooth consumption by drawing upon assets in times of economic need (Deaton, 1991), however, low-income families may have fewer assets to draw upon (Barr and Blank, 2009) and thus may be more dependent upon private safety nets. The current study investigates the association between unemployment (individual and aggregate) and private safety nets.

Only a few studies have investigated the association between individual unemployment and private safety nets. These studies find that individual unemployment is positively related to receiving private financial transfers (Cox & Way, 2011) and doubling up (Wiemers, 2011; Mykyta & Macartney, 2011). This study extends this literature by investigating additional measures of support: cash assistance, in-kind/instrumental assistance (coresidence with kin, gifts, childcare), and perceived emotional and social support.

Although the effect of individual unemployment on private safety nets is important to understand, individual unemployment is affected by choice. Investigating the association between aggregate unemployment and private safety nets allows us to understand the effect of an exogenous shock to the entire household, not just the employment of one particular member, on safety nets. Three studies have investigated the association between the aggregate unemployment rate and private safety nets and have found that unemployment is related to the receipt of private financial transfers (Haider & McGarry, 2005; Gottlieb, Pilkauskas & Garfinkel, 2012) but not associated with doubling up (London & Farlie, 2006). This paper will look at the association between aggregate unemployment and several measures of private safety nets using data from the longitudinal Fragile Families and Child Wellbeing Study. The sample is relatively low-income and is ideal to study this topic as low-income families are more likely to rely on private safety nets. In addition, the latest wave of data was collected during the Great Recession allowing for an investigation in the effect of the Great Recession on private safety nets (as well as large variation in the unemployment rate). This study will help inform our understanding of how low-income families make ends meet in times of economic crisis.