Friday, November 8, 2013
Mayfair Court (Westin Georgetown)
*Names in bold indicate Presenter
Evidence on outlays targeted at poor persons suggests that the explosion in the Supplemental Nutrition Assistance Program (SNAP) and the refundable Earned Income Tax Credit (EITC) post 2007 is in large part due to the severe recession. There is no doubt that such changes were in part brought on by the Great Recession, but they have also increased steadily throughout the early 2000’s. It is clear that these benefits have had a substantial effect on poverty and instability during the recession. However the 2000’s also experienced several other changes which suggest that these benefits will only dissipate slowly as the economy recovers. Over the past three decades, employment and earnings for low skill workers have fallen and are likely to remain below subsistence for young parents with few job skills; births out of wedlock continue to rise and marriage has declined for all races over this same period. From 2002 onward, about half of all children were born to parents who have a high school education or less. Taken together, these changes may mean that food assistance and refundable tax credits will become a permanent source of ‘making ends meet’ for low wage low income families even when the economy recovers.
In this paper we use a series of short two-year panels from the 1981-2011 waves of the Current Population Survey to investigate the transitory and permanent components of changing earnings, family structures, and receipt of SNAP and EITC benefits. We model household income as a function of a deterministic component, a permanent component, and a mean-reverting transitory component. Most of the prior literature has focused on (white) men in examining earnings and income instability, but this demographic group is at comparatively low risk of transfer participation compared to women (especially single mothers) and non-white men. The large sample sizes in the CPS offer the opportunity to examine cyclical and secular trends in changing earnings and incomes. For example, if the permanent component of changing earnings rises over the past decade, we suggest that demand (outlays and recipients) for these programs will remain a substantial permanent part of the safety net, mainly due to intermittent work and low wages for the younger unskilled population, who bear most of the children in our society.