Unemployment Insurance and Low-Skilled Single Working Mothers After Welfare Reform

Background and Purpose:

During the 1990s, low-skilled single mothers left cash assistance and increased their labor force participation at unprecedented rates. An important question is the extent to which increased work effort has translated into increased access to social insurance programs, especially unemployment insurance (UI). UI is traditionally considered the major safety net program protecting against lost income incurred during unemployment. Existing literature, though, finds that low-skilled workers experience difficulties accessing UI. This study explores the extent to which low-skilled single working mothers—especially welfare leavers—have transitioned away from utilizing cash welfare assistance to accessing UI upon entering a spell of unemployment, post-welfare reform. The study focuses on three questions: (1) How has cash welfare utilization changed for single mothers transitioning into unemployment, pre- and post-reform?; (2) How has UI utilization changed?; and (3) How has UI eligibility changed?

Method:

Data are drawn from the Survey of Income and Program Participation (SIPP), a nationally-representative, longitudinal survey, to examine changing levels of eligibility and receipt of UI experienced by low-skilled single mothers, and welfare leavers in particular. The SIPP is collected by the U.S. Census Bureau, with panels offering nearly continuous data from 1984 through 2007. Panels track respondents for 2 to 4 years, collecting monthly data on demographics, income, welfare utilization and labor force participation.

Analyses compare cash welfare receipt and UI eligibility and receipt among three cohorts of low-skilled single mothers and welfare leavers who experience an employment separation (1) before reform (1989-1995), (2) directly following reform (1996-2000), and (3) during the current decade (2001-2007). Using a difference in difference approach, these groups are also compared to other groups not equally affected by welfare reform: (1) low-skilled married mothers; (2) low-skilled single women without children; and (3) low-skilled African American men. Examining trends in UI eligibility and receipt among these populations can offer evidence as to whether changes in receipt and eligibility among low-skilled single working mothers are part of larger labor market shifts, or are related to factors that particularly affect this population. Regression analyses are used to control for competing factors.

Results

The proportion of low-skilled single mothers entering a spell of unemployment who receive cash welfare (AFDC/TANF) fell substantially between 1989 and 2007. The proportion accessing UI also fell, from a high of 24 percent during 1989-1993, to between 10-14 percent post-reform. This means the proportion of low-skilled single mothers transitioning into unemployment who access neither program has increased from less than half pre-reform, to 73 percent during the current decade. Results further suggest that most low-skilled single mothers transitioning into unemployment during all periods already meet UI earnings (monetary) requirements. The more serious barriers are non-monetary requirements that restrict eligibility to those with involuntary and official employment separations.

Implications:

Results suggest low-skilled single mothers have not gained increased access to UI since welfare reform. Policy debates in the U.S. usually focus on reforming earnings requirements. If these results are correct, increasing UI access among low-skilled single mothers will require liberalizing non-monetary requirements.