The Great Recession, Public Transfers, and Material Hardship

Abstract

Economic downturns lead to lost income and increased poverty. Although high unemployment almost certainly also increases material hardship, and government transfers likely decrease hardship, the first relationship has not yet been documented and the second is poorly understood. We use data from five waves of the Fragile Families and Child Well-being Study to study the relationships between unemployment, government transfers, and material hardship. The latest wave of data was collected during the Great Recession, the worst recession since the Great Depression, providing a unique opportunity to look at how high unemployment rates affect the well-being of low income families. We find that the unemployment rate is associated with increased overall material hardship, difficulty paying bills, having utilities disconnected, and with increased usage of TANF, SNAP, UI and Medicaid. If not for SNAP, food hardship might have increased by twice the amount actually observed.