Private Financial Transfers, Family Income, and the Great Recession.

From December 2007 until June 2009, the United States experienced the Great Recession, its worst financial crisis since the Great Depression (Grusky, Western, & Wimer, 2011; National Bureau of Economic Research, 2010). The level of unemployment increased dramatically during this period, from approximately 5% to 10% in the country as a whole, although certain subgroups and geographic areas experienced particularly high levels (Hout, Levanon, & Cumberworth, 2011). Low-income families were one subgroup especially vulnerable to the poor economic conditions; estimates from the Current Population Survey indicate that unemployment rates in the lowest income decile were as high as 31% from October to December 2009 and were nearly 20% in the second lowest income decile (Sum & Khatiwada, 2010). Because the Great Recession was associated with such high levels of unemployment, especially among economically disadvantaged families, it is critical to understand how families in general, and low-income families in particular, manage to support themselves when unemployment levels are high and aggregate economic conditions are poor. Prior research has found that private financial transfers (PFTs), defined as financial support provided to the mother by anyone other than the child’s father, are a relatively common and potentially important source of income, particularly for families with young children. Research has found that PFTs are the most common source of private support for families with young children and are worth approximately 15% of mother’s earnings, suggesting PFTs are an important component of families’ income package (Pilkauskas & Alvarado-Urbina, 2014). In addition, studies have shown that PFTs are wealth enhancing for families with children (Hao, 1996) and are a key economic resource that helps low-income mothers make ends meet (Edin & Lein, 1997; Teitler, Reichman, & Nepomnyaschy, 2004). As a result, one way that families with young children may deal with bad aggregate economic conditions (and the increased need that they produce), like those experienced during the Great Recession, is to increase PFTs received from family members and nonrelatives. If, however, members of their network were also negatively affected by the poor economic conditions, network members may not have the means to provide families with children with PFTs. Thus, it is also possible that PFTs received tend to decrease when rates of unemployment are high. Determining whether families with young children are able to rely on an increase in PFT receipt when economic conditions are bad is critical because a long line of research has demonstrated that family income, and in particular family income in early childhood, is an important predictor of a wide range of outcomes for children (Brooks-Gunn & Duncan, 1997). In this study, we investigated three research questions. First, what is the association between the unemployment rate and PFT receipt among urban families with young children? Second, does family income moderate the association between the unemployment rate and PFTs received for this population? Third, how does the predicted probability of PFT receipt differ when the unemployment rate is at 5% (its level before the start of the Great Recession) compared to the peak unemployment rate during the Great Recession (10%)? Although prior research has studied whether aggregate unemployment is associated with the percentage of household income made up by PFTs (Haider & McGarry, 2006), no research has used longitudinal data (including families prior to, and during, the Great Recession), or studied families with young children in particular. In addition, no research has investigated differences in the association between the unemployment rate and PFTs by family income. This is an important oversight because evidence suggests that low-income families may have been particularly vulnerable to the Great Recession (Sum & Khatiwada, 2010). Even with this greater need, it is unclear that PFT receipt among low-income families will increase in poor economic conditions: The networks of low-income mothers may not have the economic resources necessary to provide PFTs as compared with higher income families. Last, no research has studied the impact of the Great Recession on PFTs by exploring the predicted probability of PFT receipt at different unemployment rates consistent with pre- and peak recession levels. To address these questions, we used data from the first five waves of the Fragile Families and Child Wellbeing Study (hereafter Fragile Families; see www.fragilefamilies.princeton.edu/), covering the years 1998–2010. These longitudinal data were particularly well suited to this research because they provide significant variation in the unemployment rate over time, in particular because the latest wave of data collection occurred during the Great Recession. These data also include an oversample of unmarried births, resulting in a relatively economically disadvantaged sample, making it possible to study heterogeneity in the association between the unemployment rate and PFTs by family income levels.