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The Effect of Child Care Costs on the Labor Force Participation and Welfare Recipiency of Single Mothers: Implications for Welfare Reform

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  • Rachel Connelly

    (Bowdoin College)

  • Jean Kimmel

    ()
    (Western Michigan University)

Abstract

This paper considers the effect of child care costs on two labor market outcomes for single mothers whether to participate in the labor market and whether to receive welfare. Hourly child care expenditures are estimated for all women in the sample (using data drawn from the 1992 and 1993 panels of the SIPP), whether or not they are currently using nonmaternal child care. These expenditures are then included as an independent variable predicting the probability of welfare recipiency and the probability of labor force participation. Results show a substantial positive effect of child care costs on welfare recipiency, with a child care price elasticity of welfare recipiency equaling 0.28. The estimated child care price elasticity of employment equals -0.76, showing that controlling for the welfare choice does not reduce the price elasticity of employment found in other studies. Simulations based on these data from 1994 show that welfare recipiency is reduced by approximately one-third and employment increased by approximately 50 percent when child care expenditures are subsidized by 50 percent not a large subsidy considering that the weekly expenditure on child care was about $58. While this study relies on data collected prior to the 1996 federal welfare reform that block grants welfare dollars to the states, the results show the importance of child care to both the employment and welfare outcomes and imply that policymakers will continue to need to address child care concerns as state welfare policy evolves.

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Bibliographic Info

Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 01-69.

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Date of creation: Jan 2001
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Handle: RePEc:upj:weupjo:01-69

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Keywords: welfare; welfare reform; single mothers; childcare; Kimmel;

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References

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  1. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  2. Susan L. Averett & H. Elizabeth Peters & Donald M. Waldman, 1997. "Tax Credits, Labor Supply, And Child Care," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 125-135, February.
  3. James P. Ziliak & David N. Figlio & Elizabeth E. Davis & Laura S. Connolly, 2000. "Accounting for the Decline in AFDC Caseloads: Welfare Reform or the Economy?," Journal of Human Resources, University of Wisconsin Press, vol. 35(3), pages 570-586.
  4. Gordon Cleveland & Morley Gunderson & Douglas Hyatt, 1996. "Child Care Costs and the Employment Decision of Women: Canadian Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 132-51, February.
  5. Patricia M. Anderson & Philip B. Levine, 1999. "Child Care and Mothers' Employment Decisions," NBER Working Papers 7058, National Bureau of Economic Research, Inc.
  6. Blau, David M & Robins, Philip K, 1988. "Child-Care Costs and Family Labor Supply," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 374-81, August.
  7. David Blau, 2003. "Child Care Subsidy Programs," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 443-516 National Bureau of Economic Research, Inc.
  8. Heckman, James J, 1974. "Effects of Child-Care Programs on Women's Work Effort," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S136-S163, Part II, .
  9. Siv Gustafsson & Frank Stafford, 1992. "Child Care Subsidies and Labor Supply in Sweden," Journal of Human Resources, University of Wisconsin Press, vol. 27(1), pages 204-230.
  10. Lisa Powell, 1998. "Part-time versus full-time work and child care costs: evidence for married mothers," Applied Economics, Taylor & Francis Journals, vol. 30(4), pages 503-511.
  11. John W. Graham & Andrea H. Beller, 1989. "The Effect of Child Support Payments on the Labor Supply of Female Family Heads: An Econometric Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 664-688.
  12. Blank, Rebecca M., 1985. "The impact of state economic differentials on household welfare and labor force behavior," Journal of Public Economics, Elsevier, vol. 28(1), pages 25-58, October.
  13. J. P. Ziliak & D. N. Figlio & E. E. Davis & L. S. Connolly, . "Accounting for the Decline in AFDC Caseloads: Welfare Reform or Economic Growth?," Institute for Research on Poverty Discussion Papers 1151-97, University of Wisconsin Institute for Research on Poverty.
  14. Berger, Mark C & Black, Dan A, 1992. "Child Care Subsidies, Quality of Care, and the Labor Supply of Low-Income, Single Mothers," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 635-42, November.
  15. Ribar, D.C., 1991. "A Structural Model of Child Care and the Labor Supply of Married Women," Papers 1-91-1, Pennsylvania State - Department of Economics.
  16. Jean Kimmel, 1998. "Child Care Costs As A Barrier To Employment For Single And Married Mothers," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 287-299, May.
  17. Scott Houser & Stacy Dickert-Conlin, 1998. "The Effects of After-tax Wages, Transfer Payments, and Child Care Expenses on Labor Market and Transfer Program Participation," JCPR Working Papers 51, Northwestern University/University of Chicago Joint Center for Poverty Research.
  18. Robert J. Lemke & Ann Dryden Witte & Magaly Queralt & Robert Witt, 2000. "Child Care and the Welfare to Work Transition," NBER Working Papers 7583, National Bureau of Economic Research, Inc.
  19. Rebecca M. Blank, 1989. "The Effect of Medical Need and Medicaid on AFDC Participation," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 54-87.
  20. Rachel Connelly & Jean Kimmel, 2003. "Marital status and full-time/part-time work status in child care choices," Applied Economics, Taylor & Francis Journals, vol. 35(7), pages 761-777.
  21. Connelly, Rachel, 1992. "The Effect of Child Care Costs on Married Women's Labor Force Participation," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 83-90, February.
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Citations

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Cited by:
  1. Helmut Mahringer & Christine Zulehner, 2012. "Child-Care Costs and Mothers' Employment Rates. An Empirical Analysis for Austria," WIFO Working Papers 429, WIFO.
  2. Djurdjevic, Dragana, 2005. "Women's Labour Supply after Childbirth: An Empirical Analysis for Switzerland," Darmstadt Discussion Papers in Economics 37208, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  3. Chris Herbst & Burt Barnow, 2008. "Close to Home: A Simultaneous Equations Model of the Relationship Between Child Care Accessibility and Female Labor Force Participation," Journal of Family and Economic Issues, Springer, vol. 29(1), pages 128-151, March.
  4. Andrén, Thomas, 2002. "A Structural Model of Childcare, Welfare, and the Labor Supply of Single Mothers," Working Papers in Economics 82, University of Gothenburg, Department of Economics.

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