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Why current definitions of family income are misleading, and why this matters for measures of inequality

July 12, 2017.

Childcare & Early Education

What is “equitable growth” and how do we measure it? The following essay, part of a series , asks economists, other researchers, and practitioners to explore these questions. Equitable growth means an economy that raises living standards for all families. We have seen decades of economic growth in the U.S.—commonly measured by GDP. Yet that success has not meant significant income growth for most American families. Clearly GDP doesn’t provide the full picture. How do we know we’re on the right track? There is little consensus around what specific of indicators are required to quantify whether the economy is growing on behalf of all Americans. Is it a matter of looking at different already existing measures? Should new data using existing concepts of income and well-being be created? Do our concepts of what’s important to measure need updating as well? A better understanding of equitable growth—and how to measure it—can improve our understanding, inform decisions and lead to better outcomes for all.

Researchers studying income distribution in the United States seem reluctant to acknowledge the family as an important unit of production and distribution. As a result, they often rely on statistics that provide a misleading picture of inequalities based on class, race or ethnicity, and especially gender.

Incomplete definitions of both family and income either obscure or render invisible transfers between and within households, including the value of housework and family care. Evidence from specialized surveys—such as the Health and Retirement Survey, the Panel Survey of Income Dynamics, the Survey of Income and Program Participation, and the American Time Use Survey—clearly demonstrate the quantitative relevance of these omissions.

Conventional measures

What, exactly, do economists mean by income, and what, exactly, is the presumed income-receiving unit? Usually, income refers to direct market income (labor earnings plus income from capital such as interest or dividends, and including, where feasible, indirect market income such as the dollar value of transfers from private pensions or government).

Many shortcomings of this measure are widely recognized. For instance, conventional estimates do not include any valuation of the flow of implicit service income from capital assets such as housing or the increase in wealth due to capital gains appreciation. 1 Sources of income that take the form of in-kind benefits and/or tax expenditures such as the Earned Income Tax Credit are seldom included. These problems, however, have received more attention than those related to largely unmeasured aspects of the family economy.

Most individuals in the United States pool at least some of their income with other family members over a significant portion of their lifecycles. As a result, family income is a better indicator of material living standards than individual earnings. Family-based measures are especially relevant to the economic welfare of children, the elderly, and individuals who are sick or disabled, as well as those supporting or providing direct care for such dependents.

Many unrelated individuals live together in households without pooling income, but benefit from household public goods and economies of scale in household production. That’s why it is difficult to measure the extent to which individuals pool their income and what share of family or household income should be imputed to them. While it is often assumed that married couples equally share their market income, empirical research suggests that is not always the case. 2 The proliferation of informal partnerships such as cohabitation further complicate the story. 3

Intrafamily transfers of money and time—mediated by the public-good aspects of household consumption and economies of scale in household production—potentially affect both the size and the distribution of individual income. For instance, improvements in women’s earnings relative to those of men may be counterbalanced by a decline in intrahousehold or intrafamily transfers related to nonmarriage, loss of household economies of scale, or increases in the percentage of children maintained by women alone. 4

Defining the family in family income

Seeking a practical solution to a complex problem, the U.S. Census Bureau enforces a clear distinction between family and household. Specifically:

A family consists of two or more people (one of whom is the householder) related by birth, marriage, or adoption residing in the same housing unit. A household consists of all people who occupy a housing unit regardless of relationship. A household may consist of a person living alone or multiple unrelated individuals or families living together. 5

Note, however, that the definition of family provided here is limited to family members living in the same household. In this sense, it represents a truncated and, in some respects, misleading definition. While the U.S. Current Population Survey asks some questions relating to intrahousehold family transfers, these are largely been considered a private matter, except where they represent a traditional obligation rendered visible by child support agreements.

By contrast, the Health and Retirement Survey asks respondents to report financial help, defined as:

Giving money, helping pay bills, or covering specific types of costs such as those for medical care OR insurance, schooling, down payment for a home, rent, etc. The financial help can be considered support, a gift or a loan.

This is a much broader definition of intrafamily transfers than that in the Current Population Survey, and a recent empirical analysis of the Health and Retirement Survey finds that households with an adult between the ages of 50 and 64 transferred an average of $8,350 to family members over a two-year period between 2008 and 2010. Both the probability and the size of these transfers were positively correlated with income, and the overall likelihood of such transfers increased substantially between 1998 and 2010. 6 In other words, relatively affluent adults approaching retirement age have provided an increasingly significant economic boost to their adult children, which is not factored into conventional family-income calculations.

This analysis of the Health and Retirement Survey does not break out transfers by race or ethnicity, but other research utilizing data from the 2005 and 2007 Panel Study of Income Dynamics, as well as the Survey of Consumer Finance, shows that middle- and upper-income African Americans are more likely to provide informal financial assistance than whites with similar characteristics. 7 Not surprisingly, black families are more likely to have needy family members and friends—what might be termed a negative network effect. This difference can account for a significant portion of the racial gap in wealth.

Overall, such transfers may have an equalizing effect because they generally flow from those with more market income to those with less. But young white adults are more likely to receive transfers from relatively affluent parents, while young black adults are more likely to transfer income to those closer to the bottom of distribution.

Equivalence scales and intrafamily transfers

Comparisons of family income are often unadjusted for family household composition or are adjusted on a per-capita basis, simply divided by the number of household members. Both approaches are misleading. A family of two is much better off with an income of $50,000 than a family of six. In contrast, a family of six does not need three times as much income to be as well off as a family of two, even though it has three times as many members.

For this reason, family income is often adjusted by an equivalence scale that assigns a different weight to children and adults, and takes economies of scale into account. The U.S. poverty line and benchmarks based upon it—such as the 200 percent of the poverty line—represents an implicit equivalence scale. Another common measure divides family income by the square root of family size. 8 Such scales represent an approximation of what might be termed an intrafamily transfer. 9

Virtually all conventional equivalence scales assume that children are less costly than adults because the cost of feeding and clothing them is lower. 10 Further, virtually all applications of equivalence scales to family income in the United States apply the same scales at every point in time. Since the mid-1960s, however, children have become more costly relative to adults, and family budgets have shifted away from food and clothing toward services such as childcare and education.

A major factor behind increased childcare costs is the significant increase in the labor-force participation of mothers between 1975 and the mid-1990s. Another is the steady climb in the percentage of children living in families maintained by a mother alone, since mothers are required to engage in paid employment in order to even qualify for public assistance.

While longitudinal data are scarce, a recent Census Bureau report based on the Survey of Income and Program Participation estimates that overall expenditures on childcare doubled between 1985 and 2011, from $84 to $143 per week in constant dollars. In the most recent year, families with incomes below the federal poverty line spent about 30 percent of their income on childcare, compared to 8 percent for families not in poverty. 11

Parental spending on higher education has also increased, the combined result of increasing college enrollments (despite relatively stagnant graduation rates) and significant increases in tuition and fees, particularly over the past 15 years. 12 Research also shows that home buyers and renters pay a significant premium for houses in high-quality school districts, indirectly increasing the cost of children. 13

These factors have important implications for considering the distribution of adjusted family income today. Whites in general are less likely than African Americans or Hispanics to live in households with children, and college-educated women are significantly less likely than other women to become single parents. Current equivalence scales significantly understate the economic significance of these demographic differences. Yet many dual-earner families with children sit squarely in the middle of the (conventionally measured) family-income distribution.

In current economic parlance, disposable income is typically defined as income after taxes. One could conceptualize “adult disposable income” as the net of taxes and benefits and transfers to children and other dependents. Instead, current assumptions treat spending on children or other needy family members merely as another form of consumption, no different than spending on restaurant meals or automobiles.

The value of nonmarket work

Housework and family care are now widely recognized as forms of work that yield economic benefits. Recent data from the American Time Use Survey show that productive activities that someone else could, in principle, be paid to perform constitute roughly half of all time devoted to work in the United States. 14

A number of studies impute a market value to this work on the aggregate level, simply multiplying the number of hours by an estimate of quality-adjusted replacement cost. This exercise suggests that the contribution of nonmarket work to an expanded definition of Gross Domestic Product in the United States lies somewhere between 30 percent and 40 percent. 15 Yet, with a few notable exceptions, the value of nonmarket work is largely ignored in estimates of family income on the microeconomic level. 16

Consider two family households of identical composition consisting of two adults and two children under the age of 5, both with a family income of $50,000 (ignoring both taxes and benefits, for the sake of simplicity). Conventional measures would place both of these families at exactly the same place in the distribution of income. But what if the first family includes two wage-earners, both working 40 hours per week and earning $25,000 per year, and the second family includes one wage-earner, working 40 hours per week and earning $50,000 per year, along with one stay-at-home parent who prepares meals, does shopping, and provides childcare.

Surely the second family is significantly better off than the first, if only because it does not incur the childcare costs alluded to in the section above.

What effect does imputation of the value of nonmarket work have on estimates of the distribution of family income in the United States? Empirical work today suggests that it has an equalizing effect in the cross-section, not because low-income families devote more time to it, on average, but because any imputation of the value of that work represents a larger percentage of their market income. 17

The implications for trends over time are quite different. The equalizing effect of valuing nonmarket work was almost certainly greater in the 1960s, when a relatively large percentage of married women were full-time homemakers. As women entered wage employment and substituted market employment for at least some of their nonmarket work, this equalizing effect diminished. Inequality in women’s earnings is also far greater today than it was in the 1960s, with high-earning women likely to marry high-earning men. 18

Whatever the gender implications of the traditional breadwinner/homemaker family, it may well have mitigated some aspects of class inequality among whites (it was never widespread among blacks). But most studies of the impact of women’s increased labor-force participation on income inequality completely ignore the value of nonmarket work, essentially assigning homemakers a contribution of “zero” in their empirical analysis. 19

Implications

Changes in the family economy of the United States have probably had only small effects on the relative income of the top 1 percent or the top 5 percent. They have larger implications for both the reality and the perception of relative income among households with divergent patterns of female labor-force participation and family responsibility.

Many public benefits in the United States—from the Supplemental Nutrition Assistance Program to financial aid for college—are conditioned on conventional measures of family income. Because these measures provide an incomplete and misleading picture of relative well-being of families, reliance on them may breed frustration and resentment. 20

Many of the policy proposals emerging from both political parties speak to concerns about the costs of family care: increased public provision of care and education, as well as child and dependent care tax credits. The potentially equalizing effect of such policies deserves serious consideration. In principle, many of the data sources cited above offer the potential to enlarge appreciation of the family in family income.

—Nancy Folbre is the director of the program on gender and care work at the Political Economy Research Center at the University of Massachusetts, Amherst.

1. See, for instance, the discussion of comprehensive income in Stephen Crystal and Dennis Shea, “The Economic Resources of the Elderly: A Comprehensive Income Approach” (New Brunswick: Rutgers University, 1989), available at https://www.census.gov/sipp/workpapr/wp91_8914.pdf .

2. Sara Cantillon and Brian Nolan, “Are Married Women More Deprived Than Their Husbands?” Journal of Social Policy 27 (2) (1998): 151–171.

3. Helene Perivier and Henri Martin, “Equivalence Scales Challenged by New Family Configurations,” paper presented at the meetings of the International Association for Feminist Economics (Berlin: July 2015).

4. Nancy Folbre, “Measuring Care: Gender, Empowerment, and the Care Economy,” Journal of Human Development 7 (2) (2006): 183–200.

5. “Frequently Asked Questions,” available at https://www.census.gov/hhes/www/income/about/faqs.html

6. Sudipto Banerjee, “Intra-Family Cash Transfers in Older American Households” (Washington: Employee Benefit Research Institute, June 2015), available at http://www.ebri.org/pdf/briefspdf/EBRI_IB_415.June15.Transfers.pdf .

7. Rourke L. O’Brien, “Depleting Capital? Race, Wealth and Informal Financial Assistance,” Social Forces 91 (2) (2012): 375–396.

8. For more discussion, see Nancy Folbre, Marta Murray-Close, and Jooyeoun Suh, “Non-Market Work, Equivalence Scales, and Extended Income in the U.S.” paper presented at the meetings of the International Association for Feminist Economics (Berlin: July 2015).

9. Nancy Folbre, Valuing Children: Rethinking the Economics of the Family (Cambridge: Harvard University Press, 2008).

10. Earlier in the 20th century, it was sometimes assumed that women were less expensive than men because they consumed less food. The intragender distribution of income in the family remains an important topic of study, especially relevant to the calculation of child support requirements imposed on noncustodial parents.

11. “Child Care: An Important Part of American Life,” available at https://www.census.gov/content/dam/Census/library/visualizations/2013/comm/child_care.pdf .

12. Nancy Folbre, Saving State U: Why We Must Fix Public Higher Education (New York: The New Press, 2010).

13. Much of this research is summarized in Elizabeth Warren and Amelia Warren Tyagi, The Two Income Trap: Why Middle-Class Parents are Going Broke (New York: Basic Books, 2004).

14. U.S. Bureau of Labor Statistics, American Time Use Survey (U.S. Department of Labor, 2013), Table A-1, available at http://www.bls.gov/tus/tables.htm .

15. Katherine Abraham and Christopher Mackie, eds. Beyond the Market: Designing Nonmarket Accounts for the United States (Washington: The National Academies Press, 2005); Benjamin Bridgman and others, “Accounting for Household Production in the National Accounts, 1965-2010” Survey of Current Business (2012): 23–36; Jooyeoun Suh and Nancy Folbre, “Valuing Unpaid Child Care in the U.S.: A Prototype Satellite Account Using the American Time Use Survey,” Review of Income and Wealth (forthcoming).

16. Important exceptions include Iulie Aslaksen and Charlotte Koren, “Unpaid Household Work and the Distribution of Extended Income: The Norwegian Experience” Feminist Economics 2 (3) (1996): 65–80; Joachim Frick, Markus M. Grabka, and Olaf Groh-Samberg, “The Impact of Home Production on Economic Inequality in Germany,” Empirical Economics 43 (3) (2012): 1143–1169; Edward N. Wolff, Ajit Zacharias, and Thomas Masterson, “Trends in American Living Standards and Inequality, 1959-2007,” Review of Income and Wealth 58 (2) (2012): 197–132.

17. Harley Frazis and Jay Stewart, “How Does Household Production Affect Measured Earnings Inequality?” Journal of Population Economics 24 (2011): 3–22.

18. For more discussion, see Nancy Folbre and others, “Women’s Employment, Unpaid Work, and Economic Inequality.” In Janet Gornick and Markus Janti, eds., Income Inequality: Economic Disparities and the Middle Class in Affluent Countries (Stanford: Stanford University Press, 2013).

19. See, for instance, Susan Harkness, “Women’s Employment and Household Income Inequality.” In Janet Gornick and Markus Janti, eds., Income Inequality: Economic Disparities and the Middle Class in Affluent Countries (Stanford: Stanford University Press, 2013).

20. Nancy Folbre, “The Resentment Zone,” The New York Times, March 22, 2010, available at http://economix.blogs.nytimes.com/2010/03/22/the-resentment-zone-losing-means-tested-benefits .

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Covid-19 pandemic pinches finances of america’s lower- and middle-income families, nearly one-in-five middle-income families report receiving unemployment benefits in 2020.

This report analyzes data from the  Annual Social and Economic Supplements  (ASEC) of the  Current Population Survey  (CPS) to study the effects of the coronavirus pandemic on the financial wellbeing of U.S. households in the middle class and in lower- and upper-income tiers. The latest available survey data, from March 2021, records the household income and work experience of adults in 2020, the first year of the pandemic. 

The CPS is the U.S. government’s official source for  monthly estimates of unemployment  and the ASEC, conducted in March each year, is the official source for its estimates of  income and poverty . In this report, the ASEC files were also matched from one year to the next to examine the annual movement of adults across income tiers over the period from 2000 to 2021.

The COVID-19 outbreak has affected data collection efforts by the U.S. government in its surveys, limiting in-person data collection and affecting the response rate. It is possible that some measures of economic outcomes and how they vary across demographic groups are affected by these changes in data collection. This report makes use of  updated weights  released by the Census Bureau to correct for nonresponse in 2019, 2020 and 2021.

“Middle-income” households are defined as those with an income that is two-thirds to double that of the U.S. median household income, after incomes have been adjusted for household size. For a three-person household, the middle-income range was about $52,000 to $156,000 annually in 2020 (in 2020 dollars). Lower-income households have incomes less than two-thirds of the median, and upper-income households have incomes that are more than double the median.

Unless otherwise noted, incomes are adjusted for household size and scaled to reflect a household size of three. Adults are placed into income tiers based on their household income in the calendar year prior to the survey year. Thus, the income data in the report refer to the 1970-2020 period, and the demographic data from the same surveys refer to the 1971-2021 period.

The terms “middle class” and “middle income” are used interchangeably in this report, as are the terms “households” and “families.” The estimates presented pertain to households and adults living in households.

White, Black and Asian adults include those who report being only one race and who are not Hispanic. Hispanics are of any race. Asians include Native Hawaiian and other Pacific Islanders. Other racial and ethnic groups are included in all totals but are not shown separately.

The financial hardships caused by the  COVID-19 recession  in the U.S. were endured mostly by lower- and middle-income families. From 2019 to 2020, the median income of lower-income households decreased by 3.0% and the median income of middle-income households fell by 2.1%. In contrast, the median income of upper-income households in 2020 was about the same as it was in 2019, according to a new Pew Research Center analysis of government data. 

The setbacks to the finances of lower- and middle-income households during the pandemic mark a significant reversal from their recent experiences. From 2010 to 2019, following the end of the  Great Recession , the median incomes of households in all income tiers had increased at about the same pace – an annual average rate of 1.8% for lower-income families, 1.6% for middle-income families and 1.9% for upper-income families, after adjusting for inflation. 

The  long-running shift  in the distribution of U.S. household income towards upper-income families stayed on track during the  coronavirus pandemic . The share of aggregate U.S. household income held by upper-income families reached 50% in 2020, up from 46% in 2010. The share held by middle-income families decreased from 45% to 42% over the same period. The share held by lower-income families also decreased, from 9% to 8%.

In a  Pew Research Center survey  conducted in January 2021, about a third of lower-income adults (31%) said their family’s situation had worsened in the last year, compared with 18% of middle-income adults and 11% of upper-income adults. At the same time, about half of lower-income adults (49%) said they or someone in their household had experienced job or wage loss since the coronavirus outbreak began in February 2020, as did 45% of middle-income adults. The share among upper-income adults (33%) was also notable, but considerably less.

The COVID-19 recession, which lasted  from February 2020 to April 2020 , is the shortest in recorded history. But its effects were sharp.  Unemployment soared  to near-record highs and national output, as measured by the gross domestic product (GDP),  shrank in 2020 . Although  employment  and  national output  have recovered to a great extent since 2020, new concerns have  emerged about inflation . 

This report focuses on the impact of the pandemic on the financial wellbeing of households in the lower-, middle- and upper-income tiers, with comparisons to the Great Recession era. The analysis relies on the Annual Social and Economic Supplement (ASEC) of the Current Population Survey (CPS), conducted by the U.S. Census Bureau in March of each year. The  latest available survey data , from March 2021, records the household income and work experience of adults in 2020, the first year of the pandemic. A  related analysis  examines changes in the economic status of the American middle class from a historical perspective, including how the distribution of different demographic groups across the three income tiers has changed from 1971 to 2021.

Who is middle income or middle class?

In this analysis, “middle-income” adults in 2021 are those with an annual household income that was two-thirds to double the national median income in 2020, about $52,000 to $156,000 annually in 2020 dollars for a household of three. “Lower-income” adults have household incomes less than $52,000 and “upper-income” adults have household incomes greater than $156,000.

The income it takes to be middle income varies by household size, with smaller households requiring less to support the same lifestyle as larger households. The boundaries of the income tiers also vary across years with changes in the national median income.

The terms “middle income” and “middle class” are used interchangeably in this report for the sake of exposition. But being middle class can  refer to more than just income , be it level of education, the type of profession, economic security, home ownership, or one’s social and political values. Class also could simply be a  matter of self-identification .

U.S. households entered the pandemic era on the heels of robust growth in their incomes

In 2019, just before the start of the pandemic, the incomes of U.S. households were substantially higher than what they were in 2010. Among households overall, the median income had increased from $68,004 in 2010 to $79,475 in 2019, a gain of 17%. It stood in sharp contrast to the  reversal experienced from 2001 to 2010 , a period encompassing the Great Recession, when incomes had decreased by 5%. The growth from 2010 to 2019 was also greater than the growth seen in any single decade since 1970. But the pandemic ate into some of the gains, causing the median income overall to fall to $77,951 in 2020, a one-year loss of 2%.  

For middle-class households, the median income had increased by 15%, from $79,838 in 2010 to $92,042 in 2019. The onset of the pandemic sent the median down to $90,131 in 2020. Lower-income households had a similar experience, with their median income rising from $26,371 in 2010 to $30,877 in 2019, up 17%, and then falling to $29,963 in 2020.

The finances of upper-income households were left relatively unscathed in the first year of the pandemic. Their median income in 2020 ($219,572) was statistically no different than what it was in 2019 ($220,783), and it stood about 18% higher than in 2010.   

As a result of these trends, the income gap between upper-income and other households stretched a bit wider from 2010 to 2020. The median income of upper-income households had been 7.0 times greater than the median income of lower-income households in 2010. This ratio increased to 7.3 in 2020. The ratio of the median income of upper-income households to the median income of middle-income households edged up from 2.3 in 2010 to 2.4 in 2020.

Unemployment insurance was a notable source of income for households with loss of work during the pandemic and the Great Recession

Despite the  historic spike in unemployment  during the COVID-19 recession, the unemployment experiences of workers during 2020 bore many similarities to their experiences in the Great Recession, which lasted from December 2007 to June 2009 but sent unemployment soaring through 2010.

Among adults overall, the work-experience unemployment rate in 2020 (15.0%) was about the same as in 2010 (15.2%), just following the end of the Great Recession. But encounters with unemployment varied across income tiers. The work-experience unemployment rate for lower-income adults in 2020 (28.2%) was somewhat less than in 2010 (32.5%). Meanwhile, middle-income adults (13.8%) and upper-income adults (7.8%) saw slightly higher work-experience unemployment rates in 2020 than in 2010, when they stood at 12.8% and 6.6%, respectively.

Despite the sense of déjà vu evoked by the work-experience unemployment rate, the share of households reporting receipt of unemployment insurance payments was much higher in 2020 (15.4%) than in 2010 (9.6%). A key reason for this was the  extension of the eligibility for unemployment insurance  benefits in the pandemic. Workers usually not eligible for these benefits, such as self-employed workers and independent contractors, were allowed to receive benefits in 2020.

The extension of unemployment insurance benefits helped households in all income tiers. Nearly one-in-five middle-class households (18.0%) reported the receipt of these benefits in 2020, compared with 13.0% of lower-income households and 13.1% of upper-income households. These rates were higher than in 2010 for households in all income tiers. For instance, only about one-in-ten middle-income households (10.7%) received unemployment benefits in 2010. 

The relatively low share of lower-income households receiving unemployment benefits in 2020, despite a higher work-experience unemployment rate, partly reflects the fact that lower-income adults are less likely to be in the labor force. In March 2020, the labor force participation rate among lower-income adults was 42.4%, compared with 69.1% among middle-income adults and 78.8% among upper-income adults. Lower-income adults are also more likely to be foreign-born, which  may affect eligibility , and evidence suggests that unemployment benefits  may not be reaching all who are eligible . 

For adults who experienced at least some joblessness, unemployment insurance payments were a valuable source of financial assistance during both the pandemic and the Great Recession. In 2020, these payments accounted for 29.5% of the aggregate income of lower-income households who received the benefits, albeit less than in 2010. Unemployment insurance payments also accounted for 12.4% of the aggregate income of middle-income households, about the same as in 2010, and 4.6% of the aggregate income of upper-income households receiving the benefits, less than in 2010. 

It should be noted that the reliance on unemployment insurance benefits  may be underreported  in the Current Population Survey, the source data for this analysis. Research based on personal earnings and benefits data from the IRS finds that unemployment insurance benefits  replaced more of the lost personal earnings  of low-income workers in 2020 than they did during the Great Recession. Regardless of the precise value of these benefits, it is evident that the estimated decline in the median incomes of lower- and middle-income households overall in 2020 may have been even greater in their absence.

Coronavirus economic impact payments to U.S. households in 2020

Unemployment insurance benefits were not the only source of financial relief available to U.S. households during the economic downturn in the COVID-19 pandemic. Among its many provisions, the  CARES Act  established two rounds of  economic impact payments to U.S. households in 2020, both in the form of  refundable tax credits . These tax credits, amounting to about $400 billion in direct financial assistance, are credited with a  reduction in the U.S. poverty rate  in 2020.

By design, the economic impact payments were directed towards lower- and middle-income families. In the 2021 CPS ASEC, some 97% of lower-income households, 100% of middle-income households and 53% of upper-income households reported that they received economic impact payments in 2020. Among households receiving the tax credits, the payments represented 13.9% of the aggregate income of lower-income households, 4.6% of the aggregate income of middle-income households, and 1.3% of the aggregate income of upper-income households.

The amount of payment received by each household in 2020, as recorded in the 2021 CPS ASEC, was  estimated by the Census Bureau  based on their tax model. The payments, disbursed as tax credits, boosted the disposable (after-tax) income of households, but they did not affect the gross (pre-tax) income of households, the income measure used in this report.

Americans moved across income tiers during the pandemic, but to about the same extent as in the past

Despite the economic headwinds from the COVID-19 recession, the shares of U.S. adults who were living in lower-, middle- and upper-income households were unchanged in the pandemic. In 2021, some 50% of adults lived in middle-income households, 29% in lower-income households and 21% in upper-income households. In 2020, 51% were middle class, 29% were lower-income and 21% were upper-income. (The population shares for 2020 and 2021 are based on household incomes in 2019 and 2020, respectively. Shares may not add to 100% due to rounding.)

But the stability in the shares of American adults in the three income tiers conceals a fair degree of churn in  who  is lower-, middle- or upper income from one year to the next. Movements across income tiers are driven by changes in the earnings of households from one year to the next. These changes can be substantial, perhaps the result of a job lost or gained, or due to life cycle events, such as retirement, marriage, divorce, or a death in the family. On this score, the first year of the pandemic proved to be no different than in other years in the past two decades.

Among the adults who were in the middle class in 2020, some 68% remained in the middle class in 2021. Another 16% had moved into the upper-income tier in 2021 and 16% had slipped down to the lower-income tier. These shifts were similar in magnitude to those that have prevailed since 2000 (see more on this below).

Similarly, among adults who were in the upper-income tier in 2020, some 64% held that status in 2021. About one-third (32%) had retreated to the middle-income tier and 4% had fallen to the lower-income tier by 2021. Among adults who were in the lower-income tier in 2020, nearly a third (32%) had progressed into the middle class and 4% had leapfrogged into the upper-income tier. 

Adults who moved from the middle class in 2020 to the upper-income tier in 2021 saw a gain of 68% in their household income at the median. On the other hand, middle-class adults who moved to the lower-income tier from 2020 to 2021 experienced a loss of 52% in their household income. Similarly large changes in income characterized the experiences of lower-income adults who moved up to the middle class and upper-income adults who moved down to the middle.  

The magnitude of the changes in income experienced by adults transitioning across income tiers is not unlike what has been seen in the past.  Other researchers  have recently examined the issue of income volatility using data from the IRS. They find that, from 2004 to 2020, about 30% of workers experienced a decline in their incomes of more than 10% from one year to the next and another 30% of workers saw an increase of more than 10%. These shares varied little over the 16-year period. Indeed, this pattern in income volatility has  prevailed for several decades .

Consistent with the pattern of income volatility, the rate at which adults move across income tiers from one year to the next, or stay put, has changed only modestly since 2000, the earliest year examined in this analysis. About seven-in-ten adults (74%) who were in the middle class in 2000 were still in the middle class in 2001. Slightly lower shares of adults retained their place in the middle class following the Great Recession, some 72% from 2010 to 2011, and in the first year of the pandemic, some 68% from 2020 to 2021. 

The shares of middle-income adults moving up to the upper-income tier inched up across these three pairs of years, from 12% during 2000 to 2001, to 13% from 2010 to 2011, and then to 16% from 2020 to 2021. The share of middle-income adults moving down to the lower-income tier also edged up, from 14% during 2000 to 2001 to 16% from 2020 to 2021.

Retention rates in the lower-income and upper-income tiers have also changed little since 2000. From 64% to 68% of lower-income adults remained in that tier from 2000 to 2001, 2010 to 2011 or 2020 to 2021, and from 63% to 65% of upper-income adults stayed put in these years. For both groups of adults, most of the movement was either one tier up, from lower- to middle-income, or one tier down, from upper- to middle-income.

The degree to which adults moved up or down the income ladder annually since 2000 varied across some demographic groups in some instances. Among those in the middle-income tier, White and Asian adults were more likely than Black and Hispanic adults to move to the upper-income tier the next year. Adults with higher levels of education were less likely to move down from the upper-income tier and more likely to move up from the middle-income tier from one year to the next.

The share of adults in the middle class is unchanged since the Great Recession

However, the share in the middle class had fallen from 2001 to 2011, from 54% to 51%. Over the same period, the share in the upper-income tier had edged up from 18% to 20%. A  companion report  looks at this issue from a historical perspective, including how different demographic groups have shifted across the three income tiers from 1971 to 2021.

• The more widely reported monthly  unemployment rate , which provides a snapshot of outcomes in a single week each month, averaged 8.1% over 2020. But, as reflected in the work-experience rate, encounters with unemployment over the course of a year were much more prevalent, especially among lower-income adults. ↩
• Although the income data in this report refer to the 2000-2020 period, the population data refer to the years in which the surveys were conducted, namely 2001 to 2021. ↩

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Well-Being and Stability among Low-income Families: A 10-Year Review of Research

• Published: 25 October 2020
• Volume 42 , pages 107–117, ( 2021 )

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• Yoshie Sano   ORCID: orcid.org/0000-0002-1741-2736 1 ,
• Sheila Mammen 2 &
• Myah Houghten 3  

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A Correction to this article was published on 28 December 2020

This article has been updated

Scholarship on families in poverty, in the last decade, documented various struggles and challenges faced by low-income families and expanded our understanding of their complicated life circumstances embedded within the contexts of community, culture, and policies. The research articles published in the Journal of Family and Economic Issues during this time, that highlighted poverty, focused primarily on three topic areas: economic security, family life issues, and food security. Overall, findings conclude that family well-being and stability cannot be promoted without the consideration of environmental factors. They depend on the interaction among individual (e.g., increased human capital), family (e.g., positive co-parental relationship), community (e.g., affordable childcare), and policy changes (e.g., realistic welfare-to-work programs). Collectively, the articles have provided a road map for future research directions.

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Introduction

Family well-being, essential to the smooth functioning of communities and societies, is hindered when there is high incidence of poverty. Poverty rate in the US hovered around 14% prior to the enactment of the Personal Responsibility and Work Opportunity Reconciliation Act (PROWRA) of 1996 (U.S. Census 2019a ). Following welfare reform, the poverty rate started to decline (to a low of 11.3% in 2000) (U.S. Census 2019a ), although scholars have questioned if PROWRA is the cause of this decline. Uncertainties in the economy, including the 2008 Great Recession, caused the poverty rate to climb again and remain at around 15% until 2014. With the fading effects of the recession, the US poverty rate was at 11.8% in early 2020, right before the current Coronavirus pandemic. One group that is most vulnerable to poverty, however, are female-headed households, who consistently comprise 50% of all households living in poverty. Other vulnerable groups include non-Whites [poverty rate in 2018, Blacks: 22%; Hispanics: 19%; Native Americans: 24%] (Kaiser Family Foundation 2020 ); rural communities [poverty rate in 2018, non-metro: 16%; metro: 13%] (Economic Research Service 2020 ); and children [poverty rate in 2018, 16%; i.e. 1 in every 6 children] (US Census 2019b ).

Family well-being is a multidimensional concept that refers to a family’s subjective sense of overall welfare, taking into account the physical and emotional health of family members as well as their interconnectedness, which in turn results in family stability (a sense of consistency, predictability, and continuity). There are many components that contribute to the well-being of families such as income sufficiency, food security, stable family environment, mental and physical health security, safe housing and communities, employment opportunities, and adequate transportation. These components, taken as a whole, provide the necessary foundation for the well-being of families. For low-income families, in particular, the lack of some or all of these dimensions can be severely detrimental to their well-being since this could lead to poverty. Such a direct link between lack of well-being and poverty can ultimately lead to family instability.

In this paper, we will review select research findings of the past decade published in the Journal of Family and Economic Issues from 2010 to 2019 that have increased our understanding of low-income families living in poverty. Each study employed a unique approach to its particular topic. Some studies utilized large secondary datasets including both metropolitan and non-metropolitan residents while others collected their own data from a smaller sample generated by non-probability sampling. However, all studies focused on low-income families in the United States with the exception of one study that examined poverty-related social policy in Columbia. The 29 papers, Footnote 1 while highly diverse, all illustrated the strengths and challenges faced by individuals and families living with limited resources.

Our review was carried out in multiple stages. First, each author independently reviewed the 29 articles, and then the authors qualitatively compared and contrasted the main themes that emerged from these articles. In the last step, the authors identified three specific dimensions of well-being Footnote 2 : economic security, family life, and food security. Our objective was not to provide a comprehensive summary of all poverty-related issues addressed in these articles but, rather, to synthesize the research findings along these three dimensions to see how they have contributed to the current knowledge base regarding low-income families and to provide a path for future research in order to improve family well-being and stability.

Families in Poverty: Decade in Review

Economic security among low-income families.

In the last decade, research on the economic security of low-income families has centered around poverty dynamics, the effectiveness of welfare-to-work programs, employment issues, the Earned Income Tax Credit, and banking behavior.

Poverty Dynamics

Mammen et al. ( 2015 ) developed the Economic Well-Being Continuum (EWC) as a comprehensive measure to describe the circumstances of low-income families in eight specific dimensions (child care, employability, food security, health care security, housing security, transportation, reliance of assistance programs, and capabilities) and establish their level of economic functioning (persistently poor, struggling, and getting by). When certain life circumstances and trigger events experienced by low-income mothers, which contributed to their entry into and exit from poverty, were examined with the EWC, the authors found that family health issues and changes in mothers’ intimate relationships acted as significant trigger events that established or altered the economic functioning of the families. We believe that what mitigated families’ hardships was their support networks. Prawitz et al. ( 2013 ) reported on the centrality of locus of control among low-income individuals who expressed less financial distress and more hopefulness when locus of control was more internal to them. When low-income individuals were able to make financial adjustments, however, they had more financial distress, accompanied with more hopefulness, possibly implying that while the current situation may be bleak, their adaptive responses may have fostered hopefulness that things would improve.

Effectiveness of Welfare-to-Work Programs Among Low-Income Families

One of the goals of PRWORA was to enable recipients of Temporary Assistance for Needy Families (TANF) to exit the program and enter the job market. The transition from welfare to work, however, was not as effective when low-income individuals were trained only through labor force attachment (LFA) programs. Kim ( 2010 , 2012 ) found that former TANF recipients were more likely to obtain employment when LFA programs were combined with human capital development (HCD) programs as participation in HCD programs were related to longer employment durations and lower probability of TANF re-entry.

Participants in Welfare-to-Work programs, who succeeded leaving assistance and obtaining employment, disclosed low wages; informal labor market activity; notable levels of unmet needs; and continued government, community, and social support use (Livermore et al. 2011 ). Those with higher earnings and regular nonmonetary help from family and friends were likely to have more needs met; those who had fewer needs met reported lower wages, had more young children, used government support programs (including childcare subsidies), and engaged in informal labor market activity (Davis et al. 2018 ; Grobe et al. 2017 ; Livermore et al. 2011 ).

Employment Issues

An important way to exit poverty and attain economic security is through employment. Unfortunately, many low-income mothers, especially rural low-income mothers, face daunting challenges to remain employed. Son and Bauer ( 2010 ) reported that mothers who were able to remain in the same job did so because they utilized their limited resources and developed strategies to combine work and family life. These strategies included utilizing social support network for childcare and other household activities as well as relying, where possible, on flexibility at work such as non-standard work hours and supportive supervisors.

One way that low-income mothers were more likely to be employed, and especially employed full-time, was if they were provided state childcare subsidy (Davis et al. 2018 ) and the receipt of childcare subsidy was tied to their employment (Grobe et al. 2017 ). High level of job instability (job loss, major reduction in work hours), however, created a greater likelihood of losing the childcare subsidy. While job changes per se was not related to loss of childcare subsidy, parents required the subsidy to remain employed.

The Earned Income Tax Credit (EITC)

The EITC program, initiated in 1975, is the largest federal assistance program targeted towards working poor families in order to supplement their household wages and to offset their Social Security taxes (Mammen et al. 2011 ). Despite the many benefits of the EITC, a substantial portion of working families, especially in rural communities, do not participate in the program. Mammen et al. ( 2011 ) found that, among rural low-income women, the EITC non-participants were more likely to be Hispanic, be less educated, have larger families, perceive their income as being inadequate, live in more rural counties, and possess little understanding of the EITC. Participating rural working mothers, on the other hand, were more likely to be single, food secure, and satisfied with life.

One important element of the EITC program is the frequency with which the tax credit payments are received by the working families: lumpsum, periodic, or monthly. Kramer et al. ( 2019 ) reported that periodic EITC payment recipients experienced significantly lower levels of perceived financial stress. This relationship was partly mediated by less need to borrow money, lower levels of food insecurity, and fewer unpaid bills. Therefore, periodic EITC payments may enhance the positive association between the EITC and financial well-being of families.

Banking Behavior of Low-Income Families

Having a bank account is more likely to enable low-income families to build assets and to offset unexpected financial expenditures. According to the Federal Deposit Insurance Commission (FDIC), among households with incomes less than $30,000, 38% of them were unbanked in 2017 (Federal Deposit Insurance Corporation 2018 ). Grinstein-Weiss et al. ( 2010 ) found that low-income households who did not have a bank account (unbanked) were more likely to be younger, Black, unpartnered, have more children, and have less income. They were also less likely to have attended college and less likely to be employed full-time. Banked participants, however, were more likely to have better saving performance in Individual Development Accounts (IDA) Footnote 3 programs and lower risks of dropping out the IDA programs. According to Rao and Malapit ( 2015 ), for female-headed households, having an additional child increased their likelihood to be underbanked or unbanked. Such financial behavior is more prevalent among female-headed households compared to couples or male-headed households, likely due to the opportunity cost of time for women and the intimidation they feel, perhaps, based on their lack of banking sophistication.

Family Life Issues

Family is where individuals seek rest and support, take nutrition, promote good health and, perhaps, most importantly, raise the next generation. In this section we will discuss findings from the last decade on work-family balance, parenting dynamics, and child well-being and poverty.

Work and Family Life

Many rural low-income families face daunting challenges to balance work and family life. Katras et al. ( 2015 ) found low-income families were able to juggle the demands of work and family life if they had access to resources such as informal social support, could manage both work and family time, and were in jobs that supported work and family life. Difficulties regarding availability of resources or inflexibility in employment created problems in work and family life balance (Katras et al. 2015 ). As mentioned previously, low-income mothers relied on informal support for childcare and household tasks. They also depended on sympathetic supervisors who provided flexible work hours (Son and Bauer 2010 ).

Work-family life balance that working mothers try to achieve can be easily sabotaged by housing instability. Kull et al. ( 2016 ) reported that higher residential mobility was associated with changes in employment status and relationships, experiences of intimate partner violence, as well as private-market rentals, substandard housing, and bad neighborhoods.

Parenting Dynamics

In their study of unmarried couples who coparented children, Jamison et al. ( 2017 ) documented that the difficulties of living in poverty, combined with the demands of parenting young children, can create stress and chaos. Parents who were successful in coparenting were those who were able to manage their limited resources well. Jamison et al. concluded that the best way of assisting low-income couples manage day-to-day stress is by providing them with adequate resources as well as information on how to use these resources effectively.

Traditionally, poverty research has focused on low-income mothers. Myers ( 2013 ), however, studied how low-income fathers defined responsible fatherhood. Previous findings on middle-class fathers have emphasized the importance of breadwinning and childcare rearing roles (Schoppe-Sullivan and Fagon 2020 ). Low-income fathers, who did not provide finances or primary care, on the other hand, did not consider responsible fatherhood to include provision for either of these two functions. Instead they defined responsible fatherhood as spending time in non-caregiving activities, voluntarily distancing themselves from a child when it is in the child’s interest to do so, acknowledging paternity in non-legal settings, spending money on presents, engaging in fun activities, attending to special needs, keeping abreast of what is going on in the child’s home, and ensuring that they are not absent from the child’s life (Myers 2013 ).

Child Well-Being and Poverty

The association between poverty and negative child outcomes has been well-established. Children growing up in poverty are more likely to experience negative health outcomes, poor academic performance, higher dropout rates, and behavioral issues compared to children in middle- and upper-income households (Brooks-Gunn and Duncan 1997 ). Focusing on three economic indicators (income, material hardship, and non-liquid assets), Kainz et al. ( 2012 ) found an association among them and variations in 36-month old children’s social and cognitive development. Poverty status, measured by income-to-needs ratio, was related to lower cognitive skills while the presence of non-liquid assets was associated with higher cognitive skills. Greater material hardship was correlated with more social problems for these children.

Investing in children’s education produces positive child outcomes (Chaudry and Wimer 2016 ). Child subsidy programs expand childcare options for low-income parents. De Marco and Vernon-Feagans ( 2015 ) found that parents who received child subsidies tended to choose center-based care. They concluded that childcare, regardless of type, was of higher quality when these families received child subsidies. Okech ( 2011 ), whose focus was on parents’ decision to enroll in preschool children’s college education accounts, found that decisions were influenced by parental education level as well as parents’ participation in information sessions about the account.

Another indicator of child well-being is good health. According to Valluri et al. ( 2015 ), low-income mothers chose healthcare visits for themselves and their child simultaneously. Pediatric visits increased with new medical conditions and greater number of chronic conditions among children, and maternal healthcare use increased with higher maternal depression scores, chronic conditions, new medical conditions, more children, more pediatric visits, prenatal/post-partum needs, and having health insurance coverage. Maternal health visits, on the other hand, decreased with maternal depression, pregnancy, being Latina or Black, having more children, and if mothers were covered through private health insurance.

Food Insecurity

Consumption of nutritious food is necessary for a healthy, productive life for both adults and children. Having enough food at home contributes to an enhanced sense of family well-being. In this section, we will discuss findings related to the measurement of food insecurity, factors influencing food insecurity, and food-related assistance programs.

Measurement of Food Insecurity

Balistreri ( 2016 ) argued that the commonly used measure of food security (18-item U.S. Household Food Security Survey) only captures the prevalence of food insecurity, not its depth or severity. He has, instead, proposed the Food Insecurity Index (FII) to assess the degree of food insecurity. Using the FII, Balistreri found that low-income households without children experienced the most rapid increases in the depth and severity of food insecurity since the 2008 Great Recession until 2018. Although White non-Hispanic households, with or without children, had lower food insecurity prevalence rates, they experienced steeper increases in both depth and severity throughout the last decade. Finally, Black non-Hispanic households, with and without children, were most likely to suffer food insecurity.

Factors Leading to Food Insecurity

Guo ( 2011 ) documented that, regardless of socio-economic status, family food security is related to household assets. This is because the interaction between household assets and income loss buffered changes in food consumption patterns. Further, regardless of household income level, the risk of food insecurity increased, when faced with liquidity constraint and asset inadequacy (Chang et al. 2014 ). This relationship was strongest among low-income families. Financial constraint was found to be an exogenous factor in the determination of food insecurity. Food insecurity also resulted partly from the interaction between unstable income and nonstandard work schedules (multiple jobs, part-time, varied hours). While this association differed across household types, it was most pronounced in male- and female-headed households, and weakest among married couples (Coleman-Jensen 2011 ). The above findings, taken together, implies that food insecurity should be considered in the broader context of asset building and work environment.

The food security of Latino immigrant families in rural communities was influenced by multiple ecological layers. This included family characteristics (higher literacy and life skills), community conditions (state of the local economy, embrace of diversity, affordable housing, and access to health care), cultural values (familism), as well as federal immigration policy (Sano et al. 2011 ). The rapidly expanding growth among Latino families in rural areas of the US requires that attention be paid to the food security needs of this mostly vulnerable population (Hanson 2016 ). In rural Colombia, conditional cash transfers (CCT) increased the perception of food insecurity and subjective poverty among marginalized families (Morales-Martínez and Gori-Maia 2018 ). The conditionalities (families’ commitment to education, good health, and proper nutrition) imposed on the beneficiary families reduced their dissatisfaction with health and education.

Food-Related Assistance Programs

In 2005 and 2010, metro and non-metro households had relatively similar levels of food insecurity. Yet, Nielsen et al. ( 2018 ) reported that a higher proportion of non-metro households received government food assistance (Supplemental Nutrition Assistance Program [SNAP], Special Supplemental Nutrition Program for Women, Infants and Children [WIC], free and/or reduced school meals, and related local and/or federal programs) compared to metro households. After the Great Recession, when government resources were expanded, this assistance gap widened even further. Nonetheless, according to Chang et al. ( 2015 ), participation in SNAP and WIC programs increased fruit and vegetable consumption significantly among disadvantaged families. Other factors such as exercise habits, family support, and willingness to adopt a healthy lifestyle played a bigger role in increasing consumption of fruits and vegetables. For some families, however, nutrition knowledge seemed to decrease actual intake of the same.

In a study that identified nonfood needs of low-income households who patronized food pantries, Fiese et al. ( 2014 ) classified product needs into three categories: products for survival (water, food, medicine), products to keep the household together (soap, toilet paper, hygiene products), and products to “make do” (paper plates, dish soap, household cleaning supplies). When households went without these products, it resulted in stress, personal degradation, and in illegal activities.

Overall Summary of Findings

The research findings from JFEI articles presented above have identified multiple challenges and have suggested future research directions to improve the well-being and stability of vulnerable families. Taken together, the findings imply that family economic functioning depends on the interaction among individual, family, and contextual factors (e.g., social network, culture, policies). Additionally, emphasizing employment alone, without consideration of factors such as childcare (availability, accessibility, affordability) or jobs (availability, flexibility), is not adequate to successfully enable welfare recipients to exit the program. Governmental and institutional support also play an important role in the economic security of low-income families, such as participation in the EITC, for those who are eligible, and in the banking sector.

In order to balance work and family life, which would contribute to family well-being, working poor mothers require informal social support, especially for childcare and household tasks. In addition to effective resource management skills, it is important for low-income mothers to have a reliable co-parent who is more likely to decrease day-to-day stress and chaos in the household. Even those low-income fathers, unable to provide finances and primary care, may provide support in non-traditional ways, thereby, contributing to family stability. Utilizing available resources such as childcare subsidies, college savings programs, or local financial institutions enhance child well-being.

Food security is another important aspect of family well-being. New measures combined with traditional approaches should be used to capture the true extent of the depth and severity of food insecurity. Multidimensional in nature, food insecurity is impacted, not only by income, but also by household assets, food management knowledge and skills, cultural values, community resources, as well as federal policies. This is particularly true for racial/ethnic minorities and rural immigrant families.

Future Research Directions

The 29 articles from the Journal of Family and Economic Issues, that are reviewed here, suggest strategies for improved family well-being and increased stability. These strategies incorporate the true needs of low-income families with a variety of support systems at the individual (e.g., increase human capital), family (e.g., positive co-parental relationship), community (e.g., affordable childcare), and policy (e.g., realistic welfare-to-work programs) levels. The findings of these studies have provided a road map for future research directions. In this section, we will present a general direction for future research; detailed research recommendations, tied to specific findings, can be found in Table 1 (Economic Security), Table  2 (Family Life Issues), and Table  3 (Food Security).

Future research should examine life circumstances and trigger events that may affect changes in families’ economic functioning including the size and duration of its impact. Recent examples of trigger events that could cause a cascading effect on low-income families include natural disasters, the opioid crisis, technological displacement of jobs, and the novel Coronavirus pandemic. Research should also look at how such events may be mitigated in vulnerable families by individuals’ agencies such as internal locus of control, hopefulness, and financial literacy. The evaluation of current welfare programs and policies strongly suggest that future research must explore the impact of variations of state welfare policies including work requirements, strategies to incentivize employers to provide flexible work policies, and community-based support systems for parents of young children. Scholars should also explore low-income families’ attitudes, knowledge, and decision-making processes in the area of finances including their reluctance to participate in the banking sector and, for those who qualify, in the EITC program. At the same time, scholars should also not neglect to identify disincentives created by financial institutions that stand in the way of families participating in the banking system.

Previous research has established that work-family balance is vital for low-income mothers to obtain and maintain their employment in order to promote family well-being. Future research should focus on strategies to incentivize employers to provide flexible work policies and to establish community-based support systems. This current pandemic has created a loss of employment opportunities and loss of income especially for low-income working families; future research should, therefore, evaluate the meaning of work flexibility to include off-site work and job sharing.

Positive child development is embedded in family and social contexts. To prevent generational poverty, future lines of inquiry should go beyond mothers’ perspectives alone to include multiple voices of other family members such as co-parents (especially fathers), older and step-children, and grandparents. Additionally, research should focus on the impact of parental decisions regarding childcare enrollment and healthcare visits on the long-term outcome of children. Finally, the association between receipt of governmental assistance and the stigma experienced by low-income families, particularly among rural families, would be another important area of study.

Future research must investigate the role of economic volatility, market conditions, and policy changes in understanding the relationship between family finances and employment of low-income families and food insecurity. For poor immigrant families, the effect of documentation status and immigration policy changes on food insecurity cannot be understated and, to capture the nuances of their food needs, qualitative and mixed-methods studies would be preferred. Future studies should also incorporate geographical information to identify reasons why urban–rural disparity occurs among food insecure families when attempting to access food and possible strategies that would enable food-insecure metro families to access food. It is equally important to assess family income and food budgeting on families’ dietary habits as well as parental modeling and family food environment on healthy food behavior.

Change history

28 december 2020.

A Correction to this paper has been published: https://doi.org/10.1007/s10834-020-09746-0

The 29 articles reviewed in this paper were assigned by the special editor of this issue of the Journal of Family and Economic Issues. More information is in the introduction to the special issue.

Other dimensions of family well-being are being reviewed by other authors in this special issue. A topic of “health” was covered by Chaudhuri and “health and family” issues were covered by Tamborini.

An individual development account (IDA) is an asset building program designed to enable low-income families to connect to the financial mainstream by saving towards a targeted amount usually used for building assets.

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Sano, Y., Mammen, S. & Houghten, M. Well-Being and Stability among Low-income Families: A 10-Year Review of Research. J Fam Econ Iss 42 (Suppl 1), 107–117 (2021). https://doi.org/10.1007/s10834-020-09715-7

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DOI : https://doi.org/10.1007/s10834-020-09715-7

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Family Income at the Bottom and at the Top: Income Sources and Family Characteristics

Lawrence e. raffalovich.

Department of Sociology University at Albany, SUNY

Shannon M. Monnat

Department of Sociology University of Nevada - Las Vegas

Hui-shien Tsao

Center for Social and Demographic Analysis University at Albany, SUNY

Attention has recently been focused on wealth as a source of long-term economic security and on wealth ownership as a crucial aspect of the racial economic divisions in the United States. This literature, however has been concerned primarily with the wealth gap between poor and middle-class families, and between the white and black middle class. In this paper, we investigate the incomes of families at the top and bottom of the family income distribution. We examine the sources of income and the demographic characteristics of these high-income and low-income families using family level data from the 1988-2003 Current Population Surveys.

We find that, at the bottom of the distribution, transfer income is the major income source; in particular, income from social security, supplemental security, and public assistance. At the top, employment income is the largest component of family income. Non-white, female, and non-married householders are disproportionately located at the bottom of the family income distribution. These families consist of both young and old adults, with high-school educations or less, in low-level service occupations. Many are disabled, many are retired. Householders at the top of the income distribution are typically male, white, and married. Householders and spouses at the top are typically middle-age, with college educations, employed in professional service and managerial occupations.

We find that wealth is not an important source of income for families at the highest percentiles. The highest income families during this period in the U.S. were not a “property elite”: their income is mostly from employment. We speculate, however, that they will join the “property elite” later in the life-course as they retire and receive income from their investments.

The Family Income Distribution: Income Components and Demographic Characteristics Introduction

Until the mid-1990s, nearly all discussions of economic inequality focused on income. Income, after all, is the proximate source of material well-being for the overwhelming majority of families and individuals in most societies, and data on income are easily obtained from a wide variety of sources. More recently, however, attention has been focused on wealth as a measure of long-term economic security ( Oliver & Shapiro 1997 ; Keister 2000 ; Shapiro 2004 ; Wolf 2002 ). The distinction between wealth and income is important because wealth signifies ownership of a stock of assets, while income represents a flow of purchasing power. “Wealth represents a more permanent capacity to secure advantages in both the short and long term” ( Shapiro 2004 , 33), while income is a more short-term capacity to acquire goods and services. Wealth and income are positively correlated, because income that is saved and/or invested thereby becomes wealth, and wealth can be a source of income: families with more income can thereby amass more wealth, and families with more wealth can acquire additional income ( Wolf 2002 ; Keister 2000 ).

The distribution of wealth is exceedingly unequal in the United States, much more unequal that the distribution of income: In 2004, the bottom 50% of families owned only 2.5% of net worth, while the top 1% owned 33.4%. In contrast, the bottom 50% of families received 23.8% of income, and the top 1% received 13.6% (Kinnickell 2006,Table 11a). The asset most equally distributed among families in the U.S. is the family home 1 : the bottom 50% of families owned 11.7% of the value of principal residences in 2004, and the next 40% owned over half of that value. It is through home-ownership that most Americans are able to accumulate wealth.

Oliver and Shapiro (1997) and Shapiro (2004) emphasize that, as a form of wealth, home-ownership conveys many of the advantages of wealth-holding, including the ability to leverage home equity to provide better opportunities for ones’ children, to invest in other assets, and to provide a hedge against spells of unemployment or other economic misfortune. They then argue that racial differences in the distribution of home-ownership create a qualitative chasm in life experiences and life chances between the white and black middle class.

In contrast to income-earning assets, however, home-ownership does not produce a flow of additional income, raising the family’s standard of living and, through savings or investment, adding to the family’s stock of wealth. Indeed, it is these income-producing assets (stocks, bonds, businesses, and real estate other than the principal residence) that free families from dependence on the labor market and contribute to economic independence, autonomy, and power. These income-producing assets are the most unequally-distributed of all: In 2004, the top 1% of families owned over half of the value of all directly held stocks, 70% of directly held bonds, 62% of “closely held businesses,” and 47% of non-residential real estate, while the bottom 50% owned less than 1% of these assets (Kinnickell 2006, Table 11a). The unequal distribution of these economic resources is important for several reasons. In market economies, wealth is an important source of economic power, and, in representative democracies, wealth is an important source of political power. As Gates and Collins (2002) suggest, “concentration of wealth and power distort our democratic institutions and economic system and undermine social cohesion.” As a result, the wealthy in America are granted more political power and greater opportunities (Cf. Lindblom, 1977 ).

Income and wealth are jointly determined. Income can be accumulated as wealth, and wealth is a source of additional income. We expect, therefore, that the highest income families are those with the most substantial wealth holdings and thus the highest income from wealth. Opportunities for the acquisition of both income and wealth in the United States have historically been determined, in part, by race. Blacks’ history of slavery, past and present discrimination in employment and housing, and extremely high levels of residential segregation have all served to create and maintain inequality in the distribution of schooling, jobs, home-ownership, and the ownership of other assets ( Shapiro 2004 ). Therefore, we also expect that families with the highest incomes are predominantly white.

In addition, considering that approximately one-half of all Black households are headed by women, the economic status of Black women in the United States is an important predictor and major force between the consistent and wide-spread disparity between Black and White households (Brown 1997; Rivlin 1992 ). We therefore expect that black women are most likely to be located at the bottom of the family income distribution.

In what follows, we investigate the distribution of family income by income source, and the demographic characteristics of families at the top and the bottom of the family income distribution. Specifically, we focus on the bottom 10% and 25%, and the top 10%, 1%, and 0.5%. We pay special attention to the very top because of our interest in wealth and income from wealth: as we will show, only those at the very top receive substantial income from wealth. In this paper, we neglect the bottom 1% because their median income is under $1.00 for the entire sample period. On closer examination, the bottom 1% appears to be comprised of two very different populations: poor families with very low incomes, and others with large negative property and self-employment incomes. This is consistent with Lenski’s (1984 , p. 191) suggestion that households with large negative incomes and large positive incomes are, in fact, very similar (e.g., entrepreneurs). We also examine what Lenski (1966 , p. 340) calls the “property elite”: those whose income from wealth exceeds twice the median income from all sources.

Data and Methods

Data are from the Current Population Survey, Annual Demographic Supplement, 1968-2003. The Current Population Survey (CPS) is a monthly household survey conducted by the Census Bureau and the Bureau of Labor Statistics. The CPS collects monthly economic, social, and demographic data on all persons in the 50,000-60,000 sampled households ( Current Population Survey, 2002 ); in addition, the Annual Demographic Supplement (ADS), collects employment and income data for the previous calendar year. Data are available at the person-, family-, and household-level. Technical details are available in the CPS Technical Paper 63RV ( Current Population Survey, 2002 ). We extracted family-level income data for 1988-2003 from the 2004 CD ( CPS Utilities, 2004 ) 2 . For each year, we aggregated families into the family income percentiles noted above. For each, we calculated the median income for each income source. Detailed income sources were aggregated into five broad categories: Employment (wages and salaries), Self-employment (self-employment and farm), Property (dividends, interest, and rents), Transfer (alimony, child-support, worker’s compensation, education, financial assistance, public assistance and welfare, retirement, supplemental security from government, survivor benefits, social security/railroad retirement, unemployment compensation, and veteran’s benefits), and “Other”. We did not include the earned-income tax credit (EITC) in any of our income categories. The documentation for this variable states that the actual dollar amount received by families is not the value reported for this variable. It is, instead, a simulation of what the family would have been eligible for, not what they actually received. There is no way to know in the CPS how much the family actually received from the EITC ( CPS Utilities, 2004 ).

The CPS top-codes all incomes at the individual level, and these top-codes changed over time. We recoded all top-codes to the 1988 values before we aggregated individual incomes into families. 3 Income is expressed in constant 2003 dollars using the Census Bureau’s Consumer Price Index Research Series (CPI-U-RS) 4 . We use the ADS family weights for all analyses (N=1,039,305 families).

Median family income and income sources for the bottom 10% of families are presented in Figure 1 . Median income for these families declined from just over $5,000 in 1988 to under $4,000 in 2003. The only income source with a non-zero median is transfer income, which declined from under $3,000 in 1988 to zero by 1999 5 . Other data (not shown) indicate that much of these transfers consisted of social security, supplemental security, and public assistance 6 . The demographic characteristics of these families are presented in Table 1 . Half of the householders are between 25 and 61 years old, with a median age of 40. Householder’s spouse (for those with a spouse) have a somewhat higher median age, and a narrower age range. Twenty-nine percent of householders are non-white, and over 63% are female. Well over 80% are not married, and more than 20% have unmarried children under 18 living with them. Half of householders did not complete 12 years of schooling, but half of spouses did.

Median Family Income and Components- Bottom 10% of Family Income

Characteristics of Families at the Top and Bottom of the Family Income Distribution

Only about a quarter of householders and spouses were employed during the week prior to the survey, although their unemployment rate of 5.8% for householders is not much above the national average of 5.5% during these years, and the unemployment rate of 3.5% for spouses is below the national average ( Bureau of Labor Statistics 2009 ). Fully 2/3 of householders and 72% of spouses were out of the labor force, the majority for reasons other than disability and retirement. The modal occupations of those who were employed (both householders and spouses) are Food Services, Personal Services, and Retail. The modal industries are Retail Trade and Construction.

Median family income and income sources for the bottom quartile of family income are shown in Figure 2 . Total family income for these families increased slightly over the sample period, from about $9,500 in 1988 to just under 10,000 in 2003. As with the bottom 10%, the only income source with non-zero median income is transfer income, which declined from about $4,500 in 1988 to $2,000 by 2003. Additional analyses (not shown) indicate that, like the bottom 10%, the important transfers are social security, supplemental security, and public assistance. From Table 1 , we see that these families have a wide age range (the middle 50% of householders are between 28 and 69, the middle 50% of spouses are between 33 and 66). 61% of householders are female and only 17.1% are married. More than a fifth live with their unmarried children under 18. Half of householders had completed the equivalent of a High School education, and over half of spouses had not. Similar to the bottom 10% of families, most householders and spouses were not employed during the week prior to the survey, despite an unemployment rate well below the national average. As with the bottom 10%, the majority of householders and spouses were not in the labor force. About a quarter were retired, and another 26% of householders and 42% of spouses were not in the labor force for “other” reasons. 7 Of those who were employed, the modal occupations and industries are the same as for families in the bottom 10%: Service occupations in Retail and Construction. Compared to the bottom 10%, families in the lower quartile are slightly older, and more likely to be employed or retired.

Median Family Income and Components- Bottom 25% of Family Income

Median family incomes at the top of the distribution differ in important respects from those at the bottom. The top 10% of families are shown in Figure 3 . Median family incomes are more than ten times those of the bottom quartile, and labor income accounts for over 80% of the total. Furthermore, median incomes have steadily increased over the period from just under $120,000 in 1988 to just over $140,000 in 2003. Property income appears as a very small component (1-2%). These families are very different from those at the bottom of the income distribution (see Table 1 ). Householder and spouse are about the same median age as families at the bottom of the distribution, but the age ranges are considerably narrower. The middle 50% of householders are between 39 and 55, their spouses between 38 and 53.

Median Family Income and Components- Top 10% of Family Income

These families are overwhelmingly white (90%) and married (88%). Compared to families at the bottom of the distribution, they are more likely to have children under 18 at home (42.5% vs 22% and 21% for families at the 10 th and 25 th percentiles, respectively). More than three-quarters of householders are male (almost twice the percentage of families at the 10 th and 25 th income percentiles). Half of householders have 4 years of education beyond high school (the median is 16 years) and half of spouses have 2-4 years of education beyond high school.

Over 80% of householders were employed during the week prior to the survey as were almost three-quarters of spouses. Very few householders or spouses were unemployed (1.1% and 0.8%, respectively), and relatively few were not in the labor force (12.1% of householders, mostly retired; 23.5% of spouses, mostly for “other” reasons). Modal occupations for both householder and spouse were Executive and Management positions in Professional and Educational Services.

Median incomes for families in the top 1% are almost twice as high as for families in the top 10%, and, as with the top 10%, most (between 75% and 85%) are from earnings. Property income is about 10% of family income at the start of the period, but declines to about 2% by 2003. There is a sharp increase of about 33% in labor income (and about 25% in the total) between 1995 and 1996. 8 The same rapid rise in labor incomes at the same time, and the same slow decline in property incomes were observed in entirely different data (income tax data for households) by Piketty and Saez (2006) , who interpret this pattern as a sharp increase in executive compensation: “top executives…replaced top capital owners …at the top of the income hierarchy” in the U.S. (p. 204. Cf. Piketty and Saez, 2003 ; Kaplan and Rauh, 2007 ). Our data are not sufficiently detailed to confirm or refute this explanation. We note that our data do not show “capital owners” at “the top” of the income distribution, but there are few extremely high earners in the CPS ( Kaplan and Rauh [2007] report incomes in the tens of millions of dollars). Because our results are for medians of top-coded data, the sharp rise we observe is consistent with this interpretation.

Families in the top 1% are similar to those in the top 10%: overwhelmingly white, married, two-earner families with children under 18 at home (See Table 1 ). They are slightly older and better educated (median schooling for both householder and spouse is 4 years beyond high school). As with the top 10%, over 80% of householders are employed, as are 70% of spouses. Also similar to the top 1%, about 1/8 of householders and 1/4 of spouses are not in the labor force. The majority of these householders are retired, and the majority of these spouses are out of the labor force for “other” reasons. Modal occupations are Executive and Administrative, Medicine, Law, and Teaching. Modal industries are Professional, Health, and Educational Services.

Families in the top 0.5% appear almost identical to those in the top1% (see Figure 5 and Table 1 ). They have somewhat higher total incomes but comparable labor incomes. Labor income is a smaller proportion of the total. Property income makes up the difference, though its contribution is relatively small. Trends in income components are the same as for income components of the top 1%, a large jump in labor income between 1995 and 1996, and slowly declining property income. Aside from their higher property income, not much distinguishes families in the top 0.5% from those in the top 1%. Age and educational distributions are the same, as are distributions of gender, race, marital status, children under 18, and employment status. Modal occupations differ only in that there’s a slight shift away from Law and Teaching and a corresponding shift into Insurance and Real Estate.

Median Family Income and Components- Top 0.5% of Family Income

Median family income and income sources for the “Property Elite” are presented in Figure 6 . Following Lenski (1966) , this elite includes families whose income from wealth is at least twice the median family income from all sources. This elite comprises 0.5% of the families in our data, but these are not the families at the 99.5 percentile of family income. From Figure 6 , we see that median family income is considerably lower, that labor income is a much smaller component, and that property income is a much larger component (over half) of the total. Transfers are a very small (2-3%) source of income for these families, mostly social security and retirement income. Labor income rises throughout the period, reflected in a small upward trend in the total.

Median Family Income and Components- Lenski’s “Property Elite”

It is particularly notable that, unlike the incomes of the top 1% and 0.5%, labor income does not exhibit the sharp rise between 1995 and 1996, and property income does not exhibit the slow decline. If Piketty and Saez ( 2003 , 2006 ) are correct in their interpretation of these patterns, the “property elite” are not well-compensated executives, the “working rich,” but more closely approximate the “coupon-clipping rentiers” (Picketty and Saez, 2003, p. 17).

These families are considerably older than those at the top of the family income distribution (25% of householders and spouses are over 71 and 68, respectively). Like families at the top, these families are white (95%), married or widowed (86%) 9 , with fewer children at home. In contrast to families at the top of the income distribution, just under half are employed (50% and 40% of householders and spouses, respectively). Most of those not employed are retired. This may account for the relatively large share of property income that they receive. These families report the same occupations as families at the top of the distribution, suggesting that the “property elite” are the top-income families a decade later.

Our examination of the bottom and top of the family income distribution found:

At the Bottom

Looking at medians, transfer income is a major income source for families in the 10 th and 25 th percentiles. Transfer income was largely from social security, supplemental security, and public assistance.

Families in the 10 th and 25 th percentiles are about 25% non-white, over 60% of householders are female, less than 20% are married, and just over 20% included children under 18. The inter-quartile age range of householders and spouses is quite wide, approximately 30 years. In terms of age, these families are quite diverse, consisting of both younger and older adults.

Typically, householders and spouses have, at most, a high-school education. Less than a third of householders and spouses were working in the week prior to the survey. Many are disabled (7-12%), many are retired (17-25%), most are not in the labor force. Typical jobs are low-level service or sales occupations.

For families at the top of the income distribution, the major income source is employment. Property income is a relatively small and declining component of income for these families. In 1996, labor income sharply increased from the previous year, in both amount and as a proportion of the total, for families in the top 1% and 0.5%, but not for families in the top 10% of the income distribution.

Families in the top 10%, 1%, and 0.5% are overwhelmingly white and married, with two income earners. Half of householders were in their early 40s to late-50s. About 40% have children under 18 (and 13-16% have children under 6). Most have a college-level education and most are employed. Typical jobs for the top 10% of families are Executive and Management occupations; typical jobs for the top 1% and 0.5% are in these occupations, and also in Medicine, Law, and Teaching.

“Property Elite”

The “property elite” are high income families who receive about half of their income from wealth. Unlike the top 10%, 1%, and 0.5%, labor income is a relatively small, but increasing, proportion of the total. These families also receive transfer income, in the form of social security and retirement. Their median family income is higher than that of the top 10%, but lower than the top 1% and 0.5%.

Families in this “property elite” are typically older than families in the highest percentiles of the income distribution but, like them, are predominantly white and married (if one includes the widowed). They have fewer children living with them, and a larger proportion were not working in the week prior to the survey. Most of those are retired.

Conclusions and Implications

As anticipated, families at the bottom of the income distribution are disproportionately non-white, female, and non-married. These families consist of both young and old adults, with high-school educations or less, in low-level service occupations. Many are disabled, many are retired. Much of their income is in the form of transfers.

Also as anticipated, families at the top of the income distribution are typically white and married. Householders and spouses are typically middle-age with college educations, employed in professional service and managerial occupations. Although not directly comparable (families at the top of the income distribution are not the same as those at the top of the wealth distribution), these findings are consistent with Keister’s (2000 , Table 4-4) findings with respect to the wealth distribution: the wealthiest 1% of households are predominantly white, middle aged, with at least a college education.

Not anticipated is the small contribution of property income to the total family income at the top, and the correspondingly large contribution of income from employment. Our findings do not support the argument that wealth is a primary source of income for families at the highest percentiles. The top 0.5% of families received a median of around $40,000 in property income in 1988 (of a median family income of $240,000), but this declined to $5,000 by 2003 (of a median family income of almost $300,000). The “property elite” do receive over half of their median family income from wealth, but that is by construction. Importantly, the highest income families during this period in the U.S. were not the “property elite”.

The decline in property income and increase in labor income among the highest income families does support the claim of Piketty and Saez ( 2003 , 2006 ) that executive compensation has increased rapidly in recent years, while income from wealth has gradually declined. The decline in property income is also consistent with Keister’s (2000) finding that mean financial wealth of the top 1% declined between 1989 and 1995 (Table 4-1), and median net worth for families with income of $100,000 or more declined from 1983-1995 (Table 8-5).

How are we to understand the differences between families in the top 10%, 1% and 0.5% of the income distribution? Those in the top 1% are slightly older and better educated than those in the top 10%. We can speculate that those in the top 1% are perhaps further along in their careers and occupy higher executive positions. This would be consistent with Picketty and Saez’s (2003, 2006) explanation of the rapid rise in labor income for the top 1%.but not for the top decile. Alternatively, the top 1% may be more likely to be in the independent professions (Medicine, Law). The only notable difference between families in the top 1% and 0.5% are occupational. We can speculate that the top 0.5% of families are more likely to be self-employed instead of salaried, or simply higher-up in the executive hierarchy. These are areas of future research.

Our finding that age and retirement status are the major distinctions between the “property elite” and those at the very top of the family income distribution is unexpected. It is, however, consistent with Keister’s (2000 , p. 232) finding of a life-cycle process whereby salaried and/or entrepreneurial professionals and executives invest high earnings during their careers, then draw income from these investments after retirement. Is this life-cycle process consistent with the theoretical meaning of “property elite”?

Lenski (1966 , p.340) uses “property elite” to “understand the political activities of the propertied class [those who control economic resources]” in market systems. These “elite” are a “tiny minority” whose wealth constitutes an important source of economic and political power.

From this perspective, the extreme concentration of wealth in the U.S. has suggested that, despite the trappings of electoral democracy, real political power is concentrated among a small class of wealthy individuals and families ( Domhoff 2002 , Chapter 3; Lindblom 1977 , Chapter 17). But the composition of this class is contentious. Does this class consists of a discrete set of individuals with a common class culture that reproduces itself from one generation to the next, (e.g., Domhoff 2002 ), or of a set of positions with common interests in property rights and “free enterprise,” that replicate over time along with other societal structures (e.g., Lindblom 1977 )? It seems to us that a life-cycle process is consistent with either conceptualization. Families use their wealth to advance their children’s prospects – e.g., through institutional mechanisms described by Domhoff (2002) . Alternatively, careers advance through merit or through luck..

Adjudication of these conceptualizations of a propertied class requires detailed information on wealth mobility, and on inheritance processes. We know of no existing data adequate for this purpose, but hope that continued interest in wealth research will promote the development of longitudinal wealth databases. .

Median Family Income and Components- Top 1% of Family Income

Acknowledgments

We thank Don Hernandez, Kate Strully and two anonymous reviewers for comments on a previous draft.

1 Kinnickell (2006) includes vehicles as assets, but we regard these as consumer durables instead. The bottom 50% of families owned 26.8% of the value of vehicles in 2004 (Kinnickell, 2006, Table 11a).

2 Detailed income sources are not available prior to 1988.

3 Details of the aggregation are available on request.

4 These were retrieved from < http://www.census.gov/hhes/income/income03/cpiurs.html > on 1/14/07.

5 The large gaps between median total income and the sum of the median sources of income is due to the fact that the median of a sum is not the same as the sum of medians.

6 Temporary Assistance for Needy Families (TANF), which took effect in 1997, may be partly responsible for the sudden drop in transfer income for the bottom 10% after 1997.

7 “Other” includes armed forces, unemployed and not looking for work, and other.

8 In 1996, the CPS changed some aspects of its sampling procedures, but this discontinuity remains after adjustment for sampling proportions using the family weights included with the data.

9 10.6 percent are widowed (not shown).

A previous version of this paper was presented at the Annual Meetings of the American Sociological Association in Boston, August 4, 2008.

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Contributor Information

Lawrence E. Raffalovich, Department of Sociology University at Albany, SUNY.

Shannon M. Monnat, Department of Sociology University of Nevada - Las Vegas.

Hui-shien Tsao, Center for Social and Demographic Analysis University at Albany, SUNY.

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Guest Essay

The Explosive Rise of Single-Parent Families Is Not a Good Thing

By Melissa S. Kearney

Ms. Kearney is the author of the forthcoming book “The Two-Parent Privilege: How Americans Stopped Getting Married and Started Falling Behind.”

There has been a huge transformation in the way children are raised in the United States: the erosion of the convention of raising children inside a two-parent home. This shift is often not publicly challenged or lamented, in an effort to be inclusive of a diversity of family arrangements. But this well-meaning acceptance obscures the critical reality that this change is hurting our children and our society.

The share of American children living with married parents has dropped considerably: In 2019, only 63 percent lived with married parents, down from 77 percent in 1980. Cohabitation hardly makes up for the difference in these figures. Roughly a quarter of children live in a one-parent home, more than in any other country for which data is available. Despite a small rise in two-parent homes since 2012, the overall trend persists.

This is not a positive development. The evidence is overwhelming: Children from single-parent homes have more behavioral problems, are more likely to get in trouble in school or with the law, achieve lower levels of education and tend to earn lower incomes in adulthood. Boys from homes without dads present are particularly prone to getting in trouble in school or with the law.

Making the trend particularly worrisome is the wide class divide underneath it. In my research, I found that college-educated parents have largely continued to have and raise their children in two-parent homes. It is parents with less than a four-year college degree who have moved away from marriage, and two-parent homes, in large numbers. Only 60 percent of children who live with mothers who graduated from high school, or who have some college education but did not graduate, lived with married parents in 2020, a whopping 23 percentage point drop since 1980. Again, cohabitation does not erase the education divide. Neither does looking at the numbers across race and ethnic groups.

The result is less economic security for affected households and even wider inequality across households and childhood environments than economic changes would have wrought alone.

College-educated adults have seen their earnings rise over recent decades, and they have continued to get married at relatively high rates, typically to one another. Their household income has grown considerably. Meanwhile, adults without a college degree have experienced declining rates of employment and relatively modest increases in wages, while becoming more likely to set up households without a spouse or a partner. As a result of the decline in marriage, the economic security of the high-school educated has weakened even more.

A higher level of income is a key mechanism through which married parents transmit advantages to their children. One-parent homes generally do not have the same income as two-parent homes, even when we compare the homes of mothers of the same age, education level, race and state of residence. This largely reflects a simple fact of math: Two adults have the capacity to earn more than one. Even if one thinks, as I do, that the United States should provide more support to low-income families with children in order to help children thrive and also to secure a stronger work force and future for our country, we will most likely never have a government program that fully compensates single parents with the equivalent of the annual earnings of a spouse who works full-time.

Congress allowed the expanded child tax credit to expire at the end of 2021, rejecting a policy that provided families who met certain income thresholds with annual tax credits of $3,000 per child age 6 to 18 and $3,600 per child under 6. What are the odds that the government will start providing one-parent families with, say, benefits equal to the median earnings of an adult with a high school degree, which comes to around $44,000 a year? I would put the odds at zero. As long as that’s the case, income gaps between one- and two-parent homes will be substantial, and income matters a lot for kids’ prospects and futures.

Income differences are not the only driver of differences in outcomes. A second committed adult in the home can contribute considerable time and energy to taking care of children. We can and should do more as a society to try to compensate for these gaps in parental investments. But again, it is highly unlikely that government or community programs could ever provide children from one-parent homes with a comparable amount of the supervision, nurturing, guidance or help that children from healthy two-parent homes receive. That means a generation of children will grow up more likely to get in trouble and less likely to reach their potential than if they had the benefits of two parents in their homes.

It is an economic imperative to break the vicious cycle of a widening class gap in family structure — and more generally, a high share of one-parent homes outside all but the most highly educated groups in society.

That won’t be easy to do. For decades, academics, journalists and advocates have taken a “live and let live” view of family structure. Mostly this reflects a well-intentioned effort to avoid stigmatizing single mothers and to promote acceptance and respect for different family arrangements. But benign intentions have obscured the uncomfortable reality that children do better when they are raised in two-parent homes.

The result is the widespread normalization of one-parent homes outside the college-educated class and woefully little public support for programs aimed at strengthening families. Only 1 percent of the budget of the federal Administration for Children and Families is allocated to “promoting safe and stable families,” as compared to, for example, 15 percent for foster care.

On the other side of the issue, there are people inclined to blame single mothers for having or raising children outside of marriage. But it is not helpful to blame or shame women who are faced with the difficult choice between parenting alone or living with a partner who is an economic or emotional drain on the family. Surely we as a society can openly recognize the advantages of a two-parent home for children and offer a variety of kinds of support to couples who struggle to achieve a stable two-parent family arrangement without stigmatizing single parents and their children. Crucially, we need to bolster parents’ own capacity to thrive and be reliable providers for themselves and their children — including fathers, who were often left out of the conversation.

The issue is complicated, and solutions will necessarily be multifaceted. Just as scholars, journalists and policymakers acknowledge the need to improve schools and debate various reform ideas, those of us who discuss and debate questions of society and policy should be frank about the advantages of a healthy two-parent home for children and challenge ourselves to come up with ways to promote and support that institution.

We need to work more to understand why so many American parents are raising their children without a second parent in the home, and we must find effective ways to strengthen families in order to increase the share of children raised in healthy, stable two-parent homes. Doing so will improve the well-being of millions of children, help close class gaps and create a stronger society for us all.

Melissa S. Kearney is an economics professor at the University of Maryland and author of the forthcoming book “ The Two-Parent Privilege: How Americans Stopped Getting Married and Started Falling Behind .”

Source photographs by eyenigelen and Jasenka Arbanas/Getty Images

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Effects of Income on Infant Health: Evidence from the Expanded Child Tax Credit and Pandemic Stimulus Checks

During the COVID-19 pandemic, the federal government issued stimulus checks and expanded the child tax credit. These pandemic payments varied by marital status and the number of children in the household and were substantial with some families receiving several thousand dollars. We exploit this plausibly exogenous variation in income to obtain estimates of the effect income on infant health. We measure the total amount of pandemic payments received during pregnancy, or the year before birth, and examine how this additional income affects birthweight, the incidence of low birth weight, gestational age and fetal growth. Data are from birth certificates and analyses are conducted separately by maternal marital status and education (less than high school or high school) to isolate only the variation in pandemic payments due to differences in the number of children (parity). Estimates indicate that these pandemic cash payments had no statistically significant, or clinically or economically meaningful effects on infant health. Overall, the findings suggest that income transfers during pregnancy will have little effect on socioeconomic disparities in infant health.

The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

Robert Kaestner has nothing to disclose.

MARC RIS BibTeΧ

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Macroeconomic Developments and Prospects For Low-Income Countries—2024

Publication Date:

April 2, 2024

Electronic Access:

Free Download . Use the free Adobe Acrobat Reader to view this PDF file

The outlook for Low-Income Countries (LICs) is gradually improving, but they face persistent macroeconomic vulnerabilities, including liquidity challenges due to high debt service. There is significant heterogeneity among LICs: the poorest and most fragile countries have faced deep scarring from the pandemic, while those with diversified economies and Frontier Markets are faring better. Achieving inclusive growth and building resilience are essential for LICs to converge with more advanced economies and meet the Sustainable Development Goals (SDGs). Building resilience will also be critical in the context of a more shock-prone world. This requires both decisive domestic actions, including expanding and better targeting Social Safety Nets (SSNs), and substantial external support, including adequate financing, policy advice, capacity development and, where needed, debt relief. The Fund is further stepping up its support through targeted policy advice, capacity building, and financing.

Policy Paper No. 2024/011

External debt Monetary policy Political economy

9798400272400/2663-3493

PPEA2024011

Please address any questions about this title to [email protected]

Texas Attorney General sues to stop guaranteed income program for Houston-area residents

H OUSTON (AP) — Texas’ attorney general filed a lawsuit on Tuesday seeking to stop a guaranteed income program set to start this month for Houston-area residents.

The program by Harris County, where Houston is located, is set to provide “no-strings-attached” $500 monthly cash payments to 1,928 county residents for 18 months. Those who qualified for the program must have a household income below 200% of the federal poverty line and need to live in one of the identified high-poverty zip codes.

The program is funded by $20.5 million from the American Rescue Plan, the pandemic relief law signed by President Joe Biden in 2021.

Federal pandemic funding has prompted dozens of cities and counties across the country to implement guaranteed income programs as ways to reduce poverty, lessen inequality and get people working.

In his lawsuit filed in civil court in Houston, Texas Attorney General Ken Paxton dubbed the program the “Harris Handout” and described it as a “socialist experiment” by county officials that violates the Texas Constitution and is “an illegal and illegitimate government overreach.”

“This scheme is plainly unconstitutional,” Paxton said in a statement. “Taxpayer money must be spent lawfully and used to advance the public interest, not merely redistributed with no accountability or reasonable expectation of a general benefit.”

State Sen. Paul Bettencourt, a Republican from Houston who had asked Paxton to look into the county's program, called it an “unbelievable waste” of taxpayer dollars and "Lottery Socialism."

Harris County officials pushed back on Paxton's lawsuit, which is asking for a temporary restraining order to stop the program. The first payments were set to be distributed as early as April 24.

Harris County Judge Lina Hidalgo, the county's top elected official, said guaranteed income is one of the oldest and most successful anti-poverty programs, and she feels “for these families whose plans and livelihoods are being caught up in political posturing by Trumpian leaders in Texas.”

“This lawsuit from Ken Paxton reads more like a MAGA manifesto than a legal document,” said Harris County Commissioner Rodney Ellis, who spearheaded the program, known as Uplift Harris.

Harris County Attorney Christian Menefee said the program “is about helping people in a real way by giving them direct cash assistance — something governments have always done.”

The lawsuit is the latest legal battle in recent years between Harris County, Texas’ biggest Democratic stronghold, and the GOP-dominated state government.

Elections in the nation’s third-most populous county have been scrutinized for several years now. The Texas Legislature passed new laws in 2023 seeking more influence over Harris County elections.

Last year, Texas took over the Houston school district , the state’s largest, after years of threats and lawsuits over student performance. Democrats assailed the move as political.

Austin and San Antonio have previously offered guaranteed income programs in Texas. El Paso County is set to roll out its own program later this year. No lawsuits have been filed against those programs.

Follow Juan A. Lozano: https://twitter.com/juanlozano70

Analysis of the perceptions of flood and effect of adoption of adaptation strategies on income of informal settlements of Mamelodi in South Africa

• Nyam, Y. S.
• Modiba, N. T. S.
• Ogundeji, A. A.
• Okolie, C. C.
• Selelo, O. T.

Extreme weather events are being experienced all over the world because of climate change, posing challenges for individuals and households who rely on agricultural operations as their major source of livelihood. Household-level adaptation is an efficient way of dealing with global climate change. As such, this study aims to examine the perception of informal settlers to flood risk and their adoption of adaptation strategies to flood. This study applied the seemingly unrelated regression (SUR) to identify factors influencing the perception of flooding on community members and probit regression to identify the factors influencing the adoption of adaptation strategies to floods and examined the impact of the adoption of adaptation strategies on income in Eerste Fabriek informal settlement in Mamelodi using two-step quasi-maximum likelihood estimates of fractional response model. Our results show that community members are perceptive of floods and their impact on the environment and their livelihoods, and on average, they believe flood impact is significant. Age, marital status, education, employment status, income, and household size are demographic factors that tend to influence their perception of the impact of flood events. Access to institutional facilities such as health and recreational facilities was also a significant factor in how community members adapt to the impact of floods. Timely healthcare access services are a significant precursor for people to form their perception, which is intended to help them adapt appropriately to situations as health is wealth. Community members' perceptions and adaptive capacity can be improved through policies that foster the adoption of effective adaptation strategies. Community-based adaptation strategies are necessary for involving all stakeholders and necessary for mitigating the effects of flooding.

• Flood risk;
• Adaptation strategies;
• Eerste Fabriek;
• fractional response model;
• informal settlement