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Low-income working families support themselves through different combinations of employment earnings, public transfers and in-kind supports, and assistance from formal (social service) and informal (family and friends) sources. Understanding how householders garner and deploy their financial resources can help guide effective and just anti-poverty policy.
Previous work on family budgets has focused on the current or “typical” budgets (e.g. Edin and Lein 1997; Magnuson and Smeeding 2005). However, volatility in the earnings and expenses of low-income families suggests that point-in-time or average values over time inadequately capture families' full financial life experiences. Many low-wage workers experience frequent changes in the number of hours they work (Kazis and Miller 2001). Coupled with spells of unemployment and uncertain or time-variant nature of transfer benefits (Romich, 2006), income bounces around a lot. Similarly, some expenses occur every month but others are seasonal (children's Christmas gifts and school clothes) or unexpected (emergency medical bills). One strategy is to delay paying utility or other bills, but when a car repossession or power cut-off looms, seemingly routine expenses suddenly require lump sums.
Instead of treating these perturbations as “noise” in an otherwise consistent pattern, the current study uses them as the unit of analysis. Longitudinal fieldwork allows us to answer two questions: ‘How do family financial lives unfold over time?' and ‘How do families experience financial perturbations, or atypical events, that arise?' Analysis of this evidence allows us to consider the implications family budget patterns for program design and policy intervention.
METHODS
Empirical analysis is based on a longitudinal qualitative study of families living in public housing in a Northwestern city. Field data collectors visited ten participant households once every two to four months over an 18 month period. Data consist of ethnographic field notes, transcripts of semi-structured conversations, and documents from structured financial questions. Analysis techniques include analytic summaries, within- and across-case analysis, and validity-enhancing strategies such as outlier examination.
RESULTS AND DISCUSSION
As anticipated, examining families' experiences over time reveals substantial variability in the amount and reliability of income. Families reliant solely on wages and means-tested transfers (most commonly Food Stamps/Supplemental Nutrition) experience more variability than families whose income includes disability or Supplemental Security (SSI) income. Families experienced both positive and negative perturbations to income, although the latter is more common. Income bumps most commonly come at tax-time. After filing federal income tax returns, households receive combined returns and refundable credit amounts of several thousand dollars. Automobile-related expenses are the most common source of unexpected negative shocks. Respondents often had to quickly adjust financial plans to make repairs or find alternative transportation after car accidents or breakdowns.
These empirical findings will considered in light of both design and normative questions about savings-promotion and income-transfer policies. For instance, changes to the current once-yearly delivery of the Earned Income Tax Credit may be advantageous to families. These findings are important in light of federal tax reform efforts that may be undertaken as the Bush administration's tax cuts expire in 2011.