Over the past decade, national policy has emphasized the centrality of parental work in strategies to support low-income families. This emphasis is exemplified by the fact that the earned income tax credit (EITC), the nation's largest cash assistance program for low-income families, is available only to those who are working. In addition, work among low-income women and single parents has increased dramatically since the mid-1990s.
It is natural to ask, therefore, who working low-income families are and how they are faring. This paper addresses these questions. In large part, the paper relies on data from the 2002 National Survey of America's Families (NSAF), which provides extensive information on family and job characteristics, income sources and expenses, and experience of material hardships for a large sample of low-income families.1 We also draw from other sources to provide additional context for these findings. In the paper, we examine the work effort of low-income families, characteristics of their jobs including wages and benefits, their demographic characteristics, and how often parents and children in these families experience various good and bad outcomes measured by the survey.
We focus on low-income working families with children; this differs from other discussions that focus on low-wage workers. Targeting families with a worker that are nevertheless low-income (as opposed to individual workers earning low wages) brings attention to the circumstances of children in these families, who live with limited economic resources and with parents who are (for the most part) working outside the home. The problems and potential solutions related to low-wage jobs in the labor market are relevant for our focus, however, because many workers in low-income families hold low-wage jobs.2
We set our low-income threshold at twice the official poverty threshold, or about $38,000 for a family of four. While any choice of cutoff is arbitrary, this line defines a group of families that often endures hardships despite working and "playing by the rules." This is also the income level when most families are no longer eligible for government support. The number of children in low-income families under this definition is large, encompassing almost a third of all families with children in 2001 (Nelson 2004). This represents just over 13 million families and 26.5 million children.
Attention to working low-income families is especially salient now given the dramatic increases in work over the past 10 years. In reaction to changes in welfare policy and the booming labor market of the 1990s, large numbers of poor women with children have left welfare and entered the labor market (Acs and Loprest 2004). Employment gains since the mid-1990s among single parents have been dramatic, rising from 59 percent in 1994 to 74 percent in 2001. These employment gains have been largest among less-educated single mothers (Lerman 2001).
The recession in 2001 and subsequent weak labor market through 2003 dampened these trends in work but did not reverse them entirely. Employment among single parents remained at 71 percent in 2004 (Lerman 2005). Of course, the composition of low-income working families changes in a recession. As unemployment reduces work hours and earnings, the size of the low-income population grows and families that usually have higher incomes become low-income. Acs, Holzer, and Nichols (2005) find that between 2000 and 2003, the number of people in low-income families with children increased from 30 to 32 percent of the population, and the proportion of all households with a full-time, full-year worker fell from 88 to 85 percent. The results presented below are for low-income working families in 2001, just after the recession began but while employment and incomes remained relatively high.
Notes from this section of the report
1. This survey provides information on families' income and work status from 2001.
2. One limitation of focusing on families living with children is that we do not consider the work and circumstances of nonresident parents. Low-income noncustodial parents are a potential source of support for children and face similar work-related issues to those discussed in this paper (Sorensen and Zibman 2001).