Child Support as an Income Source for Low-Income Families
IRP Reports
Following the passage of welfare reform in the mid-1990s and the end of entitlement benefits under Temporary Assistance for Needy Families, the U.S. economic safety net has become increasingly individualized. In fact, it is no longer clear whether low-income families tend to rely on particular types of public benefits, or whether there are characteristics that differentiate benefit "packaging." Furthermore, the extent to which child support, as a source of family income, varies as a function of benefit packaging and earnings from employment is not known.
This project examines the combinations of child support and other sources of income (including earnings) comprising economic safety nets for low-income families. In addition to child support and earnings, the income sources we explore include Temporary Assistance for Needy Families (TANF), Supplemental Nutritional Assistance Program (SNAP) benefits, child care subsidies, unemployment insurance (UI) benefits, Supplemental Security Income (SSI), and Medicaid, using data from administrative records on a sample of families participating in the Women, Infants, and Children's (WIC) Program in Wisconsin. We find that child support makes up a relatively low proportion of the economic safety net for WIC recipients, but this proportion is fairly constant across income levels and is complementary to both work and welfare. The findings from this investigation may be useful to social service programs as they attempt to identify safety net resources for economically struggling families.
The Wisconsin Shares child care subsidy program provides assistance to low-income families who need help with child care in order to work. Families must meet both financial and nonfinancial eligibility criteria to participate and are expected to pay part of the cost of the child care in the form of copayments that are calculated according to a sliding scale. Currently, child and family support payments are not counted as income when determining financial eligibility or expected copayment amounts. A previous report considered the effects on program caseloads if child and family support income were considered as income for the purposes of eligibility determinations. The report also estimated the effects of these changes in caseloads on program costs. This report estimates a fuller fiscal effect of considering child and family support as income for purposes of calculating Wisconsin Shares copayment amounts, including the effect of families who would retain eligibility but experience higher copayments.
Using detailed administrative records for custodial mothers in the couples who had their first child support orders in Wisconsin in 2000, the authors analyzed child support receipts over the subsequent five years. They were particularly interested in whether child support was a regular source of income and in whether child support contributed to reducing the irregularity of income of custodial-parent families.
The authors show that in the first year, although 86 percent of mothers with child support orders receive some support, only 49 percent receive support during at least 10 months, and only 43 percent receive a regular amount of support for at least 10 months. The proportion of mothers with regular receipt does not change substantially over time. They also find that child support contributes a critical part of income for many custodial-parent families.
The Wisconsin Shares child care subsidy program provides assistance to low-income families who need help with child care in order to work. Families must meet both financial and nonfinancial eligibility criteria to participate. Currently, child and family support payments are not counted as income when determining financial eligibility. In this report, we assess the extent to which families participating in the child care subsidy program would be disqualified were support income considered in calculating eligibility and benefit levels.
To examine the effect of counting child support as income in child care subsidy calculations, data were drawn from CARES, Wisconsin’s public assistance information system, and from KIDS, the child support information system. All cases that participated in Wisconsin Shares between March 2000 and the end of 2005 were selected from CARES. A total of 130,110 cases had an eligibility determination during this time period. Wisconsin Shares applicants have an eligibility determination at initial entry and then again every six months. Participants are also required to update their income information any time it changes, so the interval between eligibility determinations could be less than six months.
Wisconsin’s policy providing a full child support pass-through and disregard of child support payments in calculating eligibility offers a new source of income for W-2 families. It also requires that both custodial and noncustodial parents comply with new rules. This report investigates the effects of both changes, as well as how participants perceive the trade-offs. The researchers reviewed child support policy documents, and in three counties conducted short interviews with local child support administrators and longer ethnographic interviews with a stratified sample of 42 women. The interviews covered family transitions, work history, and changing sources of formal and informal income in an effort to determine how child support income and child support enforcement policies affect economic well-being and family structure.
This report examines changes in earnings in a cohort of noncustodial fathers, focusing on the extent to which orders and payments change when earnings change. The analysis provides the basis for the companion analysis of the impact of changes in noncustodial fathers’ orders and payments on the stability of custodial mothers’ incomes. The report includes couples who had their first child support order in 2000 and examine patterns over the next 4 years.
Regarding patterns of earnings, the authors find that a substantial proportion of fathers experience large changes in earnings during this five-year period. They also find that relatively few of the cases with large changes in earnings have a large change in their owed amount. Finally, they find that changes in the amount of child support orders are a stronger predictor of changes in payments than are changes in earnings.
Given the exceptional treatment of child support payments in Wisconsin, child support is likely to play a more essential role for custodial mothers with low incomes, especially for welfare recipients, in Wisconsin than in other states. However, we know little about the significance of child support in families receiving cash benefits. Furthermore, very little is known about how the role of child support as an income source differs between low-income families of custodial mothers in Wisconsin and their counterparts in other states.
In this paper, we use Wisconsin survey data and state administrative records to examine the importance of child support for Wisconsin custodial mothers who entered the state’s Wisconsin Works (W-2) program in its first year. We also compare a broader group of low-income families in Wisconsin to those in other states, using data from a national survey to consider the Wisconsin case from a national perspective.
IRP Discussion Papers
Single-parent families are economically vulnerable. Some child support policies have been aimed at improving the economic well-being of these families, while others have been focused on decreasing welfare costs. Since 1996, states have been free to decide how to treat child support when it is paid on behalf of a welfare participant. States decide both how much child support income to ignore in the calculation of benefits (the disregard) and whether to send a separate child support check to the participant (the pass-through). Disregard and pass-through policies have potential impacts on economic well-being and on governmental costs, but little research has focused on their effects. This paper uses variation in child support disregard and pass-through policy across states and years to estimate whether these policies are associated with paternity establishment, child support collections, and the average dollar amount of child support collected, as reflected in state-level administrative data. We find that the disregard is positively associated with paternity establishment in all models, and is positively associated with collections in two of the four models examined. The pass-through has insignificant, or negative, effects.
In this paper the authors argue that in order to assess the child welfare impact of family policies, one must consider their influence on parents' investments in their children as well as the stability of the marginal marriage. Further, the authors expect that changes in the regulatory environment induce changes in the distribution of resources within both intact and divided families. The authors develop a continuous time model of parents' marital status choices and investments in children, with the main goal being the determination of how policies toward divorce influence outcomes for children. Estimates are derived for model parameters of interest using the method of simulated moments, and simulations based on the model explore the effects of changes in custody allocations and child support standards on outcomes for children of married and divorced parents. The authors find that, while small changes in children's academic attainment are induced by significant shifts in custody and support, the major effects of these policies in both intact and divided households are on the distribution of welfare between parents. In addition, children's attainments are not necessarily best served by the divorce-minimizing policy.
There is surprisingly limited information on how much individuals know about the policy rules that could affect them, either in general or in evaluations of new programs. In this article we examine the level of knowledge that participants in a Wisconsin child support and welfare demonstration had about child support policy rules. We find very low levels of knowledge. Our results suggest that people tend to learn policy rules by experience; we find less consistent support for knowledge being primarily imparted through interactions with caseworkers. Implications of the lack of participants' knowledge for policy evaluations are discussed.
In all developed countries, single-parent families are particularly vulnerable to poverty. In contrast to many European countries that provide some guaranteed income support for children, the United States has emphasized private responsibility, increasingly requiring child support from the other parent. The reliance on a private approach raises several questions concerning the adequacy and distribution of child support. Using detailed administrative records for virtually all mothers with new child support orders in one U.S. state in 2000, we analyze child support receipts over the subsequent three years. We find that most mothers with child support orders receive support, and many receive substantial amounts. However, the amount received varies substantially from year to year. Moreover, we find substantial instability within years–a characteristic of private support that has been difficult to measure with prior data. Our analysis of child support outcomes across the income distribution shows remarkably similar proportions of families receiving at least some support. Considering amounts received over the distribution of pre-child-support income, we find a U-shaped pattern, with amounts declining slightly with income over the first three deciles, and then increasing steadily. Lower-income families are also less likely to receive regular child support. Nonetheless, child support plays an important role in the income packages of many low-income families, reducing pre-child-support poverty rates by 16 percent and closing the poverty gap by an average of 44 percent in 2001.
In this paper, we document the continuing decline in employment and labor force participation of black men between the ages of 16 and 34 who have a high school education or less. We explore the extent to which these trends can be accounted for in recent years by two fairly new developments: (1) the dramatic growth in the number of young black men who have been incarcerated and (2) strengthened enforcement of child support policies. We use micro-level data from the Current Population Survey Outgoing Rotation Groups, along with state-level data over time on incarceration rates and child support enforcement, to test these hypotheses. Our results indicate that post-incarceration effects and child support policies both contribute to the decline in employment activity among young black less-educated men in the last two decades, especially among those aged 25-34.
A simple model of fatherhood and marriage choice implies that stricter child support enforcement will tend to reduce nonmarital childbearing by raising the costs of fatherhood. We investigate this hypothesis by examining nonmarital childbearing during 1980-1993, a period when child support policy and enforcement underwent enormous changes. We use a sample of women from the Panel Study of Income Dynamics, to which we add information on state child support enforcement. We examine childbearing behavior between the ages of 15 and 44, both before marriage and during periods of nonmarriage following divorce or widowhood. Discrete-time hazard models of nonmarital childbearing provide evidence that women living in states with more effective child support collection were less likely to bear children when unmarried. The findings suggest that policies that shift more costs of nonmarital childbearing to men may reduce this behavior.
How will welfare reform affect family structure and childbearing decisions? To address this question we summarize changes in key elements of welfare policy as well as changes in closely related policies on child support enforcement and sex education and family planning programs. Drawing on a conceptual framework that highlights how incentives created by public policy can affect demographic behaviors, we conclude that, as Congress intended, reform has shifted welfare's incentives in directions that encourage marriage and discourage nonmarital pregnancy and childbearing, childbearing while on welfare, divorce, living independently from relatives, and avoiding child support responsibilities. We review the empirical evidence about welfare's effects on demographic behavior, including nonmarital childbearing, abortion, sexual activity, contraceptive use and pregnancy among teenagers, marriage and divorce, single parenthood, living arrangements, and nonresident parenting behavior. The general tenor of this evidence is that behavioral effects consistent with theoretical expectations and policymakers' intentions do exist. Their magnitudes are small or uncertain.
Although there is a large body of research devoted to the issue of the determinants of welfare caseloads, none of these studies has incorporated the effects of child support. Given that stronger child support enforcement is expected to reduce caseloads by deterring entrances and promoting exits from welfare and by deterring divorce and nonmarital births, this is a surprising and potentially serious omission. The authors employ annual state panel data from 1980 to 1996 first to replicate previous models and then to incorporate the effects of child support. They find support for the hypothesis that strong child support enforcement decreases welfare caseloads.
Nonmarital childbearing is important because it is increasing and because there is concern (and some evidence) that it is damaging to children and perhaps parents as well. We refer to the unions of unwed parents as fragile families because they are similar to traditional families in many respects, but more vulnerable. Most people believe that children in fragile families would be better off if their parents lived together and their fathers were more involved in their upbringing. Indeed, public policy is now attempting to enlarge the role of unwed fathers both by cutting public cash support for single mothers and by strengthening paternity establishment and child support enforcement. Yet the scientific basis for these policies is weak. We know very little about the men who father children outside marriage, and we know even less about the nature of their relationships with their children and their children's mothers. The Fragile Families and Child Wellbeing Study (FFS) is designed to remedy this situation by following a new birth cohort of approximately 4,700 children, including 3,600 children born to unmarried parents. The new data will be representative of nonmarital births in each of 20 cities and in U.S. cities with populations over 200,000. Both mothers and fathers will be followed for at least 4 years, and in-home assessments of children's heath and development will be carried out when the child is 4 years old. The survey is designed to address the following questions: (1) What are the conditions and capabilities of new unwed parents, especially fathers? (2) What is the nature of the relationships in fragile families? (3) What factors push new unwed parents together and what factors pull them apart? In particular, how do labor markets, welfare, and child support public policies affect family formation? (4) How do children fare in fragile families and how is their well-being affected by parental capacities and relationships, and by public policies? The paper discusses what we know about each of these questions and how the FFS addresses each of them. It also presents preliminary findings based on data from Austin, Texas, and Oakland, California.
The central elements in President Clinton's proposal to reform the welfare system are: increasing the earned income tax credit, improving the child support system, educating and training the poor, and limiting the amount of time people can receive assistance. The authors commend the first two components of the president's plan but question the likely effectiveness of the last two: even with the education, training, and child care programs that the president has proposed, few welfare recipients will be able to command wages that would lift them out of poverty, and successful education and training programs would cost more than the government appears willing to spend. The authors recommend that the president consider giving tax credits to, and subsidizing the wages paid by, employers who hire low-wage workers and assist young people and poor families to save for future opportunities. In their view, poverty will not be alleviated by only getting tough on welfare recipients; instead, labor market interventions should be adopted so as to expand opportunities for low-wage, low-skilled workers.