Welfare, work, and single mothers: The Great Recession and income packaging strategies

The public social safety net in the U.S. for single mothers and their children, including cash assistance and in-kind benefits or vouchers, is largely tied to work—both from individual earnings and from child support intended to supplement public support. How does the safety net perform in periods of severe work instability, such as during the unemployment crisis of the 2008–2010 Great Recession? This paper uses a unique panel dataset from Wisconsin to compare total formal income for a cohort of first-time single mothers in 2002 with a cohort in 2007. Income for both cohorts is constructed for the year after birth—including earnings from the formal labor market, public benefits, and child support—and five years after birth. We hypothesize that total formal income will grow over those five years as mothers accrue experience in the labor market. However, with the labor market crisis of the Great Recession, we expect public benefits to expand as earnings decrease, but not enough to offset the loss of earnings and child support when comparing total formal income differences across the two cohorts, resulting in a lower total income package for mothers in the Great Recession cohort. Using multivariate regression to adjust for demographic covariates, we find that while there is significantly less income from earnings and child support among the Great Recession cohort, the total formal income for the Great Recession cohort is slightly but significantly greater than the control cohort at time two. This suggests that the safety net during the Great Recession provided a buffer relative to lost income, likely as a result of critical policy changes making public benefits more generous and more accessible during the recession. High poverty rates among both cohorts of mothers, however, highlight the importance of the safety net even in stable labor market conditions, and suggests the need for greater benefit expansion.