Panel Paper: Expenditures On Children During the Great Recession

Saturday, November 9, 2013 : 8:20 AM
Georgetown I (Washington Marriott)

*Names in bold indicate Presenter

Ariel Kalil, University of Chicago, Lindsey Leininger, University of Illinois-Chicago and Patrick Meehan, University of Michigan
The global economic downturn, sparked by bursting of the U.S. housing bubble and the ensuing crisis in the financial sector, produced a lengthy list of casualties. Indeed, scholars have suggested that the “Great Recession” (which officially lasted from December 2007 through June 2009) may have affected more families than any since the Great Depression. As has been widely documented, employment levels dropped more severely compared to any other recession in the past 50 years (Greenstone and Looney, 2010). In 2011, real median household income was 8.1 percent lower than in 2007 ((DeNavas-Walt, Proctor, and Smith 2012). And, the collapse of the housing market in early 2006 led to unprecedented losses in home equity and extremely high rates of foreclosures (Gould Ellen and Dastrup, 2012). Scholars have long been interested in how economic changes affect children (Weiland and Yoshikawa, 2012). However, there is currently little evidence on how children fared during the Great Recession and its aftermath.

One mechanism that may link economic downturns to child development is family expenditures on children. Research shows that families who experience severe income losses are especially susceptible to cuts in expenditure and that consumption is significantly reduced as a result of permanent earnings shocks such as job loss. Food insecurity rates spiked with the onset of the Great Recession (Anderson et al. 2012), pointing to one area in which families may have reduced consumption.

We rely on the Michigan Recession and Retirement Study (MRRS) – a population-based survey of the Detroit metro area (fielded in two waves in 2009-2012) to examine this question. The goal of the MRRS is to understand the association between economic conditions and household well-being in the context of the Great Recession and subsequent recovery. We examine the associations between family-level economic shocks, as well as subjective perceptions of economic hardship, and parents’ reports of cutbacks in expenditures on children. To do so, we use data from a sub-study that was fielded as part of W2 of the MRRS (the Child and Youth Study (MRRS-CYS). The MRRS-CYS has a total sample size of 415 children ages 0-18 years from 269 households. Child-level data collected from the (W2) MRRS-CYS are merged with household-level data from W1 and W2 of the MRRS.

Using items from national surveys, we examine cutbacks in 8 areas: school supplies, lessons/hobbies, vacations, toys/presents, clothes/shoes, after-school programs, food, and medical/dental care. Cutbacks were common and prevalent across the economic spectrum. More than 40% of household reported cutbacks on lessons/hobbies, vacations, toys/presents; more than 30% reported cutbacks on clothes/shoes and after-school programs; and more than 10% of households reported cutbacks on food, medical/dental care, and school supplies. Robust predictors of cutbacks in these areas, in regressions that control for a wide range of demographic characteristics, include recent parental job loss and parental reports of household food insecurity. However, subjective perceptions of financial strain are also correlated with cutbacks in most arenas. Our final paper will expand these results, explore subgroup differences where possible, and make comparisons with national data.