Abstract
This study investigates the extent to which the social safety net in the United States adapted and expanded in response to the profound economic dislocation triggered by the Great Recession. Aggregate per capita spending across major safety net programs increased substantially, with particularly notable expansions in the Supplemental Nutrition Assistance Program (SNAP), the Earned Income Tax Credit (EITC), Unemployment Insurance (UI), and Medicaid. When assessed across demographic dimensions, these transfers were distributed broadly, benefiting households both with and without children, as well as single-parent and two-parent families. Furthermore, transfer payments increased among households regardless of employment composition, including those with higher and lower numbers of employed adults.
However, the growth in transfer receipts exhibited limited progressivity across income strata within the low-income population. Increases were somewhat more pronounced among families situated just below and just above the official poverty threshold compared to those at the very bottom of the distribution. This pattern primarily reflects the design of the EITC, which disproportionately supplements earnings among households with moderate labor force attachment. By contrast, the expansions of SNAP and UI tended to provide more substantial support to the lowest-income households.
The Great Recession itself, commencing in 2008, represented the most severe contraction since the Great Depression. Between 2007 and 2009, real gross domestic product contracted by 3.1 percent, and real per capita personal income declined by 8.3 percent. Over the same period, the national unemployment rate more than doubled, rising from 4.6 percent to 9.3 percent, while labor force participation eroded markedly, driving the employment-to-population ratio down to 59.3 percent—a level not observed since the early 1980s. Unlike most postwar recessions, this downturn was precipitated by a financial crisis that subsequently propagated through the broader economy. Although the aggregate recovery of output advanced more swiftly than in the 1930s, the rebound in employment lagged substantially. As of November 2012, national employment remained below pre-recession peaks, and forecasts anticipated a protracted recovery trajectory.
This paper systematically evaluates how the U.S. social safety net responded to these developments. The safety net, as conceptualized herein, encompasses both principal means-tested transfer programs and major social insurance mechanisms. Importantly, not all components of the safety net are designed to serve as countercyclical income supports. Certain means-tested benefits target elderly retirees or disabled populations whose incomes may remain relatively stable across the business cycle. Similarly, most social insurance programs, such as Disability Insurance and old-age pensions, are tied to prior earnings histories and are not contingent on current labor market status. By contrast, Unemployment Insurance is explicitly designed to mitigate earnings losses during economic downturns.
Despite these distinctions, many safety net programs provide essential resources to families adversely affected by recessions. While it is unrealistic to expect complete replacement of lost earnings during downturns of this magnitude, there remains a general presumption that substantial mitigation should occur.
The paper addresses four core questions:
- What was the scale of aggregate expenditure growth across all safety net programs during the Great Recession, and how did this compare with prior recessions?
- Which specific programs contributed most prominently to the observed increases in spending?
- Given the diversity of target populations, did the expansion of benefits disproportionately assist certain demographic groups?
- To what extent did additional resources flow to the very poor as opposed to households at modestly higher income levels, including those above the poverty line?
The initial two questions center on assessing the aggregate effectiveness of the social safety net, where effectiveness is evaluated by the magnitude and scope of its overall response. In contrast, the third and fourth questions address its distributional effectiveness. Regarding the third question, performance is gauged by the degree to which the safety net succeeded in delivering support across all demographic groups uniformly, or at least comparably, rather than disproportionately assisting certain segments while neglecting others. In the fourth dimension, most scholars and policymakers would consider a safety net to be more effective if it provides relatively greater assistance to those situated at the lower end of the income distribution compared to those with higher incomes. Consequently, the degree of progressivity in the safety net’s response to the Recession serves as a critical indicator of its performance in this respect.
An alternative but equally salient measure of the safety net’s impact concerns its influence on poverty rates during the Great Recession. However, this particular study does not explore that dimension in detail. According to official estimates, the poverty rate in the United States increased from 12.5 percent in 2007 to 15 percent in 2011 (De Navas-Walt et al., 2008, 2012), with an even steeper rise observed among the non-elderly population, as poverty rates among older adults actually declined over this interval. Since, as the findings will illustrate, transfer payments expanded during this period, it is likely that poverty would have increased even more substantially in the absence of such interventions. This issue, however, is reserved for future investigation.
Prior research dedicated specifically to the questions posed here—namely, changes in the volume and distribution of transfers during the Recession—has been relatively limited. Ziliak (2011) compiled total transfer payments through 2009 utilizing data from the Current Population Survey (CPS) and reported substantial increases in expenditures. Burtless and Gordon (2011) relied on administrative records to estimate aggregate federal transfers and similarly documented a significant rise in spending. Gabe and Whitaker (2012) focused their analysis on Unemployment Insurance, examining the role of federal stimulus measures in expanding program benefits. Bitler and Hoynes (2010) conducted a state-level econometric assessment, concluding that while cash transfer programs have become less sensitive to cyclical downturns, in-kind assistance programs have shown heightened responsiveness.
The evidence presented here demonstrates that the safety net mounted a considerable response to the Great Recession. Aggregate expenditures in major safety net programs climbed from $1.6 trillion in 2007 to $2.1 trillion by 2010. Over this same period, total caseloads across all programs increased from 276 million beneficiaries to 310 million. The most substantial contributors to this rise were Unemployment Insurance, the Earned Income Tax Credit, and the Supplemental Nutrition Assistance Program, which together accounted for approximately one-third of the overall spending growth. Additionally, notable expansions were observed in Social Security retirement and disability benefits as well as in Medicare and Medicaid.
Importantly, the increase in assistance was broadly distributed across all major demographic categories and family configurations. Transfers grew for households across the low-income spectrum, with a slightly larger proportional increase accruing to families whose incomes were situated just below or modestly above the poverty line. Although certain programs exhibited a relatively modest response, the safety net as a whole demonstrated a broadly effective performance during the economic downturn.
1.The Structure of the Social Safety Net
It is instructive to begin with an overview of the social safety net, examining each program individually to consider whether it would be expected to provide countercyclical income support and to clarify the specific demographic groups and income ranges it is designed to serve.
The array of transfer programs constituting the social safety net is typically distinguished by whether a program is means-tested or rooted in social insurance principles. Means-tested programs condition eligibility primarily on low levels of income and assets, though additional criteria related to age, disability status, or family composition frequently apply. Some of these programs operate as entitlements, ensuring benefits to all eligible applicants, while others are constrained by funding allocations. Generally, benefits in means-tested programs decline as income rises, though there are notable exceptions. For instance, the Earned Income Tax Credit (EITC) delivers larger benefits to certain households with moderate earnings than to those with no earnings at all.
In contrast, social insurance programs determine eligibility and benefit levels on the basis of employment and earnings histories. Consequently, individuals and families with more sustained attachment to the labor market typically qualify for higher benefits. As a result, the distributive profile of social insurance differs markedly from that of means-tested programs, because many of the nation’s most disadvantaged households have the weakest employment histories and thus often remain ineligible for social insurance coverage.
Means-Tested Programs
Within the means-tested category, the largest programs in expenditure terms are Medicaid, the Earned Income Tax Credit (EITC), Supplemental Security Income (SSI), Subsidized Housing programs, and the Supplemental Nutrition Assistance Program (SNAP). Medicaid finances health care for various groups, most notably low-income mothers and children, as well as elderly and disabled individuals with limited resources, including those requiring long-term care services. The EITC, administered through the tax system, offers a refundable credit to working families—especially those with children—structured to rise with earnings up to a specified threshold, after which it gradually phases out. Thus, it delivers maximum support to households with earnings within a moderate range (approximately $10,000 to $20,000 in 2012). Smaller credits are allocated to families with earnings either below or above this range.
SSI provides cash payments to individuals who are elderly, blind, or disabled and who possess limited income and assets, with benefits diminishing as recipients’ incomes increase. Approximately 80 percent of SSI beneficiaries are classified as disabled. Subsidized housing programs include vouchers redeemable in the private rental market as well as subsidized units in public housing developments. Voucher amounts are inversely linked to income, while public housing rents rise with income. Eligibility criteria encompass both income and asset limits as well as participation in other assistance programs. Critically, unlike entitlement programs, housing assistance is capped by available funding, resulting in lengthy waiting lists—sometimes extending over several years.
SNAP provides eligible households with an electronic benefits transfer card for purchasing approved food items. Benefit levels are inversely related to income. Unlike housing assistance, SNAP is an entitlement, fully federally funded, and open to all qualifying households irrespective of demographic composition, including single individuals without dependents.
Temporary Assistance for Needy Families (TANF) offers cash support to children and their caregivers, primarily targeting single-parent families headed by mothers. Eligibility is predicated on meeting low income and asset thresholds. Unlike SNAP, TANF is not an entitlement but is subject to the limits of a federal block grant and supplemental state resources. Moreover, it imposes time limits and work participation requirements.
Table 1 (upper panel) provides a summary of expenditures, caseloads, and average expenditures per recipient in 2007, the year preceding the onset of the Great Recession. Medicaid far surpasses other means-tested programs in scale, with $327 billion in expenditures and 56 million beneficiaries. The EITC, SSI, Housing Assistance, and SNAP collectively form a second tier, each with expenditures ranging from $30 billion to $48 billion but with considerable variation in the number of beneficiaries. For example, Housing Assistance serves approximately 5 million recipients, while SNAP and the EITC each reach between 24 million and 26 million households. Importantly, the average expenditure per recipient differs substantially across programs: Housing Assistance provides a relatively high per-recipient value of $646, whereas SNAP and the EITC deliver more modest average benefits ranging between $96 and $165 per person.
Other means-tested programs—including TANF, School Nutrition Programs, Head Start, and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)—are comparatively small in budgetary terms. Despite their more limited scale, these programs still play an important role in the overall safety net, addressing specific needs such as food security, early childhood education, and supplemental nutritional support for vulnerable families.
Which of these programs should be expected to provide additional assistance during a recession? Among the programs examined, only three can be reasonably anticipated to deliver expanded support in response to an economic downturn: Medicaid, SNAP, and, to a considerably more limited extent, the SSI program.1 The declines in household income and asset levels that characteristically accompany recessions should increase the number of families qualifying for Medicaid and SNAP, as these programs have relatively few supplementary eligibility criteria beyond financial means-testing. In the case of SSI, one may expect some rise in eligibility among elderly households whose incomes fall below the program’s threshold during a recession. However, this effect is tempered by the fact that older individuals generally have lower rates of labor market participation, thereby constraining the magnitude of the anticipated increase in eligibility.
It is important to note that there is no compelling reason to expect that a recession will appreciably alter the proportion of families meeting SSI’s medical criteria for disability, and because such families constitute the predominant share of SSI beneficiaries, a substantial countercyclical response in the SSI caseload is unlikely. Similarly, no significant increase in assistance should be anticipated within subsidized housing programs or TANF. These programs are not structured as entitlements but are constrained by the limits of annual appropriations.2 Further, because TANF’s work participation requirements were not suspended or relaxed during the recessionary period, its capacity to provide robust assistance to newly unemployed families was inherently limited.
The responsiveness of the EITC during recessions is inherently ambiguous. On one hand, as household earnings decline, some families become newly eligible for the EITC or may qualify for higher benefits relative to their prior receipt. On the other hand, families whose primary earners lose employment entirely become ineligible for any EITC benefits, given that the credit is contingent on positive earnings. Consequently, the aggregate effect is indeterminate ex ante and depends on the relative prevalence of these contrasting scenarios across the income distribution.
Apart from the EITC, benefits conferred by most means-tested programs are generally targeted toward households with the lowest incomes, resulting in distributional effects that are favorable to the most economically disadvantaged. The EITC is a notable exception because it delivers the largest subsidies to families with moderate earnings levels, rather than those at the very bottom of the earnings distribution. TANF, too, presents a complicated distributional profile; in principle, the program’s work requirements mean that families lacking any employment or earnings will eventually lose eligibility. Over time, this has contributed to a decline in TANF transfers to households at the bottom of the income spectrum and an increase in transfers to those somewhat higher up (Ben-Shalom et al., 2012).
Regarding the demographic groups served, Medicaid, TANF, subsidized housing programs, and the EITC primarily benefit families with children, rather than childless adults. Moreover, Medicaid and TANF are particularly oriented toward single-mother households. SSI, by design, restricts eligibility to the elderly and disabled. SNAP is the sole program with nearly universal demographic eligibility, covering households of all compositions, including single adults without children. For this reason, with the exception of SNAP, expansions in safety net funding should not be expected to benefit all demographic groups uniformly.
Social Insurance Programs
The principal social insurance programs consist of Social Security Old Age and Survivors Insurance (OASI), Medicare, Social Security Disability Insurance (DI), Unemployment Insurance (UI), and Workers’ Compensation. The OASI program provides monthly cash benefits to individuals aged 62 or older, as well as to their spouses, dependents, and survivors, contingent upon having sufficient lifetime employment and earnings histories to qualify. This program is modestly progressive, awarding proportionately higher replacement rates to individuals with lower average lifetime earnings. Medicare subsidizes health care services for individuals over age 65 and DI beneficiaries, including coverage of hospitalization, physician services, and prescription drugs.
The DI program provides cash benefits to workers who can demonstrate that they suffer from severe mental or physical impairments preventing substantial gainful employment and who also have adequate employment and earnings histories. Upon reaching age 65, DI recipients transition into the OASI system. UI offers temporary cash benefits to individuals who have been involuntarily separated from employment and who have adequate work and earnings histories to qualify. Under normal circumstances, most states provide up to 26 weeks of UI benefits, with additional weeks of support available through the Extended Benefits program if a state’s unemployment rate exceeds statutory thresholds. Finally, Workers’ Compensation supplies benefits to individuals who sustain work-related injuries or illnesses, usually of a less permanent or severe nature than those covered under DI.
As documented in Table 1, OASI and Medicare are by far the largest social insurance programs in terms of both expenditures and caseloads. In 2007, OASI expenditures totaled approximately $486 billion and served around 40 million recipients, while Medicare spending was comparably high. DI, although serving a much smaller caseload of about 9 million beneficiaries, still entailed $99 billion in expenditures—an amount exceeding that of any means-tested program other than Medicaid. In 2007, when the national unemployment rate stood at a relatively low 4.6 percent, UI expenditures were $34 billion, supporting nearly 8 million recipients. Workers’ Compensation spending was higher still, totaling about $55 billion.
During an economic downturn, UI stands out as the program explicitly designed to deliver countercyclical income support to newly unemployed workers. In contrast, fluctuations in OASI expenditures and caseloads are mainly driven by shifts in retirement behavior, which may accelerate or decelerate during recessions. The evidence regarding retirement timing is mixed; for example, Munnell and Rutledge (2013) report no consistent change in retirement ages during the Great Recession. Medicare participation and spending are unlikely to exhibit meaningful short-term sensitivity to macroeconomic conditions, given that eligibility is determined primarily by age. Similarly, the incidence of severe disabilities qualifying for DI benefits is not expected to change markedly in the short term. However, the propensity of eligible individuals to apply for DI may increase during recessions, potentially affecting caseloads and expenditures indirectly.
From a distributional perspective, UI benefits accrue to individuals with no current earnings but sufficient recent employment histories to qualify, which may systematically exclude workers with intermittent or marginal attachment to the labor force. Consequently, UI does not always reach the very poorest households. Moreover, UI benefits are occasionally paid to households with substantial additional sources of income. Although UI is available to workers across all demographic categories, groups such as single mothers—who tend to have more erratic employment records—may benefit less consistently. Medicare and DI benefits, by definition, are restricted to the elderly and disabled populations, respectively. Thus, social insurance programs are not distributionally neutral; they disproportionately serve certain demographic and economic groups and cannot be presumed to deliver assistance in proportion to need across the full spectrum of the income distribution.
Recession-Specific Legislation
Beyond the standard countercyclical provisions embedded in social safety net programs, it is common for the federal government to enact special legislative measures during recessions to further augment benefits and reduce tax burdens in ways that exceed what would occur under permanent statutory rules. The Great Recession provides a clear example of this practice, as the supplementary benefits legislated during this period were substantially larger in magnitude than those implemented in most previous economic downturns.
Starting in June 2008, Congress passed legislation to extend the duration of Unemployment Insurance (UI) benefits, and in 2009, these extensions were expanded further. Ultimately, recipients residing in states with particularly elevated unemployment rates could qualify for as many as 99 weeks of benefits. Additionally, Congress authorized increases in UI benefit levels, encouraged states to broaden eligibility criteria, and reduced the extent to which UI benefits were subject to federal income taxation. In early 2009, further stimulus measures were enacted, including increases in Supplemental Nutrition Assistance Program (SNAP) benefit levels and encouragement to states to relax SNAP eligibility requirements. The Earned Income Tax Credit (EITC) was augmented for families with more children, while supplemental funding was provided to bolster state TANF block grants. The Child Tax Credit was also increased, and both income and payroll tax rates were temporarily lowered for low-income households. Furthermore, one-time payments were distributed to recipients of Social Security Old Age and Survivors Insurance (OASI) and Supplemental Security Income (SSI), along with targeted allocations to support housing assistance programs. Collectively, these measures were intended to stimulate aggregate demand and to deliver targeted relief to economically vulnerable families, thereby constituting a significant expansion of the social safety net during the recessionary period.
III. Aggregate Trends
Figure 1 illustrates the trajectory of real per capita expenditures from 1990 through 2010 across major means-tested transfer programs, excluding Medicaid. As anticipated, some programs exhibited minimal responsiveness during the Great Recession. The Temporary Assistance for Needy Families (TANF) program is perhaps the most salient example, displaying a long-term decline in expenditure that began following its restructuring in the mid-1990s. The modest rise in TANF spending observed after 2009 likely reflects the infusion of additional resources through stimulus legislation, rather than any reversal of this downward trend. Similarly, spending on SSI and housing assistance programs increased only marginally, consistent with the constraints and eligibility features previously discussed.
In contrast, expenditures under SNAP and the EITC demonstrated pronounced growth during the Recession. SNAP spending expanded most rapidly among all means-tested programs, with total expenditures increasing from $30 billion in 2007 to $65 billion by 2010, effectively more than doubling in nominal terms. Real per capita spending similarly climbed from $136 to $287 over the same period. This remarkable expansion can be traced partly to earlier reforms implemented between 2000 and 2007, which simplified eligibility procedures, streamlined and extended recertification intervals, increased the exemption threshold for vehicle ownership, and instituted outreach initiatives designed to raise awareness among eligible families. These measures had already begun to elevate participation before the onset of the recession, thereby facilitating broader access when household incomes declined. Nevertheless, the increases in benefit levels and the easing of eligibility rules specifically enacted during the recession undoubtedly contributed to this surge. However, data disaggregating SNAP caseloads and benefits per recipient reveal that the bulk of expenditure growth was driven by rising participation rather than increases in benefit amounts per household.
EITC expenditures also grew substantially, though at a less dramatic rate than SNAP. Aggregate EITC spending rose from $49 billion in 2007 to $59 billion in 2010, while real per capita spending increased from $217 to $242—a gain of approximately 12 percent. This trend clarifies the question of whether more families lost all earned income and thereby became ineligible for the credit, versus those whose earnings declined but remained positive, qualifying them for higher benefits. The evidence indicates the latter scenario predominated. Although provisions in the stimulus package increased benefits for larger families with three or more children, this factor alone does not appear sufficient to explain the bulk of the expansion. In fact, per-recipient expenditure actually declined slightly during the recession, suggesting that growth was attributable almost entirely to increased caseloads rather than higher average payments.
Although not displayed in Figure 1, Medicaid spending also rose sharply during this period. Aggregate Medicaid expenditures grew from $327 billion in 2007 to $401 billion in 2010, with real per capita expenditure increasing from $1,459 to $1,658—an approximate 14 percent rise. As discussed earlier, Medicaid participation is expected to be inherently countercyclical, making this pattern consistent with prior expectations.
Figure 2 depicts trends in expenditures across the principal social insurance programs, all of which demonstrated marked growth during the recessionary period. As anticipated, the UI program experienced the most significant expansion, reflecting both its design as a countercyclical safety net mechanism and the extraordinary temporary enhancements enacted through stimulus legislation. From 2007 to 2010, aggregate UI spending increased from $34 billion to $142 billion, while real per capita expenditure grew from $150 to $581, representing nearly a fourfold increase.
Although less dramatic, OASI, Medicare, and DI expenditures also increased during the Recession. For Medicare, the observed trajectory largely reflected a continuation of preexisting long-term trends, without significant deviation attributable to the recession. However, the growth rates of OASI and DI spending accelerated somewhat relative to prior patterns. For OASI, part of this acceleration may have been driven by the stimulus provision that granted one-time benefit increases to recipients. In the case of DI, rising expenditures are best interpreted as an increase in the participation rate among medically eligible individuals—many of whom may have been working prior to the downturn and subsequently applied for benefits following job loss. This dynamic underscores the role of economic conditions in shaping the take-up of disability benefits, even absent changes in underlying medical eligibility.
Taken together, these developments reveal that, perhaps surprisingly, the social insurance programs—beyond UI—exhibited a robust and sustained positive response to the recessionary environment. Indeed, when considering both means-tested and social insurance programs collectively, the expansion in spending constituted a substantial and consequential policy response to the Great Recession.
Appendix Figure A-1 provides a longer-term perspective on aggregate per capita spending trends from 1970 to 2010. This figure, which encompasses the programs enumerated in Table 1, demonstrates that total safety net spending has trended consistently upward over the past four decades. Notably, expenditure growth during the Great Recession substantially outpaced that of the early 1990s recession, a period characterized by a peak annual unemployment rate of 7.5 percent, substantially lower than the 9.6 percent observed during the more recent downturn. Intriguingly, the recession of the early 1980s, which recorded a comparable peak unemployment rate of 9.7 percent, exhibited only slightly lower growth in real per capita spending—approximately 14 percent between 1979 and 1982, versus 18 percent between 2007 and 2010. Importantly, the differential in growth rates between these recessions does not appear to have been driven by UI alone. Although UI expenditures during the Great Recession expanded by approximately 280 percent—far exceeding the 100 percent increase during the early 1980s recession—Medicare expenditures rose 26 percent in the early 1980s, compared with only 13 percent during the Great Recession. Given that Medicare’s overall spending dwarfs that of UI (approximately four times larger at 2010 levels), the comparatively modest Medicare growth partially offsets the surge in UI expenditures. The most salient difference between the recessions emerges in means-tested program spending, which expanded by 17 percent during the Great Recession but only 2 percent during the early 1980s. This divergence reflects, in part, the fact that most of today’s major means-tested programs were substantially smaller or less developed thirty years ago.
III. Distribution
Although aggregate expenditures in safety net programs expanded markedly during the Great Recession, this overall growth does not imply that all demographic and income groups experienced commensurate gains. Indeed, given the disparate responses among individual programs—each of which targets distinct populations—the distribution of benefits was necessarily uneven. Demographic groupings can be delineated by family structure, distinguishing, for example, single-parent families, two-parent families, and childless households or individuals. Historically, single-parent families have constituted a substantial share of TANF recipients, yet TANF was among the programs displaying only minimal responsiveness during the recession. Consequently, it is plausible that these families did not benefit proportionately from the aggregate increases in safety net expenditures. The EITC, by contrast, primarily assists families with children, potentially resulting in greater gains for these households.
A further salient distinction lies between the elderly and disabled populations on the one hand, and the non-elderly, non-disabled on the other. Over recent decades, the growth in safety net spending has disproportionately favored the elderly and disabled relative to the remainder of the population (Ben-Shalom et al., 2012), raising important questions regarding whether this relative pattern of expansion persisted during the Great Recession. Programs such as OASI and SSI principally target these groups and thus may have continued to channel resources toward them.
Another dimension warranting attention is employment status within families. While increased expenditures on UI were, by design, likely to benefit primarily non-employed individuals who lost jobs during the downturn, the rise in EITC outlays was more likely to assist families maintaining some level of earned income, since eligibility requires positive earnings.
Equally critical is understanding how the growth in safety net expenditures was distributed across segments of the income distribution. Many components of the safety net, particularly social insurance programs, extend benefits not only to families in poverty but also to households with incomes above the poverty threshold. It is therefore possible that a significant portion—or even the majority—of the increased spending accrued to families at higher income levels. The EITC, for example, generally delivers its largest subsidies to families with earnings modestly above the poverty line rather than to those at the very bottom. Similarly, although UI benefits are not explicitly income-tested, they are more likely to be received by households whose recent earnings histories were sufficiently robust to qualify, potentially excluding those in deepest poverty.
Indeed, over the past thirty years, much of the growth in U.S. safety net expenditures has accrued to families with incomes exceeding 50 percent of the poverty line, while expenditures per family for those below that threshold have actually declined in some groups (Ben-Shalom et al., 2012). Determining whether this pattern of regressive growth continued through the Great Recession is a critical policy question.
To address these issues empirically, this analysis builds upon the work of Scholz et al. (2009), Moffitt and Scholz (2010), and Ben-Shalom et al. (2012), extending their methodologies to encompass the period of the Great Recession. In their earlier research, these authors employed data from the 2004 panel of the Survey of Income and Program Participation (SIPP) to document the extent to which families differing in demographic composition and pre-transfer income received public assistance. Their 2004 findings serve here as a pre-recession benchmark. During the reference months for their analysis, the national unemployment rate averaged 5.7 percent.
For this study, we rely on data from the 2008 SIPP panel, which captures two critical phases of the recession: an initial period spanning September 2008 to March 2009, when the unemployment rate averaged 7.3 percent but when most stimulus-driven expansions of the safety net had only begun to take effect; and a subsequent period from September 2010 to March 2011, when unemployment had risen further to an average of 9.3 percent and the policy expansions were fully implemented. For clarity, we denote these periods as “2008” and “2010,” respectively.
The SIPP constitutes a nationally representative household survey that periodically draws random samples of the non-institutionalized U.S. population, following respondents longitudinally for multiple years. The survey interviews households every four months, gathering detailed information on demographic characteristics, income sources, and program participation covering each of the four preceding months. Because it is explicitly designed to measure benefit receipt, the survey offers relatively comprehensive coverage of transfer programs.
Using the 2008 panel data, we first define each individual’s “market” income in each month as the sum of wage and salary earnings, self-employment income, capital income (including interest, dividends, and rental income), and defined-benefit pension income. We compute the average of this monthly market income over the preceding four months, then aggregate across family members to construct an average family market income. This measure serves to classify families into discrete portions of the pre-tax, pre-transfer income distribution: those with income below 50 percent of the official poverty line for their household size; those with income between 50 and 100 percent of the poverty line; and those with income between 100 and 150 percent of the poverty threshold.3
Post-transfer income is calculated by summing the reported values of all relevant transfers received over the four months prior to each interview, averaging these sums, and then aggregating across all individuals in the household. The set of transfers included comprises the EITC, Child Tax Credit, SSI, housing subsidies, SNAP, TANF, General Assistance, WIC, Veterans’ benefits, foster care payments, OASI, Disability Insurance (DI), Unemployment Insurance (UI), and Workers’ Compensation. We exclude Medicaid and Medicare from this calculation because respondents typically lack information on the monetary value of the benefits they receive from these programs.4
To investigate demographic distribution, we categorize households into five groups: the elderly (reference person aged 62 and older), the disabled (identified by receipt of SSI-disability or DI benefits), and three groups among the non-elderly, non-disabled population: single-parent families with children under age 18, two-parent married families with children under 18, and childless families and unrelated individuals.5 For the disabled group, the definition relies exclusively on benefit receipt because the SIPP does not provide sufficient detail to ascertain medical eligibility for disability programs.
Additionally, we construct two mutually exclusive categories within the non-elderly, non-disabled population based on employment status: “employed” families include households with at least one adult who worked in all four months preceding the interview, while “non-employed” families are those in which no adult worked during the entire four-month period. This framework allows a detailed examination of how the recession-era expansions in safety net programs were distributed across demographic and income groups, and how these patterns compare to pre-recession benchmarks.
Findings
We begin by examining trends in safety net expenditures across various demographic groups and segments of the income distribution. Figure 3 presents the real average monthly transfer per family for each of seven demographic categories in the years 2004, 2008, and 2010. These expenditures represent the sum of all transfer programs and are averaged across all families within each demographic category, regardless of their income level. In 2004, the data exhibit a pattern consistent with established knowledge regarding relative income levels and program eligibility: expenditures were higher for single-mother households ($414) compared to two-parent households ($242) and childless families or individuals ($101). Similarly, non-employed families received significantly more in transfers ($353) than those with at least one employed member ($161).6 Elderly and disabled individuals received the largest average transfers, $1,245 and $1,277 respectively, largely due to the high prevalence of OASI receipt among the elderly and the comparatively generous benefits associated with Disability Insurance (DI) and Supplemental Security Income (SSI).
Between 2004 and 2008—representing the initial stages of the Great Recession—average total transfers increased across all groups. The non-elderly, non-disabled categories experienced gains ranging from 16 to 20 percent. By contrast, elderly households saw the smallest increase at 6 percent, while disabled individuals experienced a 10 percent rise. As noted in Appendix Table A-1, these gains were driven predominantly by increased expenditures in three key programs: the Supplemental Nutrition Assistance Program (SNAP), the Earned Income Tax Credit (EITC), and Unemployment Insurance (UI). Each of these programs contributed to gains across all demographic groups, including those typically associated with work or recent employment history such as EITC and UI recipients. Given that major legislative expansions had only minimally taken effect by 2008, these increases likely reflect the automatic stabilizer functions embedded within these programs.
From 2008 to 2010, transfer payments rose again substantially across all non-elderly, non-disabled groups, with increases again ranging between 16 and 20 percent. Elderly and disabled populations experienced more modest increases during this period—5 percent or less. According to Appendix Table A-1, the sources of growth varied among demographic groups. Two-parent and single-parent families benefited broadly from expansions in all three programs. In contrast, childless households and non-employed families primarily benefited from SNAP and UI, with minimal gains from the EITC. Families with at least one employed member saw increased support from all three programs. Interpreted as the result of both automatic countercyclical program behavior and policy expansions enacted through stimulus legislation, the data reveal that safety net responses were broad-based and reached all major demographic constituencies.
Figure 4 illustrates average transfer levels by income segment, focusing specifically on households with incomes below 150 percent of the federal poverty threshold and averaging across all demographic categories. The data capture three primary categories within the low-income population: households in deep poverty (income below 50 percent of the poverty line), shallow poverty (50 to 100 percent of the poverty line), and near poverty (100 to 150 percent of the poverty line). Interestingly, even prior to the Great Recession, households in shallow poverty received average transfers not markedly smaller than those in deep poverty. This finding suggests that the U.S. transfer system is not strongly progressive within the population falling below the poverty threshold.7
Across all three income categories, average transfers increased over both the 2004–2008 and 2008–2010 periods. Specifically, transfers for those in deep poverty grew by approximately 8 percent in each interval. For those in shallow poverty, the increases were 9 percent and 10 percent respectively, while those in near poverty experienced 11 percent increases during both periods. Thus, the expansion of the safety net during the Great Recession does not appear to have been particularly progressive, at least within the lower income spectrum.
Appendix Table A-2 disaggregates the contribution of the three major programs—SNAP, EITC, and UI—to these income-based transfer levels. Those in deep poverty received notable increases in SNAP and UI benefits, but relatively little from the EITC. In contrast, families in shallow poverty received the highest average EITC benefits, while those in near poverty also received significantly more from the EITC compared to those in deep poverty.
A more detailed perspective is provided by cross-classifying demographic groups with income strata. Table 2 reports average expenditure levels, while Table 3 shows percentage increases. All groups—regardless of demographic profile or income classification—saw increases in transfer payments from 2004 to 2010, with only a few exceptions. However, the extent of the increases varied significantly across groups in a manner consistent with program design. For instance, the EITC primarily targets families with children and some earned income, leading to disproportionately large increases for single-parent and two-parent households in shallow poverty. In contrast, childless individuals and families, who receive limited EITC benefits, experienced smaller differentials between deep and shallow poverty groups.
Similarly, employed families—those most likely to qualify for the EITC—saw larger increases in shallow poverty relative to deep poverty. From 2004 to 2008, transfers rose by 20 percent for employed families in shallow poverty, compared to only 6.8 percent for those in deep poverty. Conversely, non-employed families in deep poverty experienced greater gains than their shallow poverty counterparts. Since these households typically receive little from the EITC, their gains came largely from SNAP and UI, programs which do not require current employment and are thus better suited to assist those with no recent labor market attachment.
Appendix Tables A-3, A-4, and A-5 provide further detail by presenting transfer amounts from each of the three principal programs—SNAP, EITC, and UI—across both demographic and income groups. The highest average transfers observed are EITC benefits received by single-parent and two-parent families in shallow poverty. These are followed by SNAP benefits for single-parent and two-parent families in deep poverty. Other significant beneficiaries include employed households in shallow poverty and two-parent and single-parent families in near poverty, who received high average EITC transfers. UI transfers, particularly from 2008 to 2010, reflect the impact of recession-specific legislative expansions and were especially important for non-employed families and childless households in poverty.
These observed patterns are largely consistent with expectations based on the structure and eligibility criteria of the programs that saw the most substantial increases during the Recession. The expansions were driven by a combination of automatic stabilizer mechanisms that triggered as incomes fell, and policy-driven stimulus interventions that increased benefit levels and eligibility. SNAP delivers the most support to households at the lowest income levels, while UI—although not directly income-tested—provided greater assistance during the Recession to lower-income families with qualifying employment histories. The EITC, by contrast, is structurally designed to assist those with modest but positive earnings and thus inherently channels more assistance to households slightly higher up the income ladder.
Taken together, these programmatic characteristics explain the broadly distributed nature of transfer increases during the Recession. While the system did not become more progressive within the sub-poverty population, it succeeded in delivering substantial support across virtually all categories of low-income families, regardless of their position relative to the poverty line. Both those in deep poverty and those nearer to the threshold experienced notable increases in assistance, albeit through different programmatic channels reflective of their labor market status and household composition.
V. Work Disincentives
A critical consideration in evaluating the safety net’s role during the Recession concerns whether the observed increase in transfer payments to low-income households was partly driven by the programs’ potential work disincentives. If a portion of the documented rise in expenditures stemmed from voluntary reductions in labor supply, the true extent of income replacement provided by the transfers would be overstated, as pre-transfer earnings could have declined in response to more generous benefits. Theoretically, the impact of expanding program generosity in a downturn is ambiguous. On the one hand, more generous benefits would generally amplify any pre-existing disincentives to work. On the other hand, recessions inherently lower the availability of employment opportunities—that is, in the terminology of economic research, they reduce the arrival rate of job offers (even if the wage itself remains unchanged). As a result, employment levels would decline during a recession irrespective of any program changes. Consequently, the magnitude of work disincentives during a downturn could be either greater or smaller relative to normal economic periods.
In practice, robust econometric evidence on the work disincentives of transfer programs during major recessions is sparse. An exception is the body of research on unemployment insurance (UI). Rothstein (2011) examined the consequences of differential UI benefit extensions across states and over time to measure the impact of these extensions on the duration of unemployment spells. Rothstein’s findings indicate only a modest effect overall, with most of the impact attributed to prolonged unemployment spells rather than outright exits from the labor force. Similarly, Schmieder et al. (2012), studying the German UI system, compared work disincentives during recessions with those during more typical economic conditions. They concluded that work disincentives were actually smaller in recessions compared to normal times.
Outside these UI studies, there is a lack of research specifically addressing how other safety net programs influence work behavior during recessions. Nevertheless, a substantial literature examines their effects during non-recessionary periods. For the two programs most significant in the Recession—SNAP and the EITC—existing research consistently finds only limited effects on labor supply. Currie (2003), in a review of studies on Food Stamps, concluded that most estimates point to negligible or nonexistent impacts on work effort, with the largest estimated effect corresponding to about one hour less work per week. These limited disincentives are commonly attributed to the relatively modest benefit amounts in relation to overall household income. In a subsequent study, Hoynes and Schanzenbach (2012) reported that while the Food Stamp program in its early years created notable work disincentives among single mothers, the effect was minor or insignificant for the broader population.
Regarding the EITC, the evidence suggests it has encouraged labor force participation among single mothers but has no discernible impact on hours worked by those already employed. For married men, the EITC has little to no effect, while for married women it modestly reduces employment rates and hours worked—approximately a 1 percent decline in employment and a 1 to 4 percent decline in hours (Hotz and Scholz, 2003; Eissa and Hoynes, 2006). Although studies specifically examining the EITC and SNAP during the Recession might uncover somewhat different patterns, the available evidence provides little reason to believe that the expenditure increases documented here resulted to any significant degree from work disincentives.
VI. Summary
The social safety net demonstrated a significant and broadly favorable response during the Great Recession. At the aggregate level, per capita expenditures across major programs expanded considerably, with the largest growth occurring in SNAP, the EITC, UI, and Medicaid. More moderate increases were also observed in spending for DI, SSI, OASI, and Medicare. From a distributional perspective, these transfer increases were widespread across demographic groups—including families with children, single-parent households, two-parent households, and, to a lesser extent, elderly and disabled populations. Transfers increased among families regardless of whether they had employed members or not.
However, the increases were not strongly progressive across income strata within the low-income population. While all income groups saw gains in transfer amounts, the percentage increases were slightly greater for those just below and just above the poverty line than for those at the very bottom. This pattern primarily reflects the EITC’s design: viewed purely as an income support program rather than as an incentive for work, the EITC is regressive within the low-income range, as it delivers higher benefits to households with greater earnings. By contrast, SNAP and UI expansions benefitted those with the lowest incomes more directly.
Among all policy measures enacted during the Recession, the most significant was the extension and expansion of UI benefits. As the economic recovery advances, these temporary extensions have already begun to be phased out. In contrast, the EITC is expected to remain largely intact even as the economy improves, regardless of whether the specific enhancements for larger families continue. The future scope of SNAP will depend on whether eligibility expansions implemented during the Recession and reforms from the prior decade are maintained.
The withdrawal of expanded UI benefits is likely to have the greatest impact on households at the bottom of the income distribution, as suggested by the data presented here. Likewise, any retrenchment of SNAP benefits will also primarily affect this group. Meanwhile, the continued operation of the EITC in its permanent form will maintain support for families with somewhat higher earnings. Consequently, as the special provisions recede, the overall progressivity of the safety net relative to the income distribution is likely to decline.
References
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Bitler M, Hoynes H. The State of the Safety Net in the Post-Reform Era. Brookings Papers on Economic Activity. 2010; 2:71–127.
Burtless, G.; Gordon, T. The Federal Stimulus Program and Their Effects. In: Grusky, David B.; Western, Bruce; Wimer, Christopher, editors. The Great Recession. New York: Russell Sage Foundation; 2011.
Burtless, Gary; Svaton, Pavel. Health Care, Health Insurance, and the Distribution of American Incomes. Forum for Health Policy Research. 2010; 13(1):1–39.
Currie, J. U.S. Food and Nutrition Programs. In: Moffitt, R., editor. Means-Tested Transfer Programs in the United States. Chicago: University of Chicago Press; 2003.
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Hotz, VJ.; Scholz, JK. The Earned Income Tax Credit. In: Moffitt, R., editor. Means-Tested Transfer Programs in the United States. Chicago: University of Chicago Press; 2003.
Hoynes, Hilary; Schanzenbach, Diane. Work Incentives and the Food Stamp Program. J Pub Economics. 2012 Feb.96:151–162.
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Appendix
Figure A-1: Total Real per Capita Spending, 1970–2010
Table A-1
Average Government Expenditures on Different Programs by Year and Demographic Group
| Food Stamps | EITC | Unemployment Insurance | |||||||
| Program | |||||||||
| Year | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 |
| Nonelderly, nondisabled | |||||||||
| Single-parent families | 68 | 97 | 130 | 97 | 107 | 120 | 26 | 35 | 44 |
| Two-parent families | 12 | 26 | 37 | 34 | 46 | 63 | 33 | 48 | 67 |
| Childless families and individuals | 5 | 8 | 15 | 4 | 6 | 7 | 30 | 40 | 61 |
| Employed families | 10 | 18 | 27 | 24 | 30 | 39 | 26 | 36 | 46 |
| Nonemployed families | 60 | 79 | 99 | 0 | 2 | 2 | 79 | 103 | 185 |
| Elderly families and individuals | 5 | 7 | 12 | 4 | 5 | 5 | 7 | 15 | 20 |
| Disabled families and individuals | 38 | 59 | 88 | 23 | 28 | 34 | 12 | 23 | 39 |
Source: Author’s calculations using 2004 wave 1, 2008 waves 2 and 8 SIPP, and NBER TAXSIM. Note: See Table 2 notes for definition of groups.
Table A-2
Average Government Expenditures on Different Programs by Income Range and Year
| Food Stamps | EITC | Unemployment Insurance | |||||||
| Program | |||||||||
| Income Range | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 |
| Under 50% of Poverty Line |
43 |
60 |
82 |
18 |
21 |
23 |
36 |
50 |
85 |
| Between 50% and 100% of Poverty Line |
31 |
53 |
76 |
108 |
124 |
148 |
30 |
56 |
62 |
| Between 100% and 150% of Poverty Line |
11 |
23 |
36 |
57 |
65 |
80 |
32 |
43 |
53 |
Source: Author’s calculations using 2004 wave 1, 2008 waves 2 and 8 SIPP, and NBER TAXSIM Note: See Table 2 notes for definition of groups
Table A-3
Average Government Expenditures on Food Stamps by Income Range and Demographic Group
| Under 50% of Poverty Line | Between 50% and
100% of Poverty Line |
Between 100% and
150% of Poverty Line |
|||||||
| Income Range | |||||||||
| Year | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 |
| Nonelderly, nondisabled | |||||||||
| Single-parent families | 169 | 224 | 257 | 89 | 141 | 170 | 27 | 45 | 75 |
| Two-parent families | 113 | 158 | 195 | 51 | 109 | 149 | 16 | 45 | 58 |
| Childless families and individuals | 21 | 31 | 47 | 15 | 22 | 39 | 7 | 14 | 25 |
| Employed families | 70 | 88 | 121 | 45 | 74 | 103 | 14 | 29 | 44 |
| Nonemployed families | 70 | 93 | 112 | 11 | 15 | 25 | 4 | 17 | 33 |
| Elderly families and individuals | 9 | 13 | 23 | 4 | 8 | 14 | 3 | 4 | 11 |
| Disabled families and individuals | 52 | 78 | 109 | 34 | 65 | 107 | 14 | 37 | 62 |
Source: Author’s calculations using 2004 wave 1, 2008 waves 2 and 8 SIPP. Note: See Table 2 notes for definition of groups.
Table A-4
Average Government Expenditures on EITC by Income Range and Demographic Group
| Under 50% of Poverty Line | Between 50% and
100% of Poverty Line |
Between 100% and
150% of Poverty Line |
|||||||
| Income Range | |||||||||
| Year | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 |
| Nonelderly, nondisabled | |||||||||
| Single-parent families | 65 | 77 | 71 | 276 | 307 | 348 | 186 | 193 | 217 |
| Two-parent families | 114 | 133 | 152 | 261 | 305 | 363 | 111 | 136 | 185 |
| Childless families and individuals | 8 | 9 | 9 | 36 | 39 | 52 | 10 | 17 | 21 |
| Employed families | 72 | 79 | 95 | 162 | 176 | 214 | 74 | 84 | 105 |
| Nonemployed families | 0 | 1 | 1 | 0 | 36 | 25 | 0 | 9 | 22 |
| Elderly families and individuals | 2 | 2 | 3 | 15 | 18 | 21 | 12 | 14 | 16 |
| Under 50% of Between 50% and Between 100% and Poverty Line 100% of Poverty 150% of Poverty
Income Range Line Line Year 2004 2008 2010 2004 2008 2010 2004 2008 2010 |
|||||||||
| Disabled families and individuals | 11 | 12 | 16 | 102 | 136 | 150 | 62 | 71 | 86 |
Source: Author’s calculations using 2004 wave 1, 2008 waves 2 and 8 SIPP, and NBER TAXSIM. Note: See Table 2 notes for definition of groups.
Table A-5
Average Government Expenditures on Unemployment Insurance by Income Range and Demographic Group
| Under 50% of Poverty Line | Between 50% and
100% of Poverty Line |
Between 100% and
150% of Poverty Line |
|||||||
| Income Range | |||||||||
| Year | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 | 2004 | 2008 | 2010 |
| Nonelderly, nondisabled | |||||||||
| Single-parent families | 47 | 71 | 95 | 26 | 41 | 21 | 20 | 19 | 19 |
| Two-parent families | 118 | 195 | 251 | 53 | 95 | 86 | 55 | 74 | 105 |
| Childless families and individuals | 80 | 89 | 160 | 47 | 79 | 108 | 38 | 54 | 60 |
| Employed families | 64 | 75 | 99 | 43 | 72 | 76 | 40 | 54 | 64 |
| Nonemployed families | 87 | 117 | 198 | 66 | 170 | 186 | 41 | —1 | —1 |
| Elderly families and individuals | 5 | 10 | 22 | 8 | 16 | 26 | 13 | 15 | 20 |
| Disabled families and individuals | 7 | 15 | 34 | 16 | 45 | 57 | 23 | 39 | 43 |
Source: Author’s calculations using 2004 wave 1, 2008 waves 2 and 8 SIPP. Note: See Table 2 notes for definition of groups.
1Sample sizes too low for reliability
too low for reliability
Figure 1.
Expenditure per Capita, Non-Medicaid Means Tested Programs, 1990–2010 (real 2009 dollars)
Figure 2.
Expenditure per Capita, Social Insurance Programs, 1990–2012 (real 2009 dollars)
Figure 3.
Average Monthly Government Expenditures
Figure 4.
Average Monthly Government Expenditures
Table 1
Annual Expenditures and Caseloads in Social Insurance and Means-tested Programs, FY 2007
| Expenditures (millions) | Caseloads (thousands of recipients) | Monthly Expenditures per
Recipient |
|
| Means Tested Programs | |||
| Medicaid | 326,951 | 56,821 | 480 |
| EITC | 48,540 | 24,584 | 165 |
| SSI | 41,205 | 7,360 | 467 |
| Housing Aid | 39,436 | 5,087 | 646 |
| SNAP | 30,373 | 26,316 | 96 |
| TANF | 11,624 | 4,138 | 234 |
| School Food Programs | 10,916 | 41,600 | 22 |
| Head Start | 6,889 | 908 | 632 |
| WIC | 5,409 | 8,285 | 54 |
| Social Insurance Programs | |||
| OASI | 485,881 | 40,945 | 989 |
| Medicare | 431,443 | 44,010 | 816 |
| DI | 99,086 | 8,920 | 926 |
| WC | 55,195 | NA | NA |
| UI | 33,656 | 7,642 | 367 |
EITC (Earned Income Tax Credit), SSI (Supplemental Security Income), SNAP (Supplemental Nutrition Assistance Program), TANF (Temporary Assistance to Needy Families Program), WIC (Special Supplemental Nutrition Program for Women, Infants, and Children), OASI (Old-Age and Survivors Insurance), DI (Social Security Disability Insurance Program), WC (Workers’ Compensation), UI (Unemployment Insurance)
Sources: Various administrative data sources.
Figure 1.
Expenditure per Capita, Non-Medicaid Means Tested Programs, 1990–2010 (real 2009 dollars)
Figure 2.
Expenditure per Capita, Social Insurance Programs, 1990–2012 (real 2009 dollars)
Figure 3.
Average Monthly Government Expenditures
Figure 4.
Average Monthly Government Expenditures
Table 1
Annual Expenditures and Caseloads in Social Insurance and Means-tested Programs, FY 2007
| Expenditures (millions) | Caseloads (thousands of recipients) | Monthly Expenditures per
Recipient |
|
| Means Tested Programs | |||
| Medicaid | 326,951 | 56,821 | 480 |
| EITC | 48,540 | 24,584 | 165 |
| SSI | 41,205 | 7,360 | 467 |
| Housing Aid | 39,436 | 5,087 | 646 |
| SNAP | 30,373 | 26,316 | 96 |
| TANF | 11,624 | 4,138 | 234 |
| School Food Programs | 10,916 | 41,600 | 22 |
| Head Start | 6,889 | 908 | 632 |
| WIC | 5,409 | 8,285 | 54 |
| Social Insurance Programs | |||
| OASI | 485,881 | 40,945 | 989 |
| Medicare | 431,443 | 44,010 | 816 |
| DI | 99,086 | 8,920 | 926 |
| WC | 55,195 | NA | NA |
| UI | 33,656 | 7,642 | 367 |
EITC (Earned Income Tax Credit), SSI (Supplemental Security Income), SNAP (Supplemental Nutrition Assistance Program), TANF (Temporary Assistance to Needy Families Program), WIC (Special Supplemental Nutrition Program for Women, Infants, and Children), OASI (Old-Age and Survivors Insurance), DI (Social Security Disability Insurance Program), WC (Workers’ Compensation), UI (Unemployment Insurance)
Sources: Various administrative data sources.
