Millions of children were affected by parental unemployment during the Great Recession. Parental job loss can have negative effects on child development, particularly for children living in low-income families. This fact sheet summarizes findings from a paper that explores how effectively public supports provide a cushion to help children and families during times of parental unemployment. It uses data from the Annual Social and Economic Supplement to the Current Population Survey to track how seven public benefit programs responded to the increased needs of families during the Great Recession and to analyze the types of support available to children whose parents are both unemployed and low-income.
Response of Public Benefit Programs During the Recession
Millions of children lived in families experiencing unemployment and economic hardship during the Great Recession. Unemployment rates remain quite high, and as of 2012, 10.9 million children, or 15 percent of children living with their parents, continue to be affected by parental unemployment. This includes 6.9 million children living in families with income less than 200 percent of the federal poverty level, or less than about $38,000 for a family of three. Such children face the dual risks of parental unemployment and low family income.
A number of studies find that job loss has a negative effect on children's school performance, with some studies also finding such long-term effects as lower rates of college attendance and lower adult earnings. These negative effects are likely caused by a combination of reduced family income, changed family dynamics, and lower adolescent aspirations. Public supports can offset the losses in family income and therefore reduce the risk that job loss will negatively affect children's healthy development.
Public benefits supporting children and their families grew during the recession in response to growth in the number of children with unemployed and low-income parents. Unemployment insurance (UI) and the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) were particularly responsive. For example, the number of children whose families received regular or extended UI benefits more than doubled between 2007 and 2009, with 8 million children in families receiving UI benefits at some point during 2009 (see figure 1). The number of children in families receiving SNAP also rose substantially, reaching nearly 15 million in 2010 and remaining at similar levels in 2011 and 2012. SNAP caseloads are projected to peak in 2013, and then gradually decline.
Unemployment insurance and SNAP are entitlement programs, which expand automatically in tough economic times regardless of federal or state action. Also, legislation enacted in 2008 and 2009 provided temporary program expansions, providing further assistance to families and stimulus to the economy.
In contrast, the Temporary Assistance for Needy Families (TANF) program failed to expand to meet increased needs among poor children and families during the Great Recession. Capped funding, state policies that discourage access, and increased welfare stigma may explain why TANF was so much less responsive to economic conditions than its predecessor program, Aid to Families with Dependent Children.
Other programs not typically viewed as countercyclical, including the National School Lunch program, the earned income tax credit, and the Supplemental Nutrition Program for Women, Infants and Children (WIC) also expanded during the recession. In contrast, receipt of cash assistance under the Supplemental Security Income program increased only marginally during the recession, similar to trends for TANF.
Supports for Children with Low-Income, Unemployed Parents
Despite the billions spent on unemployment benefits, millions of unemployed parents failed to receive any UI benefit. Low-income, unemployed parents have particularly low coverage rates, with only one-fourth (25 percent) of their children living in families receiving UI benefits in 2012, compared with 41 percent of children from higher-income families (see table 1). An even lower percentage (12 percent) of low-income children living with unemployed parents lived in families receiving TANF assistance.
Lacking access to monthly cash assistance, many low-income families turned instead to nutrition assistance programs, including SNAP, school lunches and WIC. For example, 58 percent of children living with unemployed parents lived in families receiving SNAP benefits and even more (65 percent) lived in families receiving school lunches. Also, the earned income tax credit supported more than three-quarters of low-income children with unemployed parents in 2012 (77 percent). Although this tax credit is limited to families with earnings, many unemployed parents had earnings for part of the year, or were married to a parent with earnings.
Although UI coverage rates were low, unemployment benefits provide substantial support for those families fortunate enough to be covered; an average of nearly $6,000 in benefits over the course of the year in low-income families and more than $8,200 in higher-income families. The average annual value of TANF, SNAP and earned income tax credit benefits fell more in the $3,000–$4,000 range among low-income unemployed families who received them, and school lunch and WIC benefits were considerably lower.
Looking across seven different cash and nutrition assistance programs, almost all low-income families were able to access at least some public supports during times of parental unemployment. More than two-thirds (70 percent) of low-income children living with an unemployed parent lived in families receiving either SNAP or UI, and most of those who did not receive either of these two benefits did receive the earned income tax credit. Only 3 percent of low-income children living with unemployed parents lived in families that did not receive any of the seven programs analyzed here.
Higher-income families generally do not qualify for any public support programs other than unemployment insurance. They are much more likely to rely on private sources of income, such as earnings or child support from a working parent, or money withdrawn from the family's savings or retirement accounts. While less likely than low-income children to be affected by economic hardship, children in higher-income families may still be affected by changes in family dynamics and stress, as their parents struggle to find new jobs and keep up with monthly bills.
Conclusion and Policy Implications
While unemployment rates have peaked, the recession is not over for children. There were still 3 million more children living with parents who were unemployed in 2012 than in 2007. There also were 5.5 million more children in families receiving SNAP benefits and 1.7 million more children in families receiving unemployment compensation than before the recession.
The experience of the past five years illustrates some of the strengths and weaknesses of public supports for children with unemployed parents. Public benefit programs—particularly unemployment and SNAP benefits—expanded rapidly, providing important supports to families and a much-needed stimulus to the economy. But unemployment insurance provides less coverage than most people realize. Relatively low coverage rates, particularly for workers with low wages, leave many families dependent on more traditional safety net programs during times of unemployment.
Three policy implications are suggested by this analysis. First, reforms to improve unemployment insurance coverage of low-wage workers are needed if it is to serve as a primary support for all children when their parents lose work. Reform efforts might include improving outreach and the application process or modifying rules that prevent certain part-time workers or workers who leave jobs semi-voluntarily from collecting benefits.
Second, TANF largely failed to respond to the Great Recession and cannot be expected to respond to future recessions under its current structure. The program could be made more countercyclical by amending the complex rules governing the existing Contingency Fund to make it more effective at providing additional funds in times of high unemployment.
Finally, the SNAP program responded rapidly to changes in unemployment rates and family economic conditions and continues to support millions of children still living with low-income and unemployed parents. Several amendments to the Farm Bill (the Federal Agriculture Reform and Risk Management Act of 2013) that were adopted in the House in 2013 would have weakened assistance during time of high unemployment. These amendments were dropped from the final farm bill (the Agriculture Act of 2014). If they are added to future legislation, SNAP will not remain as strong a countercyclical program with the capacity to support children with unemployed parents and provide economic stimulus during future recessions.
This factsheet is part of the Urban Institute's Low-Income Working Families project, a multiyear effort that focuses on the private- and public-sector contexts for families' success or failure. Both contexts offer opportunities for better helping families meet their needs. The Low-Income Working Families project is currently supported by the Annie E. Casey Foundation.
Copyright May 2014. The Urban Institute. The views expressed are those of the authors and do not necessarily represent those of the Urban Institute, its board, its sponsors, or other authors in this series. Permission is granted for reproduction of this document, with attribution to the Urban Institute.