The Single Parent Law, Labor Supply and Poverty

The Single Parent Law introduced in 1992 grants single parents special treatment, primarily under the Income Support Law. In 1994 and 1995 additional legislative changes eased the terms of eligibility of this segment of the population. These changes increased the size of welfare benefits and expanded the eligible population, enabling it to earn a relatively large wage income without losing the right to receive benefits. An examination of the effect of the various legislative changes introduced between 1992 and 1995 indicates that they served to reduce the labor supply of single mothers at all levels: their rates of participation and employment declined, as did the number of hours worked, while their share of part-time employment rose. This was in contrast with the continued upward trend in the labor supply of married mothers. This result remains valid when the population of single mothers is compared with a sample of married mothers with similar characteristics (using propensity score matching). The effect is particularly strong for mothers who had not worked before the change in the law, and especially young mothers, as well as for those with a low level of education. We also find that the changes in the size of the benefits and the eligibility criteria reduced the poverty of single-parent families. Thus, we conclude that the legislative changes reduced poverty at the expense of increased dependence on the welfare system.