Abstract
This paper examines the impacts of recent Australian welfare to work reforms for low income parents of school-aged children who had been in receipt of Parenting Payment for at least one year. Specifically, the reforms introduced a requirement to engage in at least 15 hours of work-related activity per week from the youngest child’s seventh birthday. We find large positive impacts on the hazard rates for exiting welfare and for switching between welfare payments. As a consequence, over the first year of the new regime the Parenting Payment caseload for the parents in this cohort with a youngest child aged 6 at the start of the year fell by 23.5%, without activation we estimate it would have fallen by 18.5%. The reforms also offer a rare opportunity to compare impacts on single and partnered parents, with partnered parents shown to be more responsive.
Highlights
A long standing concern with means-tested social welfare payments for low income families with school-age children is that they can reduce incentives to participate in the labour market, potentially leading to long episodes of welfare dependence, depreciation of human capital, and exacerbating rather than alleviating poverty
By setting a requirement to engage in 15 hours per week of paid work or work-related activity for those in receipt of Parenting Payment (PP) – the main income support payment for this group – with a youngest child aged seven or older, the reforms involved a substantial tightening of payment conditionality, broadly in line with the additional conditionality introduced by a number of US states as part of the 1990s welfare reforms
We find a large impact on the hazard rates for both exiting welfare and switching from PP to other welfare payments
Summary
A long standing concern with means-tested social welfare payments for low income families with school-age children is that they can reduce incentives to participate in the labour market, potentially leading to long episodes of welfare dependence, depreciation of human capital, and exacerbating rather than alleviating poverty.
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