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Working to Make Ends Meet

Understanding the Income and Expenses of America's Low-Income Families

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Document date: September 20, 2005
Released online: September 20, 2005

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Note: This report is available in its entirety in the Portable Document Format (PDF).


ABSTRACT

Recently, the policy community has focused on alleviating the strain on working families, particularly families with children. Research has examined the size and characteristics of low-income working families, the amounts and sources of income available to them, and, to a lesser extent, the expenses these families face, such as housing or medical expenses. Discussions of low-income working families, however, are hampered by the fact that there is no clear consensus on how much work a family must do to be considered a working family or the level and types of resources a family must fall below to be considered low-income.

This report seeks to clarify the discussion and debate over what constitutes a low-income working family. It then documents the size and characteristics of the low-income working population. Finally, it carefully examines their incomes and expenditures.

We use data from the 2002 round of the National Survey of America's Families (NSAF), representing the income and expenses of all U.S. families with children in 2001. We find that low-income families (those with incomes below twice the federal poverty level) with at least one full-time, full-year worker (high-work families) have incomes that are roughly in line with their basic expenses.

Gross income (before taxes and transfers) varies substantially by the level of work attachment and by other characteristics, and income after taxes and food stamps varies only slightly less. However, there is surprisingly little variation in expenses. So families with lower work attachment have substantially less income left over for discretionary spending or saving, and may even find themselves running up debts to cover basic needs. Single parents living alone are less likely to be high-work families than married-couple and other multiple-adult families, but single parents who work full time fare almost as well as their married or cohabiting counterparts, with most of the gap explained by higher child care expenses. High-work families headed by immigrants as well as those with children under age 6 do not fare substantially worse than the average high-work, low-income family, and they are actually more likely to be high-work families.

Overall, we find that low-income working families fare better than one might expect in 2001, thanks to their work effort, earned income, and a generous refundable Earned Income Tax Credit. But lowincome families without a full-time, full-year worker and poor families do not appear to have enough income to cover their basic expenses. In addition, our data cannot reveal what happened to low-income families during the long, slow job market downturn of the past three years. Other research indicates that much of the impact on low-income families has been a reduction in work (Acs, Holzer, and Nichols 2005), so we may expect that a greater proportion of these families today faces the bleaker bottom line of the low-work, low-income families.

Note: This report is available in its entirety in the Portable Document Format (PDF).



Topics/Tags: | Employment | Families and Parenting | Poverty, Assets and Safety Net


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