The Persistence of Financial Strains among Low-Income Families: An Analysis of Multiple Indicators
During the late 1990s, employment and incomes improved for many households in the bottom part of the income distribution in the United States. It is unknown, however, whether these improvements markedly reduced households' financial strains. In this study, I examine how changes in resources, needs and other characteristics are associated with self-reports of financial strains using a longitudinal survey of low-income households from three American cities. I develop and estimate longitudinal Multiple Indicator Multiple Cause models of financial strains. The models combine information from several different measures of strains; they also control for unobserved characteristics, like differences in families' permanent incomes and subjective assessments of needs, that might be confounded with the observed explanatory measures. The analyses reveal that there is considerable persistence in households' reports of financial strains. They also indicate that increases in income are associated with reductions in strains but that the relationship is weak. Other characteristics, such as wealth, disability, social networks and marital status, are more strongly associated with financial strains.