By Marianne Bitler, Ph.D.
This is the fourth in a series of blog posts and other efforts by the National Research Center on Hispanic Children & Families to dig deeper into how Latino families experience poverty and earn income, and the implications that these findings have for programs and policy. The series, Latinos Interrupted: How Income and Poverty Impact Hispanic Families’ Economic Mobility, launched December 8, 2015 with the release of three briefs on poverty and income among Hispanic families.
The challenges faced by children growing up in poor households have been well documented; poor children are more likely than affluent children to struggle in school and to have a range of health, behavioral, and emotional problems. However, as documented in a previous post, the real-life economic circumstances of families identified as poor can be quite varied. For example, among poor families with the same average yearly income, some may have relatively stable income month to month, while others may have a lot of instability and see large fluctuations in monthly income. The role income instability/stability plays in families’ lives is not clearly understood.
This post highlights existing research challenges in fully understanding the experience of poverty among families. We note ongoing gaps in our understanding of the economic circumstances of families, particularly in income instability; the challenges in researching it; and what steps could be taken to improve our understanding moving forward.
Gaps in Our Understanding of Income Instability
Currently, two aspects of income instability are not fully understood:
- The cause, or why low-income families have unstable income; and
- The effect, or the impact that unstable income may have on child and family wellbeing.
Understanding why low-income families have financial problems is crucial for helping policy and social service programs provide targeted and effective assistance. For instance, low-income working families with health issues but little or no health insurance and no savings, may not benefit from a program such as Temporary Assistance for Needy Families (TANF). For these families, consistent access to health insurance may be the most effective way to minimize disruptions in income due to health-related work absences and expenses.
We also have limited knowledge about the effects of income instability on families and children. Though we have abundant evidence that poverty is detrimental to children, it is less clear whether or not the ups and downs of a household’s financial resources have independent effects on children’s development and future outcomes above and beyond poverty itself. Some work suggests it does. For instance, one study suggests that living in an income-volatile household may be associated with reduced educational attainment and performance; however, so is poverty itself. Disentangling these two aspects of a family’s economic circumstances—poverty status (measured at one point in time) vs. income instability (measured over time)—matters for how policies and programs are designed and delivered to the populations they are designed to help.
The Challenges with Current Data Sources
The Need for More—and Better—Data
Existing sources of secondary data do not adequately track the changing economic circumstances of low-income Hispanic families. Current survey data, like the Survey of Income and Program Participation (SIPP), do a good job of capturing overall poverty status (measured at one point in time), but fail to document the nuances of families’ economic circumstances that would help us observe correlations between sources/timing of income with outcomes like health. This information, in turn, could help reveal further contributors to poverty. Without sufficient information on these income and outcome questions, measured frequently and consistently, precursors (causes) and antecedents (effects) of income instability and poverty are difficult to isolate.
Errors in Measuring Multiple Income Sources
Another challenge is that not all sources of income are equally well measured in survey data. Wage and salary data are generally very well captured. However, other sources of family income, such as that received through social assistance programs like SNAP and TANF, are often largely underreported. This underreporting of certain forms of income can paint an inaccurate picture of a family’s resources and, therefore, the stability of their financial situation.
Research needs not only good data—and lots of it—but also good science. Evidence from randomized, quasi, and natural experiments has already provided causal evidence about the effects of poverty and income enhancement on kids. One example is a study looking at the impact of the Earned Income Tax Credit (EITC) on newborn health in low- to middle-income families, both before and after the EITC’s 1993 expansion. Researchers found that the expansion had a clear impact on infant health: $1,000 of EITC income reduced rates of low birth weight by seven percent overall, and by more than eight percent among African Americans.
There is a real, largely untapped, potential to use experiments to also measure the impact of income instability on family and child well-being. While true experiments are often hard to do in the social sciences, experiments that measure the impact of income shocks (i.e., infusions of income) on child and family wellbeing could be done using already existing programs, such as the EITC experiment mentioned above. Experiments that help treated families achieve greater income stability could illustrate how those children and families fare compared to a control group (who receive no help) and thus, help us better understand the impact of income stability on Hispanic populations.
It is worth noting that experiments are expensive. Additionally, challenges arise when we care about understanding the effects of some treatments for a group, like Hispanic families, who may not be eligible for or are reluctant to use some safety net programs. For instance, Latinos without social security numbers are ineligible for the EITC, and we also know that Hispanics are less likely to access social assistance programs for which they are eligible.
As we move forward, the National Research Center on Hispanic Children & Families is committed to guiding and informing the research and policy communities about ways to improve the measurement of Hispanic families’ economic circumstances of Hispanic children. Learn more about income instability in the lives of Hispanic children with our recent brief on the topic.
 Hardy, Bradley L. (2014) “Childhood Income Volatility and Adult Outcomes.” Demography 51:1641-1665.