Child Poverty, the Great Recession, and the Social Safety Net in the United States

This paper comprehensively examines the effects of the Great Recession on child poverty, with particular attention to the role of the social safety net in mitigating the adverse effects of shocks to earnings and income. Using a state panel data model and data for 2000 to 2014, this paper estimates the relationship between the business cycle and child poverty, and examines how and to what extent the safety net is providing protection to at-risk children. It finds compelling evidence that the safety net provides protection; that is, the cyclicality of after-tax-and-transfer child poverty is significantly attenuated relative to the cyclicality of private income poverty. It also finds that the protective effect of the safety net is not similar across demographic groups, and that children from more disadvantaged backgrounds, such as those living with non-Hispanic black or Hispanic, single, or particularly immigrant household heads-or immigrant spouses, experience larger poverty cyclicality than non-Hispanic white, married, or native household heads with native spouses. The findings hold across a host of choices for how to define poverty. These include measures based on absolute thresholds or more relative thresholds. They also hold for measures of resources that include not only cash and near cash transfers net of taxes but also several measures of medical benefits. [Working Paper 22682]