Francesconi, Marco, and Wilbert van der Klaauw. 2007. “The Socioeconomic Consequences of “In-Work” Benefit Reform for British Lone Mothers.” Journal of Human Resources 42(1): 1–31.
In October 1999, the British government enacted the Working Families’ Tax Credit, which aimed at encouraging work among low-income families with children. This paper uses panel data collected between 1991 and 2001 to evaluate the effect of this reform on single mothers. We find that the reform led to a substantial increase in their employment rate of about five percentage points, which was driven by both a higher rate at which lone mothers remained in the labor force and a higher rate at which they entered it. Women’s responses were highly heterogeneous, with effects double this size for mothers with one preschool-aged child, and virtually no effect for mothers with multiple older children. The employment increase was accompanied by significant increases in paid childcare utilization and our analysis in fact suggests that the generous childcare credit component of the reform played a key role in explaining the estimated employment and childcare usage responses. We also find that the increase in labor market participation was accompanied by reductions in single mothers’ subsequent fertility and in the rate at which they married, behavioral responses, which in turn are likely to influence the reform’s overall impact on child poverty and welfare.
Marco Francesconi is a reader of economics, University of Essex. Wilbert van der Klaauw is a professor of economics at UNC-Chapel Hill and a visiting scholar at the Federal Reserve Bank of New York. The authors are grateful to the Economic and Social Research Council, the British Academy and the University of Essex for financial support. Comments and suggestions from two anonymous referees, Richard Berthoud, Mike Bielby, Richard Blundell, Mike Brewer, Peter Dolton, John Ermisch, Paul Gregg, Jeff Grogger, Hilary Hoynes, Stephen Jenkins, Costas Meghir, Phil Merrigan, Bruce Meyer, Robert Moffitt, Howard Reed, and seminar participants at the 2003 European Society of Population Economics (Bergen), 2005 World Congress of the Econometric Society (London), Carolina Population Center, Institute for Social and Economic Research (Essex), Institute for the Study of Labor (Bonn), Institute of Education, London School of Economics, and at the Universities of Essex, British Columbia, and Zurich greatly improved the paper. The data used in this article can be obtained from Marco Francesconi beginning August 2007 through July 2010. The views and opinions offered in this paper do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System as a whole.