Association for Public Policy Analysis & Management

For the American middle class in the 21st century, reliance on safety net expenditures to mitigate financial insecurity has only grown. This trend was exacerbated in the Great Recession: beyond automatic stabilizers in the form of government transfers to combat skyrocketing joblessness, the American Recovery and Reinvestment Act (ARRA) was enacted into law in July 2009 to provide government transfer aid in the form of food stamps, unemployment compensation and other income supports for families in need.  Of the 832 billion dollars legislated in the ARRA stimulus package, 293 billion dollars went to programs that provided direct assistance to individuals and families in need (Council of Economic Advisers, 2014).  This increase in expenditures led to an expansion of benefits and caseloads for key social insurance and means tested transfer programs such as  Supplemental Nutrition Assistance Program, Unemployment Insurance and the Earned income Tax credit.  

A lackluster recovery however, characterized by slow job growth and negative wage growth beyond the official end of the Great Recession, has meant that middle-class families continue to rely on safety net programs to make ends meet (Mishel et al. 2012). This increased use has the potential for middle class families reap higher benefits from safety-net programs than lower-income households. Research by Robert Moffit (2013) finds that the distribution of transfers benefits during and in the aftermath of the Great Recession were not strictly progressive; individuals at the bottom of the income distribution saw smaller transfer benefit amounts than those on the boundary of the federal poverty line.  Research by Marianne Bitler, Hilary Hoynes and Elira Kuka (2014) similarly measure whether the Earned Income Tax Credit program responds appropriately to economic need, and find that the EITC serves as a stabilizer for only certain demographic groups, not all, leading to unequal distributional outcomes. To the extent that normative safety net policy objectives aim to reduce hardship for the poorest of families, the increase in use among middle class families  demands further study.

This papers seeks to understand the underlying phenomena associated with the growing use and contribution of safety net dollars to middle class income in the aftermath of the Great Recession. I measure frequency and duration of the safety net program use and benefit allocation for both means-tested programs and social insurance programs using the Survey of Income and Program Participation and Current Population Survey and test to see whether the likelihood of program specific safety-net use among middle-class households varies in a fundamentally different way from low-income households.  Understanding how the middle class’s use of the safety net is similar or different from those at the lower end of the distribution can shed light whether existing policy design of key safety net programs should be amended to support these income group directly.