Research Highlights

Under welfare reform, single moms gained work experience, but not higher wages or better jobs

Due to welfare reform’s work imperatives, single mothers of young children abruptly increased their work experience. However, that increased work experience did little to raise their wages, says new research from Brookings’ Adam Looney and Dayanand S. Manoli of the University of Texas, Austin.

In the 1990s, policymakers made sweeping changes to the U.S. social insurance system with the intent to encourage more low-income parents to return to work. Expansions to the Earned Income Tax Credit (EITC) and Medicaid offered incentives to work and stronger work requirements were attached to cash welfare to provide a spur. Not only did reformers expect to see more families earning income, they hoped that increased work experience would eventually lead to higher wages and better jobs for low-income working parents.

But studying the effects of these changes has been difficult. Many policy impact studies rely on differences in when or where policies took effect to examine their results. However, welfare reform was implemented so quickly and universally across the United States that comparisons across states or across time cannot be made.

Looney and Manoli found another difference that could be investigated to determine the effects of the push to encourage work: employment rates of single mothers based on the ages of their children. Under welfare reform, mothers with very young children returned to work earlier than they had before the reform took effect.  (Most mothers with older children were already working, regardless of changes in welfare policy.)

As a result, in the time between when a youngest child was born in 1995 and turned six in 2001, on average his mother had worked about 4.2 years. That is over a year longer than an otherwise similar mother whose child was born in 1990. This increase in employment and in work experience may be the largest policy-induced increase studied in the United States, measured both in terms of the increase in years of experience and by the size of the population affected.

When the researchers analyzed the earnings of these otherwise similar parents, however, they found little difference, suggesting any returns to experience are small. Analysis of the occupations and industries in which single mothers found work before and after welfare reform also showed no changes.

Read “Are There Returns to Experience at Low-Skill Jobs? Evidence from Single Mothers in the United States over the 1990s.”