Consumption, Income, and Material Well-Being After Welfare Reform

2006-01-01reportNational Bureau of Economic Research53 citationsgreen

No readable copy stored yet — this record is metadata only.

Gender, Labor, and Family Dynamics Labor market dynamics and wage inequality Income, Poverty, and Inequality

Abstract

This paper investigates how material well-being has changed over time for those at the bottom of the distributions of income and consumption.We document the sharp differences between recent trends in measured income and consumption, focusing on families headed by a single mother.Since the early 1990s, income in the bottom decile has fallen by nearly 30 percent, while income has risen by more than 15 percent for the fourth and fifth deciles.The trends for consumption, on the other hand, show neither a sharp decline at low percentiles nor a large increase at higher percentiles.These patterns are evident in two income and two consumption data sources.We then examine several explanations for these differences.We argue that it is unlikely that reported income provides a consistent measuring stick in recent years due to large changes in both the sources of income and the reporting rates of the main income sources for single mothers during this period.Accounting for changes in the characteristics of single mothers can reconcile most of the income consumption difference above the bottom decile.For the bottom decile, simulations accounting for transfer underreporting can account for much of the reported income decline.Finally, we consider how these trends translate into changes in well-being by investigating changes in disaggregated consumption and time use.Increases in spending on housing account for much of the increase in consumption in the bottom quintile, while increases in transportation spending account for much of the rise in the second quintile.Two datasets indicate modest improvement in housing quality, but the evidence is less strong at the very bottom.Although expenditures on food away from home and child care also rise, these categories are small, on average.The consumption of non-market time for those in the bottom half of the consumption distribution falls sharply indicating a loss in utility for those families if nonmarket time is valued above $3/hour.Evidence from time-use surveys suggests that the lost nonmarket time reflects a shift away from shopping, food production, and housework.

Citations in this library

Stored only when both papers are in the corpus — 53 citations exist upstream.

References

1989Consumption and Liquidity Constraints: An Empirical Investigation

1993An Introduction to the TAXSIM Model

1996Measuring Poverty: A New Approach

2001Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers

2006Does Income Inequality Lead to Consumption Inequality? Evidence and Theory1

1999Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers

2005Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)

2002Does Income Inequality Lead to Consumption Inequality? Evidence and Theory

Cited by

2007The relationship between income and material hardship

2009What We Know, What We Don't Know, and What We Need to Know about Welfare Reform

2007The implications of differences between employer and worker employment/earnings reports for policy evaluation

2012Footloose and Fancy Free? Two Decades of Single Mothers’ Subjective Well-Being

2010How Does Public Assistance Affect Family Expenditures? The Case of Urban China

2014Resident Perceptions of Redevelopment and Gentrification in the Heartside Neighborhood: Lessons for the Social Work Profession