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The Pitfalls of Work Requirements in Welfare-to-Work Policies: Experimental Evidence on Human Capital Accumulation in the Self-Sufficiency Project

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  • Riddell, Chris

    ()
    (Cornell University)

  • Riddell, W. Craig

    ()
    (University of British Columbia, Vancouver)

Abstract

This paper investigates whether policies that encourage recipients to exit welfare for full-time employment influence participation in educational activity. The Self-Sufficiency Project ('SSP') was a demonstration project where long-term welfare recipients randomly assigned to the treatment group were offered a generous earnings supplement if they exited welfare for full-time employment. We find that treatment group members were less likely to upgrade their education along all dimensions: high-school completion, enrolling in a community college or trade school, and enrolling in university. Thus, 'work-first'; policies that encourage full-time employment may reduce educational activity and may have adverse consequences on the long-run earnings capacity of welfare recipients. We also find that there was a substantial amount of educational upgrading in this population. For instance, among high-school dropouts at the baseline, 19% completed their diploma by the end of the demonstration. Finally, we simulate the consequences of the earnings supplement in the absence of adverse effects on educational upgrading. Doing so alters the interpretation of the lessons from the SSP demonstration.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6378.

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Length: 43 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6378

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Keywords: welfare policy; human capital; experimental methods; earnings supplementation;

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  1. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers 8983, National Bureau of Economic Research, Inc.
  2. Kesselman, Jonathan R., 1976. "Tax effects on job search, training, and work effort," Journal of Public Economics, Elsevier, vol. 6(3), pages 255-272, October.
  3. Keane, Michael P & Wolpin, Kenneth I, 2000. "Eliminating Race Differences in School Attainment and Labor Market Success," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 614-52, October.
  4. Rebecca M. Blank & David Card & Philip K. Robins, 1999. "Financial Incentives for Increasing Work and Income Among Low-Income Families," JCPR Working Papers 69, Northwestern University/University of Chicago Joint Center for Poverty Research.
  5. David Card & Dean R. Hyslop, 2005. "Estimating the Effects of a Time-Limited Earnings Subsidy for Welfare-Leavers," Econometrica, Econometric Society, vol. 73(6), pages 1723-1770, November.
  6. Michael P. Keane & Kenneth I. Wolpin, 2002. "Estimating Welfare Effects Consistent with Forward-Looking Behavior. Part I: Lessons from a Simulation Exercise," Journal of Human Resources, University of Wisconsin Press, vol. 37(3), pages 570-599.
  7. Philip K. Robins & Charles Michalopoulos, 2001. "Using financial incentives to encourage welfare recipients to become economically self-sufficient," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 105-123.
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