One response to our series on child poverty last week was that instead of giving the poor money we should force them (particularly solo Mums) to work. Commenters pointed to the tough US welfare reforms in the 1990s as an example of the success of this policy, concluding that poverty clearly is a choice.
There is no doubt that these reforms increased employment (if there is no choice, of course you will work) and depending on the measure used it also reduced poverty. But was it any good for the kids? The evidence says no; and given that we were interested in the most effective policy for children in poverty, by that measure this policy is a failure.
Isn’t It Good to Work?
Getting poor people to work is generally seen as a good thing. It generates income for the family, and increases skills that can be passed on to the children.
However, a lot depends on the circumstances. Working does not always pay well, and it can create many new costs for the family – including transport to work and childcare for the children. So it is worth asking the question: does forcing parents back to work improve their children’s lives?
The short answer is they can in some circumstances, but they mostly don’t.
The Working Poor
We know that having working parents is no guarantee that a child won’t grow up in poverty. In New Zealand between 2012 and 2014, more than 50% of children in material hardship were living in families that did not receive a benefit at any time in the previous 12 months (Perry, 2014).
The Carrot or the Stick?
Welfare employment interventions are often referred to as ‘welfare to work’ programmes and they fall into two main types:
- Those that have a ‘rewards framework’ where the policies are designed to give parents MORE income as their employment and earnings increase, for example cash supplements are provided (i.e. tax credits), or welfare payments are kept as earnings increase and
- Those that have a ‘punishment framework’, these include mandatory employment services, sanctions of benefit payment and time limits.
Welfare-to-work programmes in the USA have in fact shown small, but consistent effects in moving welfare recipients into work, increasing earnings, and lowering welfare payments if they are well designed. However, depending on whether you use the carrot or the stick, welfare to work programmes can either help or hurt the kids.
The Carrot Works Better for Kids
Assisting those on welfare to work using a rewards framework, one which supplement caregiver earnings, has been found to increase family income AND the use of formal centre-based childcare (there is a need for this to be high quality for it to have a positive effect on kids). It is these programmes that are most able to improve children’s achievement. The importance of the quality of childcare needs to be emphasised, here, because as we will discuss further this year, those in low income areas have limited access to high quality childcare .
On the other hand, those interventions that use the stick (e.g. you have to take the job or lose your benefit) do not increase family income once you account for the additional costs such as transport and childcare. In fact (as detailed in the box below) it is childcare that often suffers – forcing parents into any work they can get pushes them to use informal and low quality childcare, which harms the kids. The punch line is that these sorts of programmes – the sort we are pursuing in New Zealand right now – lead to no improvements in children’s achievements.
This is particularly the case for solo mothers. Research has shown that when there are mandated employment conditions associated with welfare payments, additional income tends to go on increased costs associated with working (e.g. transport) and not on children in sole parent families.
In the box below we outline the findings of Next Generation Project, a project that has looked closely the impacts on children of a series of welfare to work programmes in the US.[box]
The Next Generation Project (Duncan et al, 2008)3
Across the US a number of welfare to work programmes have been delivered over the last 30 years. These programmes have been subject to a large-scale evaluation and assessment via the Next Generation Project.
The Next Generation Project looked at how all these programmes affected children’s achievements (using an IQ type test). They looked across different age groups of children and between the different types of programmes. When they brought all the individual programmes’ data together what they saw was that programmes where parents incomes were supplemented had a significant positive effect on 2 to five year old’s achievement. Those that provided mandatory employment services and included time limits and penalties, saw no benefit to children of that same age group. There was not enough information to tell what impact the programmes had on older children.
Interestingly in programmes with income supplementation there was an increase in use of formal childcare arrangements, while in those without there was an increase in causal arrangements of childcare. Of course if time at home with children is reduced through participation in mandatory programmes and income does not increase then paying for formal childcare is very challenging.