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February 13, 2003
| Boosting Income for Working Parents Pays Off for Children |
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With public coffers flush during the economic expansion of the late 1990s, most states bolstered financial work incentives for low-income parents. Now sluggish economic growth is threatening these policies, putting pressure on government budgets and low-income families alike. The well-being of children has become an explicit focus of national welfare policy. Yet as governors and state legislatures strive to close deficits, they have begun to consider dramatically cutting work-based supports — a course that MDRC research suggests may have far-reaching consequences for vulnerable children and their families.
Recent studies by MDRC provide surprising and consistent evidence that welfare and employment programs that offer parents financial work incentives can also help foster youngsters’ school readiness and later development. The New Hope Project, Canada’s Self-Sufficiency Project, and the Minnesota Family Investment Program each supplemented the earnings of low-income working parents in a different way. For example, the Minnesota program expanded earned income disregards — provisions that allowed welfare recipients to keep part of their welfare checks if they worked — while New Hope provided low-income workers in Milwaukee with a combination of child care subsidies, health insurance, and earnings supplements. In random assignment studies conducted by MDRC, all three initiatives led not only to higher employment and income levels among single parents but also to better outcomes for their children, especially in the areas of school readiness and school performance. The benefits, which roughly correspond to a rise from the 25th to the 30th percentile in a standardized test score, were concentrated among young school-aged children and children of long-term welfare recipients. Where data are available, adolescents seem to have fared worse, while little is known about effects on infants and toddlers.
As summarized in a Next Generation policy brief, cross-study analyses suggest that higher family income, rather than higher parental employment alone, drove the largely positive effects on children of work incentives for parents. While initiatives that simply required work did raise the percentage of parents who were employed, they often did not improve family income or child outcomes. These programs had no effect on income because, under the pre-1996 welfare system, welfare grants were reduced by nearly one dollar for every dollar parents earned.
Many states now offer financial work supports — including higher earned income disregards, Earned Income Credits, and work-related transportation and child care subsidies — to low-income families both within and outside the welfare system. With few states offering supports as generous as those studied here, there is still room to strengthen such policies now or when fiscal conditions improve. MDRC is assessing whether and by how much efforts to boost parents’ employment and income improve children’s outcomes in the Employment Retention and Advancement project; the Enhanced Services for the Hard-to-Employ demonstration; and the Evaluation of Child Care Subsidy Strategies, led by Abt Associates.
It has long been known that low-income children fare worse than their middle-income counterparts in school and otherwise. The findings reviewed here are the first, however, to demonstrate that policy can help offset the disadvantages experienced by low-income children through its effects on family resources. In an era when state policymakers must make difficult tradeoffs, this research can help inform them about the possible consequences of their decisions. |
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