Understanding the Dynamics of $2-a-Day Poverty in the United States

Background and Purpose: Shaefer and Edin (2013) find a large rise in “extreme poverty” (defined as household cash incomes of no more than $2 per person, per day as measured in a given month or calendar quarter) among U.S. households with children between 1996 and 2011. In this paper we explore some of the underlying dynamics of this phenomenon, which we refer to a “$2-a-day poverty.”

Methods: This study uses an “iterative” mixed methods approach, in which both qualitative and quantitative research has been conducted simultaneously, with each line of inquiry informing the other. Our ongoing ethnographic research occurred in four field sites with 18 families whom had recently lived under the $2-a-day threshold for a calendar quarter. We met with all of sample members multiple times, identifying common themes across cases.

For quantitative analyses, data are drawn from the Survey of Income and Program Participation (SIPP, a nationally representative, longitudinal, sample of the U.S. non-institutionalized population, collected in panels lasting <= five years. Estimates are presented for calendar years: 1996; 2005; and 2012.

SIPP calendar year weights allow us to follow a nationally representative sample of children, <=18 years old, who remain in the SIPP sample for a full calendar year. We restrict to children in households with low assets and annual incomes below 150% of poverty. Standard errors are adjusted using Stata’s svy routine.

Results: Examining children longitudinally, we find that the changes in the incidence of $2-a-day poverty between 1996 and 2012 are concentrated among children experiencing such a state chronically, with 7 or more months under the $2-a-day threshold during a calendar year. Growth in chronic extreme poverty is seen using both the cash only definition and after accounting for SNAP. We find that 70% of children who experienced $2-a-day poverty in 2012 lived in a household where an adult worked for at least one full month during the year, while only 10.8 percent lived in households that reported TANF during the year. We find that change in the employment of household adults is a key predictor of change in extreme poverty status. Finally, we find evidence suggesting that households experiencing $2-a-day poverty are more likely to face certain material hardships than other low-income households.

Conclusions and Implications: The descriptive analyses presented here do not fully clarify the causal mechanisms driving the rise in $2-a-day poverty. We hypothesize that the virtual disappearance of a cash safety net for non-workers has played an important role, as has the extended period of high unemployment that has accompanied the Great Recession. Whatever the exact causal relationship, the results presented here offer more evidence that there has been a fundamental shift in the circumstances of households with children at the very bottom in the U.S. What’s more, rising rates of spells of very low income are concentrated among children experiencing such spells chronically, rather that episodically. Such findings raise important questions about the adequacy of the U.S. means-tested income safety net.