Long-Term Employment and Earnings Patterns of Welfare Recipients: The Role of the Local Labor Market

Abstract

AbstractMany Western countries have introduced welfare reforms that limit public assistance for the long-term unemployed and that spur rapid movement into the labor market. The work-first nature of these new policies means that the success of welfare recipients depends greatly on demand-side constraints, more particularly on local labor market conditions. Based on longitudinal administrative data of all single mothers who received cash benefits when the Israeli welfare reform was implemented (N = 45,000), this study focuses on the role of the local labor market in explaining single mothers’ long-term employment and earnings patterns. The results indicate notable diversity in employment and earnings patterns. Some mothers showed stable or improved attachment to the labor force, while others showed a much less stable pattern and about a quarter had a very weak attachment to paid employment. Local labor market conditions and their change over time play an important part in explaining these various patterns.