Family Adaptations to Income and Job Loss in the U.S.

Abstract

Using data from the Panel Study of Income Dynamics, this study examines the extent to which families experience major economic setbacks and how they respond. Families that experience a substantial loss of income or work hours are more likely to cut back on expenditures, receive public assistance, experience divorce or separation, and move. No evidence that partners are able to compensate for a major income loss by increasing their work hours was found. Initial conditions, such as income and assets, the unemployment rate of the area, and race, affect how a family adapts. Families with fewer resources and those who live in areas of high unemployment are more likely to rely on public assistance, and they are less likely to move, increase the work hours of the female head of household, or cut food expenditures.