Changes in Household Structure, School Enrollment, and Poverty: Young Adults before and after the Great Recession

Background/Purpose: Young adulthood, as that life phase for the age cohort of 18 to 34, is a crucial period from adolescence to adulthood as individuals aim towards economic independence and residential autonomy. However, growing trends in economic insecurity, particularly after the Great Recession, have continued to undermine the material foundation needed for young adults to achieve the two key markers of adulthood. Young adults experienced higher unemployment and the highest net poverty increase of 3.1 percentage-points from 16.8% in 2005 to 19.9% in 2013 compared to other adult groups. Some scholars posit that, to help buffer against poverty, more young adults are deciding to cohabit with their parents or non-marital partners than live independently. Also, scholars posit that more young adults are deciding to enter into post-secondary education, incentivized by financial supports from parents or educational loans, as they accumulate human capital for the future prospects. Thus, individual-level choices of young adults to cohabit or enroll in higher education may be endogenously related with their poverty. However, standard poverty measures commonly do not capture household structure and school enrollment as endogenous factors. The “true” poverty of young adults post recession may thus be masked. To help fill that knowledge gap, this study aims to examine how changes in household structure and school enrollment are linked to increased poverty of young adults post recession.

Methods: Using the Survey of Income and Program Participation data, this study conducted a simple decomposition to examine household structure and education enrollment among young adults between the years 2004 and 2012, for the pre- and post-recession periods. Calculated first was a hypothetical poverty rate that would have occurred had there been no changes in the proportional representation of subgroups by each factor. The difference between the hypothetical and the actual poverty rate was computed to measure the unique contribution of each factor to the change in poverty post recession.

Results: Results show that the effect of changes in household structure was -0.49, suggesting that the post-recession poverty of young adults may decrease by 0.49 percentage points by cohabitation. The effect of changes in school enrollment was -0.11, indicating that increased enrollment may mask the post-recession poverty of this group by 0.11 percentage points. Meanwhile, the combined effect of aggravating economic conditions, as indicated by mean income decrease and risen inequality was 3.66, implying that such factors contributed to increase poverty of young adults by 3.66 percentage points. This suggests that although poverty of young adults may be moderated through their individual-level choices, such choices were not enough to protect them against poverty.

Conclusions/Implications: Findings provide insight and detailed information about the effects on poverty of household structure and higher education enrollment of young adults, about which not much is known. Findings suggest that the mitigating impact of cohabitation and higher education enrollment of young adults, as attempts to help buffer against poverty during the recession period, may be less impactful than that of economic factors. Further research is warranted to more specifically analyze and substantiate findings.