Civic Report No. 35 March 2003 Gaining Ground, Moving Up: The Change in the Economic Status of Single Mothers Under Welfare Reform EXECUTIVE SUMMARY The report’s main findings are as follows: Single Mothers’ Poverty Levels Reached Record Lows Post-Welfare Reform Between the passage of welfare reform (1996) and 2001—a recession year— the poverty rate of single-mother families declined by about 20%, from 41.9% in 1996 to 33.6%, slightly above the record low for single mothers attained in 2000. The poverty decline is in large part a by-product of the transition from welfare to work induced by welfare reform. The reduction in poverty was particularly large among those groups of single mothers who have always had the the highest levels of poverty and welfare participation—black and Hispanic women, never-married mothers, and high school dropouts. Welfare Reform Leads to a Surge in the Employment of Single Mothers The proportion of single mothers who worked at all during the year increased rapidly, from 76% in 1996 to 82% in 2001. The proportion who worked half of a full year or more increased from 60% to 70%, and the proportion working a full year increased from 44% to 52%. Welfare reform was the largest single factor responsible for the rise in single mothers’ work participation, accounting for more than 40% of the increase between mid-1996 and the end of 2001. Only about 9% of the employment gain is attributable to the expansion of the economy during that period. Single Mothers’ Incomes Rise Significantly Post-Reform Single mothers’ own cash incomes rose 21% between 1995 and 2000, even after averaging in those reporting zero cash income. Similar gains were experienced by single mothers of all demographic groups, including high school dropouts. These income gains occurred because the rise in the employment of single mothers resulted in earnings gains that far outweighed their loss in welfare benefits. Total household income (including non-cash benefits) increased significantly among those mothers who left welfare since 1996. Before leaving welfare, the average incomes of these women ranged from about 10% to 40% above the poverty level. By the end of the second year after leaving welfare their incomes were 50% to 70% above poverty. Single mothers, on average, earned $11.60 per hour in 2001, considerably more than the minimum wage. Only 4% of working single mothers earned the minimum wage or less. Even among those who are high school dropouts, only 8% earned the minimum or less. Single Mothers Do Better Economically the Longer They Are Off Welfare Poverty drops steadily for women who leave welfare and the poverty decline grows with years since leaving. The poverty rate among women who left welfare in 1996, for example, fell by about 50% in four years. In addition, among single mothers who left welfare after 1994, each additional year worked between 1994 and 1998 was associated with an increase in hourly pay of about 2% and each additional year with the same employer increased pay by another 1%.

EMAIL THIS | PRINTER FRIENDLY CR 35 PDF (370 kb) WHAT THE PRESS SAID: Reforming Welfare The Daily Oklahoman, 4-14-03 Mike: I'll Sue 'Em New York Post, 4-14-03 Welfare Reform Works by June O’Neill, New York Post, 4-14-03 Moving up by Linda Chavez, Townhall.com, 4-9-03 Equal Time: To help single mothers, strengthen welfare reform by June O'Neill, Atlanta Journal-Constitution, 4-1-03 SUMMARY: This report examines how the economic circumstances of single mothers changed after welfare reform. The primary author, Dr. June O’Neill, found that the poverty rate for single mothers dropped by roughly 20% following reform, reaching an all-time low in 2000. The proportion of single mothers who were employed also surged during this period, as did their income. Single mothers’ own-cash income rose 21% overall, and rose by similar margins even in the most disadvantaged demographic groups. The report also found that single mothers’ earnings rise significantly over time as long as they remain in the workforce. TABLE OF CONTENTS: Executive Summary About the Authors Acknowledgements Index of Figures and Tables Introduction I. POVERTY Differences Between Welfare Recipients and Non-Recipients Education, Race and Marital Status Did Poverty Decline for Welfare Leavers? II. WORK PARTICIPATION Accounting for the Increase in Employment III. EARNINGS, WAGE RATES AND OTHER ASPECTS OF EMPLOYMENT Hourly Wages of Single Mothers Occupations and Sector of Employment The Employment and Earnings of Welfare Leavers: Findings from Panel Data Will the Wage Rates of Welfare Leavers Rise with Experience? IV. CHANGES IN TOTAL INCOME AND ITS COMPONENTS Changes in Household Cash and Non-Cash Income in the SIPP Panel V. CONCLUDING COMMENTS Endnotes Appendix Tables