A Cross-State Examination of Families Leaving Welfare: Findings from the ASPE-Funded Leavers Studies. Household Income and Poverty Status

08/01/2000

Total household income cannot be measured from administrative data, which is limited to information on the earnings and government benefits received by the adult leaver. Thus the household incomes reported here are limited to the four studies with survey data. Across these four studies, total monthly household cash income averaged from about $1,050 (Illinois) to over $1,400 (Missouri), as shown in Table 7A. Median household incomes were even lower, less than $900 in Illinois and less than $1200 in Missouri. These estimates are not much higher than the $1,000-$1,100 average earnings estimates reported above, but recall that the earnings estimates were averaged across the subset of households with earnings. In contrast, the household income statistics are averaged across all leavers, including those with no earnings, or even no income.

More information on the distribution of income is provided for leavers in Illinois and Missouri. Very few leavers (2 to 4 percent) reported $0 in household income. About half the leavers reported incomes of between $500 and $1,500 per month. Only 11 percent of Illinois leavers and 20 percent of Missouri leavers had household income of more than $2,000 per month ($24,000 in annual terms). This included 8 percent with incomes of more than $3,000 per month in Missouri, where income was measured two and a half years after exit from welfare.

These income distributions suggest that many former recipients remain poor after leaving welfare. The state reports from Washington and Missouri actually calculated a poverty rate for former recipients, by multiplying monthly incomes by twelve and comparing these annual incomes to the Federal poverty thresholds for different family sizes. The estimated poverty rate of former recipients was the same - 58 percent - in both states. This poverty rate was measured 6 to 8 months after exit in Washington and about two and a half years after exit in Missouri. In contrast, the poverty rate for families remaining on TANF was 83 percent, according to calculations in Washington state.

More detailed analyses of poverty status in Missouri showed that many leavers with income above poverty were still near-poor; a total of 89 percent of former recipients had incomes below 185 percent of the poverty threshold. These data on poverty status suggest that a large proportion of former welfare recipients remained eligible for child nutrition programs (eligibility at 185 percent of poverty), the Food Stamp program (eligibility at 130 percent of poverty), and the Medicaid program (eligibility varies by state and reason for exiting cash assistance).

All four studies provided some information about the sources, as well as the aggregate amounts, of household income. Earnings strongly drove household income. In both Illinois and Missouri, for example, median household income was about $400 per month in households without any earners, $1,000-$1,100 per month in households with one earner, and $2,000-$2,300 in households with two earners. In fact, earnings accounted for 70 to 85 percent of aggregate household cash income, according to data analyses from Washington, Arizona, and Missouri (see Table 7B). This included about 45-50 percent from the adult leaving TANF, and 20-40 percent from others in the household. Other major contributors to aggregate household income included TANF, child support, and Supplemental Security Income (SSI), each of which accounted for between 3 and 8 percent of total household income across the three states.

The percentage of total household income contributed by each source depends upon both the percentage of households with the income source and the amount of income from that source, as shown in Table 7C. The effects of these two factors can be seen by contrasting the examples of child support and SSI income. In the case of child support, close to one-fourth of leavers have some child support income, but the average amount of income for those with any child support income was only between roughly $150 and $300. In contrast, fewer households had SSI benefits (4 percent in Washington and 12 percent in Missouri and Illinois), but the average amount received by these households was larger, $400-$500. In the end, both child support and SSI contributed about the same percentage (3 to 7 percent) to total household income averaged across all leavers.

Half (54 percent) of leavers relied on one source of income, according to the report on Missouri leavers (data not shown). This one source of income was generally earnings. One third (34 percent) of former recipients in Missouri relied on two sources of income, with the most common package being a combination of earnings and child support. Finally 10 percent of former recipients received income from three or more sources, while 2 percent had income from no source, e.g, zero income in the past month.

Before concluding this discussion of household income and poverty status, it is important to note the difficulty of measuring household income accurately and differences across the questionnaires. The Illinois questionnaire placed relatively little emphasis on the collection of household income, simply asking respondents at the conclusion of the survey to estimate total household income in the prior month. (Earlier questions had asked about receipt of TANF, SSI, child support, etc., but without dollar amounts). The Arizona and Washington surveys went into more detail, asking about household income from a variety of sources, with separate questions about the presence and amount of income from own earnings, others' incomes, SSI, child support, etc. Finally, the Missouri survey focused the most attention on household income, asking a long set of questions about various types of income received by the adult respondent, and separately, income of others in the household. After the complete cycle of questions, the Missouri interviewer shared the calculated total income with the respondent, to confirm whether the total calculated household income seemed right to the respondent.

Past research on the collection of household income information suggests that more detailed and probing questions will reduce the problem of under-reporting of household income. It is possible, therefore, that some of the $400 differential between Missouri and Illinois may be due to differences in income reporting, as well as possible true differences in the underlying income distributions. In fact, earnings were a smaller percentage of aggregate income (69 percent) in Missouri than in other states (83-85 percent in Arizona and Washington), suggesting the possibility that the Missouri questionnaire was more successful in capturing other sources of income. It also is true, however, that average earnings in Missouri were lower than in other states, at least according to administrative data reported in Table 2B, and so the lower contribution of earnings to household income in Missouri reflects labor markets in Missouri as well as methodological differences in income reporting.

Partly because of the complexity of accurately measuring household income, most of the leavers studies also asked questions about the direct effects of financial hardship on material well-being. These questions deal with such issues as experiences of food shortages and housing problems, as discussed below.

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