Income and Benefit Packaging Strategies of Low-Income Working Families during the COVID-19

Research Background: Understanding how low-income working families package their income sources can offer insights into the critical components of the safety net and the extent to which these income sources support low-income families' basic needs. The changes made to public assistance programs during the COVID-19 pandemic, including expanded eligibility and increased benefits, are likely to have a significant impact on the ability of low-income working families to package their income sources. Our study examines which income/benefits combinations low-income families commonly use and identifies which combinations are used by specific groups within this population. This understanding can help identify the key components of the economic safety net and the relative contributions of public benefits in supporting low-income families, particularly during the recession with high unemployment rate. To address these issues, research questions follow as: (1) What are the primary sources of income among low-income families? (2) What are the most prevalent combinations of income sources including public benefits that low-income families used during COVID-19? (3) How do these combinations vary across different family demographics?

Methods: The study focused on households with children aged 0-18 years and with a gross income below 200% of FPL who were likely eligible for one or more public assistance programs (n=2248). The 2020 Surveys of Income and Program Participation (SIPP) data was used to conduct a descriptive and cluster analysis to identify specific income sources including public benefits (i.e., earnings, SNAP, TANF, UI, SSI, and Medicaid). Optimal cluster number was determined, and the frequencies of income sources for each group were described. Demographic characteristics were then compared across groups to identify any significant differences.

Results: Descriptive statistics revealed that the most common income sources of the full sample were earnings from work, followed by SNAP and Medicaid. Cluster analysis yielded four distinct groups with varying income and benefit packages. Cluster 1 (High work and High benefit receipt) primarily relied on earnings from work, with a large percentage receiving SNAP, Medicaid, and UI. Cluster 2 (Low work and High benefit receipt) depended heavily on SNAP and Medicaid, with the highest rate of TANF and SSI receipt. Cluster 3 (High Medicaid) primarily relied on Medicaid, while Cluster 4 (Mixed earnings) had a more diverse set of income sources, with a higher percentage having earnings and SNAP. The sample members in Clusters 2 and 3 were more likely to identify as Black and are less likely to be married or living with a partner compared to Clusters 1 and 4. Interestingly, Cluster 1 has the highest income levels, although this level is arguably quite low (about $18,400).

Conclusion and Implications: Many low-income families relied on multiple public benefits programs rather than a single program, and each cluster had different unique characteristics. It underscores the need for a comprehensive and integrated approach to the safety net, particularly given the current system’s complexity, which can make it difficult for families to access the benefits they are in needs.