The voices of Urban Institute's researchers and staff
August 13, 2014

Helping families deal with economic instability requires flexible public policies

August 13, 2014

When a parent loses a job, family income drops, but the effects are often more than just financial. For some families, especially those without savings to fall back on, lost income can lead to food insecurity, chronic stress, and poor health—all of which can harm children’s development. Some families may just need a temporary lifeline to get back on their feet, while others face more complex, long-term challenges.

Let’s take a look at three different types of families to see how economic instability affects them and what supports they might need. Consider (1) a stably employed parent who loses a job, (2) a parent with unstable employment who frequently has periods of joblessness, and (3) a parent who has been unemployed for a long time.

1. A stably employed parent loses a job During the Great Recession, unemployment rates surged to 10 percent, but even during better economic times, some jobs are lost even while others are created. About one in eight working-class families experience a 25 percent drop in income in any given year. And the resulting family stress and diminished resources can have a harmful effect on children.

The first, best response to instability is to prevent it. Of course, there will always be job losses, but certain policies can help—for example, short-time compensation, which allows employers to reduce workers’ hours rather than laying them off during lean economic times. Employees can then use unemployment compensation to make up for some of their lost earnings. Keeping parents employed may help reduce their stress levels. Also, because the program offsets some of the income loss, it helps preserve children’s material well-being.

Other programs, such as unemployment compensation and the Supplemental Nutrition Assistance Program (SNAP), also help families weather short-term income drops.

2. A parent with unstable employment who frequently has periods of joblessness

Low-wage jobs offer far less stability than higher-wage jobs. Low-wage workers are more likely to work part time than higher-wage workers, and are more likely to work infrequently. The typical low-wage worker will spend one-sixth of her time out of work over a two-year period. Low-wage jobs are also less likely than higher-wage jobs to provide consistent, regular hours, which poses challenges for child care and also introduces uncertainty about how much income will come in from week to week.

Policies to help these unstably employed parents include adequate, affordable, and flexible child care, along with income supports—such as the earned income tax credit, child tax credit, and SNAP— to help these families make ends meet. One challenge posed by child care subsidies, tax credits, and SNAP benefits is that they phase out as working parents move up to the second and third rungs of the economic ladder, which means that a family’s take-home pay isn’t much different at $15 an hour than at $10 an hour.

Providing some security for the unstably employed reduces the incentive to move into higher-wage, more stable jobs. We don’t know for sure, however, how important these benefit phase outs are for families’ upward economic mobility. Some families, given their constraints and backgrounds, will never move up, while others will aspire to middle-class jobs and work their way up to earning $25 an hour or more.

3. The long-term jobless and poor parent

For these families, the problem is not economic instability, it is persistent poverty and joblessness. These families also face instability in other domains, such as living arrangements and family structure.

In the short-term, public policy should address these families’ basic needs through supports for income, food, and housing. In the long-term, education, employment, and training programs—like Accelerating Opportunity—that are targeted to the hard to employ could move these parents into jobs. It’s likely they will join the ranks of the unstably employed, who still face significant challenges, but that would still be an improvement over not working at all.

Economic instability affects different families differently, so public policy must be varied and flexible enough to recognize and respond adequately to those differences.

For more on instability, read the paper and collection of essays that resulted from Urban's recent convening on instability.

Photo: A working mother who can't afford her own place lives with her child in her mother's living room. (AP Photo/Erich Schlegel)

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