More single mums get back to work under reforms: UC researchers

More single mums get back to work under reforms: UC researchers

Claudia Doman

15 February 2012:  More single mothers have joined the workforce while others have increased their hours of employment since two sets of major welfare reforms were implemented, University of Canberra researchers have found.

Preliminary findings of independent research conducted by researchers at the University’s National Centre for Social and Economic Modelling (NATSEM) and colleagues have shown that the welfare reforms related to families with children introduced since 2004 have boosted labour supply from single parents.

Researchers found the rate of employment of non-working single mothers had increased by about eight percentage points, while the number of hours worked by those already employed also increased by almost six hours a week, boosting the incomes of single parent families.

Xiaodong Gong

UC NATSEM's welfare policy expert, Xiaodong Gong. Photo: Michelle McAulay

The two sets of reforms were designed, in part, to encourage labour supply of women with children through altering the incentives associated with welfare payments and high child care costs faced by parents.

With the first reform in 2004, the amount of Family Tax Benefit was cut back more slowly as income grew so that when an employee worked more hours, workers were able to retain more of their increased earnings.

The second set of reforms consisted of two policy changes in 2006: the rules for qualifying for Parenting Payments were tightened for mothers with older children and the 30 per cent Child Care Tax Rebate took effect.

Lead researcher Xiaodong Gong said that both reforms had different effects on the labour supply of single mothers.

“While the 2004 reform increased the work hours of some of those already employed, the 2006 reform mostly increased employment participation,” Dr Gong said.

He explained that although the 2004 reform mainly encouraged some employed single mothers to increase their hours, it wasn’t enough to lure non-working mothers to join the workforce. This didn’t affect higher educated women whose income level is often out of the range affected by the change.

The findings suggest that the increase in hours of work is through job changes, which may indicate the presence of labour market rigidity in Australia. On average, Dr Gong said, the 2004 reform brought about a 5.7 hour increase for the working single mother, only if she changed jobs.

In contrast, the 2006 reform had a stronger effect on labour force participation “especially for women with lower education levels, since these reforms effectively ‘forced’ some of women with older children to participate, or else they may lose their benefits.”

This reform did not have significant effect on most workers’ hours, apart from the single mothers with higher education.

“The 30 percent reduction of child care costs through the Child Care Tax Rebate seems to have encouraged women with higher education levels (who often are higher wage earners) to work longer. This may be because the Child Care Tax Rebate reduced substantially the cost of child care for them, many of who may not be entitled to the Child Care Benefit,” he said.