An Assessment of the Income and Expenses of America's Low-Income Families Using Survey Data from the National Survey of America's Families

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Introduction

The policy community is increasingly focusing attention on alleviating the strain on low-income working families, particularly those with children. Research has examined the size and characteristics of low-income working families, the amounts and sources of income available to them, and, to a lesser extent, the expenses that these families face, such as housing or medical expenses. This paper seeks to unify discussions of income and expenses, to see if low-income working families are able to meet their expenses with the limited resources at their disposal. Relatively few data sets contain both detailed socioeconomic information and information on consumption expenditures for a large, nationally representative sample of low-income families. The National Survey of America’s Families (NSAF) is a notable exception. We use data from the third round of the survey, conducted in 2002. The NSAF surveyed approximately 40,000 households, oversampling the low-income population. In addition to eliciting information about living arrangements, work, earnings, income, and program participation, the NSAF asked respondents about their expenditures in three key areas: health care, child care, and housing.

Using these data, we assess how family expenditures in these three areas vary by family type, income, and work status. We also compare estimates of these expenditures from the NSAF to those from other data sources. Finally, we incorporate information on family spending on other items such as food and clothing drawn from other data sources to present a more comprehensive picture on expenses for low-income families.

Initially, we assess the extent to which family incomes are in line with expenses for low-income families, distinguishing between families based on work status. Then, we focus on low-income families with at least one full-time, full-year worker for several reasons: these families make up the majority of all low-income families with children, they have low incomes despite making a strong commitment to the labor market, and they are becoming a greater concern for policymakers as fewer families turn to public assistance for support and instead join the ranks of the working poor. Focusing on working low-income families we can address questions such as: Are low-income working single parent households spending a greater share of their incomes on child care than two-parent households? Do low-income households with full-time, full-year workers spend a greater share of their incomes on housing than middle-income families? Are working families with young children or working families headed by immigrants more likely to have expenses that are higher than their incomes than other families? These comparisons will help us understand how much of their incomes different types of low-income families are spending on health care, child care, and housing, and allow us to assess how much income these families have left to meet their other expenses.

Overall, we find that low-income working families with at least one full-time, full-year worker fare better than one might expect in 2001, thanks to their work effort, earned income, and a generous refundable Earned Income Tax Credit, but low-income families without a full-time, full-year worker do not appear to have enough income to cover their basic expenses.

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