Did Access to Informal Financial Support Networks Moderate the Impact of Income Loss during the COVID-19 Pandemic? Evidence from a National Survey

Background and Purpose: The COVID-19 pandemic resulted in job/income loss and material hardship for millions of Americans. Though media reports indicate a rise in informal inter-household financial support to meet these challenges, little empirical research has examined financial social support during COVID-19. Additionally, while sociologists have studied financial support networks among low-resource households for decades (Stack, 1974), little attention has been paid to this phenomenon in social work research. In this study, we examine (1) the prevalence of informal financial support network (IFSN) participation during the COVID-19 pandemic, (2) the relationship between formal public supports and informal social supports, and (3) whether IFSN participation moderates the relationship between COVID-related job loss and material hardship.

Methods: This study uses data from a nationally representative survey of U.S. households (N=4,893) administered online during the pandemic (November-December 2020) using quota sampling. IFSN participation was measured using four categories: received financial support, provided financial support, reciprocal support (both received and provided), and no participation. We use descriptive and bivariate statistics to examine the prevalence of IFSN participation among various groups. We use logistic regression to analyze the direct and moderation effects of IFSN participation on four types of hardship: missed bill payments, missed housing payments, skipped medical care, and skipped prescriptions. All models controlled for an array of demographic and financial variables, as well as participation in various public benefits programs.

Results: Participation in IFSNs among low-income respondents was high, with 12.9% receiving support, 8.9% providing support, and 16.4% engaging in reciprocal support. An especially high proportion of public benefits recipients participated in IFSNs, showing a relationship between use of formal public supports and informal social supports (p < 0.001). For example, 74.7% of TANF recipients reported reciprocal IFSN support, as compared to only 4% of respondents who were not enrolled in any public benefits programs. Overall, all three types of IFSN participation were associated with a higher likelihood of experiencing all four types of hardship (p < 0.001). Participation in financial support networks significantly moderated the relationship between job/income loss and some types of hardship. Respondents who had lost a job/income and engaged in reciprocal financial support were less likely to experience late bill payment (p < 0.001) or skipped prescription (p < 0.01) than respondents who had lost a job and had no IFSN participation. However, this moderation effect was not sufficiently strong to offset the overall higher rate of hardship experienced by those participating in IFSNs.

Conclusion and Implications: We find evidence that engagement in reciprocal financial support is widespread among low-income households and public benefits recipients. Therefore, researchers, policymakers, and practitioners who seek to address poverty and financial security issues should incorporate a focus on financial networks into their work, rather than thinking only in terms of individual households. Additionally, we find that while IFSN support was helpful in the face of COVID-19 job loss, it was not sufficient to fully offset increased hardship risk, indicating the need for more robust safety nets to guard against future economic downturns.