Across multiple outcomes, including intelligence, school achievement, and socio-emotional functioning, persistent poverty has more detrimental effects than transitory poverty (Bolger et al., 1995; Duncan, Brooks-Gunn, Klebanov, 1994; McLoyd, 1998). Thus children from families that have always been poor are likely to be worse off than children in families that experience sudden hardship due, for example, to the recession and foreclosure crisis. However, sudden hardship also takes its toll. Conger and colleagues (1994) studied the effects on children and families of the dramatic economic decline in the rural Midwest in the 1980s, when thousands of farmers and small-town businessmen went bankrupt. In a sample of 378 seventh graders living in two-parent middle class families (mean income of $33,800 in 1988 dollars, mean education of 13.8 years), they found that economic pressures experienced by parents led to parental mood changes and marital conflict, along with conflict with children about money. These, in turn, led to greater general hostility of parents toward children and to adolescent emotional and behavioral problems.
Using data from the Panel Study in Income Dynamics, which followed a nationally representative sample of 5,000 families, Yeung and Hofferth (1998) examined instances where families had income reductions of 50 percent or more (which transpired for 894 families). Families who experienced a major income loss were more likely to move within the following year. The researchers found that higher income White families were more likely to reduce food expenditures when experiencing work reduction than lower income White families, but the opposite was true for Black families. Families who started with higher incomes were less likely over time to receive public assistance such as food stamps and TANF.
A recent paper from the National Bureau of Economic Research (Stevens & Schaller, 2009) examined data from the Survey of Income and Program Participation (SIPP) from 1996 to 2006. The authors looked at the relationship between parental job loss and children’s academic difficulties. The data include a series of panel datasets covering between 14,000 and 46,000 households per panel, each of which were followed for two to four years. This study shows that when a parent loses his or her job, the probability that a child will repeat a grade in school increases by almost one percentage point a year, or about a 15 percent increase in the probability of grade retention. These results using recent data represent the short-term impact of job loss and may be indicative of the impact of the current rise in unemployment and job loss that has affected many children who fit the broad definition of homelessness. Also, a substantial body of literature shows that unemployment leads to depression among both people who lose jobs and their spouses (e.g., Howe, Levy, & Caplan, 2004; Vinokur, Price, & Caplan, 1996), and that depression among parents is associated with adverse outcomes for children (e.g., Downey & Coyne, 1990).