Iowa's Limited Benefit Plan. C. Household Income

05/01/1997

The analysis of household income before and after cash assistance was terminated under the LBP is based on total household monthly income as reported by LBP survey respondents. Total income is defined as income for all household members from all sources (including FIP, Food Stamps, other assistance, and earnings). Table V.6 presents the mean value and distribution of monthly income in LBP month 6 and in the month preceding the interview, which we refer to as the pre-interview month. Average total household income in the pre-interview month was just under $750. This was $13 higher than in LBP month 6, the last month of cash assistance. Thus, although cash assistance was terminated, households in fact had slightly higher total income, on average, several months later. However, this net increase was not uniformly distributed across households. Rather, there were clear gainers and losers, as evidenced by increases in both the upper and lower tails of the income distribution. Between the last month of cash assistance benefits and the pre-interview month, households shifted into income categories below $500 and above $1000, while they shifted out of categories between $500 and $1000. More households shifted into the lower tail of the income distribution than into the upper tail.

Table V.5
Table V.6

Table V.7 provides additional evidence of the polarization in the income of LBP households after benefit termination. Approximately 40 percent of LBP cases reported a net increase in income between the last month of receiving cash assistance and the pre-interview month, and nearly 50 percent reported a net decrease in income over this period. Also, there were relatively large changes in income in both directions. In households with increases, average income rose by $496, from $600 in the last month of cash assistance to $1096 in the pre-interview month. In households with decreases, average income fell by $384, from $884 to $500. Due to the difference in the magnitude of these offsetting changes, the average net change in income was positive, despite the fact that more households reported a decrease in income than reported an increase in income.