Trends in Work Supports for Low-Income Families with Children

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Brief #4 in the series "Perspectives on Low-Income Working Families."

Abstract

Federal and state spending on work supports for low-income families grew between 2002 and 2005, with Medicaid accounting for most of the spending growth. After 2002 states spent less on child care, and federal EITC spending declined slightly as the number of employed parents decreased. Yet, food stamp spending increased as family incomes declined and program changes expanded eligibility and participation. The weaker economy also explained a large share of the increase in Medicaid spending. Differences in the design of programs and needs among families led to wide variation in the amount of support received by families across states.

Introduction

A slow economy and more demand for public health insurance coverage have changed the shape of spending on safety-net programs since 2002. Government spending on supports directly connected to parents' work status has declined or remained flat as the number of parents working has declined. Other supports available without regard to work status have increased as more families found themselves with incomes below the poverty level. Spending on low-income families also varies widely across the states.

Four programs—Medicaid and the State Children's Health Insurance Program (SCHIP), food stamps, child care subsidies, and the federal and state earned income tax credits (EITC)—form the core set of supports for low-income families in the United States. These programs provide health insurance, assistance with food purchases, assistance with child care expenses, and earnedincome supplements to low-income families that meet certain eligibility criteria. While Medicaid, SCHIP, and food stamps are available to low-income families regardless of work status, child care subsidies and the EITC are designed specifically to help working families. The entire set of supports can offer critical help to parents trying to move up the ladder from an entry-level job with low wages and no health insurance to a compensation level sufficient to support a family with no help from the government.

The work-support safety net reflects a significant philosophical shift away from guaranteeing cash assistance to families largely not working and toward helping families support themselves through work. This new philosophy culminated in the creation of the Temporary Assistance for Needy Families (TANF) program in 1996. While TANF still provides cash assistance to lowincome families for up to five years, it also prepares families for work. Because TANF is funded through a block grant (fixed at mid-1990s spending levels) states have significant flexibility in how they spend this money.

This brief uses administrative data to show trends in spending on the four core work-support programs through 2005. The results update the 1996–2002 spending trends presented in Zedlewski and colleagues (2006). The results also show the variability in work-support spending across the states in 2005. States' population and income characteristics lead to variations in the shares of low-income families that receive support. Spending variability also reflects states' choices about their safety-net programs.

Work-support spending continued to grow steeply after 2002, with Medicaid accounting for most of the spending growth. The weaker post-2002 economy led to numerous changes in spending. States spent less on child care, and federal EITC spending declined slightly as the number of employed parents decreased. Yet, food stamp spending increased as family incomes declined and program changes expanded eligibility and program participation. The weaker economy, with fewer jobs offering such benefits as health insurance, also explained a large share of the increase in Medicaid spending. Differences in the design of work-support programs and needs among low-income families led to wide variation in the amount of support received by families across states.

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