The More Things Change, the More They Stay the Same: The Safety Net, Living Arrangements, and Poverty in the Great Recession

From Marianne Bitler and Hilary Hoynes:

Much attention has been given to the large increase in safety net spending, particularly in Unemployment Insurance and Food Stamps, during the Great Recession. In this paper we examine the relationship between poverty, the social and private safety net, and business cycles historically and test whether there has been a significant change in this relationship during the Great Recession. We explore the mediating role played by six core safety net programs-including Food Stamps, cash welfare (AFDC/TANF), the Earned Income Tax Credit, Unemployment Insurance, and disability benefits (Supplemental Security Income and Social Security Disability Income)-in buffering families from negative economic shocks. This analysis yields several important findings. First, the relationship between unemployment and official cash poverty remained remarkably consistent with historical patterns during the Great Recession. However, our more expansive alternative poverty measure shows that, if anything, the cyclicality of poverty has increased in the current period. Second, the safety net programs receiving the most attention through the Great Recession (Food Stamps and UI) exhibit adjustments very consistent with their behavior during previous historical cycles. The most dramatic change in the safety net is the post-welfare reform decline of cash assistance in providing protection for the most disadvantaged. Third, changes in living arrangements are modest and for the most part in line with prior cycles. Thus on balance we find, as our title suggests, that despite the attention to the apparent differences in the responses of the private and social safety nets in the Great Recession, the relationship between cycles and economic well-being are as we would have predicted from the historical patterns. 


About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar.
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