Secondary Effects of Job Losses on Families Create Long-Term Challenges
Increases in poverty have a significant burdening effect on families in the United States. Currently, millions of family households have experienced major job losses in the past 18 months as a result of the COVID-19 pandemic, and have left many unable to pay for necessities like housing, food, medical care and childcare.
According to a 2020 survey conducted by the Urban Institute, four in 10 parents reported that they or someone in their family lost work or work-related income because of the pandemic. In response to these financial hardships, more parents reported experiencing food insecurity and a reduction in savings and mounting debt. As the number of families with below-poverty earnings soared, those most impacted were Black and Hispanic households.
Financial hardship and its effects are contributing to the fraying of the American family. Marriage and the decision to have children are economically considered to be expressions of faith and optimism about the future, in a similar fashion to how entrepreneurs take risks when forming a new business.
These acts of optimism are reaching all time lows in the United States, according to Center for Disease Control (CDC) data. From 2017 to 2018, the rate of marriages per capita dropped 6 percent, from 6.9 per 1,000 population to 6.5, the lowest of the 1900–2018 period. Similarly, birth rates have remained consistently “below replacement” since 2007. Couples appear to be waiting longer to have children, likely a consequence of delayed financial stability with the highest birthrate in 2020 coming from women who are 30 to 34 years old.
Financial insecurity is also contributing to a rise in fatherless households. According to the U.S. Census Bureau, 18.3 million American children, roughly one in four, live without a biological, step, or adoptive father in the home. Children in father-absent homes are more likely to commit crimes and go to prison, more likely to abuse drugs and alcohol, and more likely to drop out of high school.
Household financial stability is a common cause for these circumstances. Pew Research cites economic well-being in the home as a key contributor to household size, noting also that Americans continue to live with their parents in early adulthood at relatively high rates. Adult child households account for 20 percent of Americans between the ages of 18 and 34.
Direct Cash Lowers Poverty, Mitigates Long-Term Harm to Children
Direct cash assistance is a viable tool in strengthening American families and reducing the impact of any financial hardships they may face. One policy example is the Child Tax Credit (CTC), which has assisted millions of American families navigate financial burdens and uplift their social mobility.
According to data published by the Household Pulse Survey (HPS), introduction of the CTC helped reduce food insufficiency in households with children. Before the introduction of the Child Tax Credit, food insufficiency in households with children was measured at 11 percent. After its introduction, the CTC reduced that level of food insufficiency to 8.4 percent.
The direct cash provided by the Child Tax Credit also helped in reducing financial hardships for families struggling with living expenses. According to the HPS, 31.5 percent of households with adults and children reported difficulty in paying for expenses prior to the introduction of the CTC. Upon Child Tax Credit distribution, the number of households with adults and children who had difficulty paying for expenses declined to 29 percent.
Opponents of direct cash transfers and its permanence argue that families will only misuse the funds and be disincentivized to work. However, routine distribution of direct cash like the CTC has shown to produce the opposite effect.
The Child Tax Credit as Pro-Work Policy
The Child Tax Credit is proven to promote work. After the implementation of the monthly CTC, persons employed in low- and moderate-income families with children continued to work and did not reduce their work hours. Employed parents who did reduce their hours because they received the credit only did marginally, by one hour. Among those who reported working fewer hours, two-thirds were parents of infants or toddlers.
The funds provided by the CTC are being used for the purposes for which it is intended. About 47 percent of HPS respondents reported spending their Child Tax Credit payments on food — and 17 percent of those with at least one child under the age of five — on childcare. Other respondents reported spending their payments on utilities, educational supplies, rent payments, and medical care. Overall, two-thirds of respondents immediately put their Child Tax Credit towards paying for basic necessities upon receiving funds.
The overall benefits of direct cash extend beyond reducing poverty for families. While direct cash policies promote financial stability for the family, it also promotes the stability and strengthening of intimate relationships amongst family members. With access to direct cash transfers, families have the flexibility to spend time with their familial peers and reduce the stress that low-income households can produce. With this cash relief, for example, parents are able to dedicate more time to managing their child’s well-being.
Additionally, direct cash also promotes healthy development by reducing the mental stress that comes from financial hardships. Routine payments cause families to worry less about finances and allows them to prioritize and improve their intimate relationships.
By advancing policies in Congress that deliver direct economic relief, Humanity Forward is contributing to the development of stronger families. The expanded Child Tax Credit, which Humanity Forward helped to secure in the American Rescue Plan Act with partner organizations and members of Congress, is a chief example of how putting cash into the hands of American families can promote work and healthy household environments.