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Does it pay to move from welfare to work?

  • Sheldon Danziger

    (Gerald R. Ford School, University of Michigan)

  • Colleen M. Heflin

    (University of Kentucky)

  • Mary E. Corcoran

    (Gerald R. Ford School, University of Michigan)

  • Elizabeth Oltmans

    (Massachusetts Institute of Technology)

  • Hui-Chen Wang

    (University of Michigan)

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    The 1996 Personal Responsibility and Work Opportunity Reconciliation Act requires welfare recipients to look for work and has made it more difficult for nonworking recipients to remain on the welfare rolls. In addition, the economic boom of the 1990s and changes in federal and state policies have raised the net income gain associated with moving from welfare to work. This paper analyzes data from a panel survey of single mothers, all of whom received welfare in February 1997. In 1999, those who left welfare and were working had a higher household income and lower poverty rate, experienced a similar level of material hardship, engaged in fewer activities to make ends meet, and had lower expectations of experiencing hardship in the near future than did nonworking welfare recipients. Estimations of fixed-effect regressions of income that control for both observable and unobservable time-invariant characteristics show that monthly net income increases by $2.63 for every additional hour of work effort. About 60 percent of the observed monthly income difference between wage-reliant and welfare-reliant mothers can be attributed to differences in their work effort. Thus, after welfare reform, it does pay to move from welfare to work. © 2002 by the Association for Public Policy Analysis and Management.

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    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

    Volume (Year): 21 (2002)
    Issue (Month): 4 ()
    Pages: 671-692

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    Handle: RePEc:wly:jpamgt:v:21:y:2002:i:4:p:671-692
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    1. repec:mpr:mprres:3233 is not listed on IDEAS
    2. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
    3. Bruce D. Meyer & Dan T. Rosenbaum, 1999. "Making Single Mothers Work: Recent Tax and Welfare Policy and its Effects," JCPR Working Papers 152, Northwestern University/University of Chicago Joint Center for Poverty Research.
    4. Sheldon H. Danziger (ed.), 1999. "Economic Conditions and Welfare Reform," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ecwr, April.
    5. Meyer, Bruce D. & Rosenbaum, Dan T., 2000. "Making Single Mothers Work: Recent Tax and Welfare Policy and its Effects," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1027-62, December.
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