Welfare Reform and Lone Parents Employment in the UK

The last thirty years saw dramatic increases in the employment rates of married/co-habiting mothers in the UK. Yet the employment rates of lone mothers were lower in the early 1990s than in the late 1970s, at just under 40 percent; and 25 percentage points lower than those of married mothers. In 1997 the incoming Labour government initiated a series of policy reforms aimed at reducing child poverty. A key element of their strategy was a move towards increasing employment rates among families with children. This paper evaluates how this package of policy reform impacted on lone parents employment. We use propensity score matching to construct a benchmark sample and then apply difference-in-difference estimation techniques to assess what would have happened to lone parents employment in the absence of policy reform. Our results show that, of the 11-percentage point rise in the rate of employment of lone parents between 1992 and 2002, 5-percentage points can be attribute to policy reform. This increase in employment occurred in-spite of significant rises in the level of support for non-working lone parents claiming Income Support. This is in sharp contrast to the experience of the USA, where welfare generosity did not increase and time limits and mandatory job search were employed alongside tax credits to get lone parents back to work. In the UK, further substantive policy changes are currently being phased in and so it is probable that there will be further employment gains for lone parents over the next few years. Even so, the pace of response to these reforms does not yet look sufficient to meet the Government's target of getting 70 percent of lone parents into work by 2010.