Abstract
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 – the main welfare payment for this group – 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. As was the case for similar reforms introduced by US states in the 1990s, these reforms had large, statistically significant and positive impacts on the hazard rates for exiting the welfare payment. Two thirds of these exits were exits from welfare altogether and one third were exits to other welfare payments. JEL I38, J22
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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