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One-parent families make up 13% of all UK families with dependent
children, and 90% of lone parents are women. In contrast to other
industrialized countries, the proportion of lone mothers in paid
employment in the UK is lower than that of married mothers, and about
60% of lone mothers receive Income Support (previously Supplementary
Benefit, or SB). Given the low standard of living of a large proportion
of one-parent families, it is of particular importance to know whether,
and to what extent, the structure of the UK benefit system creates a
disincentive to work. In Discussion Paper No. 302, Ermisch and Wright analyse transitions into and out of employment by previously married lone mothers, based on data from the WES. They explain these transitions in terms of the family's demographic characteristics and of the mother's human capital attributes, such as work experience and educational attainment. The results reveal that a higher human capital endowment raises the rate of entry to both full- and part-time employment and lowers the exit rate from full-time employment. The likelihood of entry to full-time employment increases with the age of the youngest child, but is much lower for mothers with four or more children. There is also a higher exit rate for women with young children and a larger number of children. These results are consistent with younger children and a large number of children making more demands on their mother's time, Ermisch noted. All else equal, older mothers are less likely to enter full-time employment and less likely to leave either form of employment. The strong upward trend in employment exit rates since the mid-1950s indicates a decreasing reliance on earnings as a source of income for lone mothers, Ermisch noted. But the estimates based on the WES of the impact of welfare benefits on lone mothers' labour force participation were inconclusive. In other research, based on the GHS data, Ermisch and Wright were better able to identify the impact of the benefit system on labour force participation. For each lone parent in the GHS data, they calculated their Supplementary Benefit entitlement, assuming they had no income, on the basis of their family composition and the year of each observation. Unlike the WES, the GHS contains information on women's non-labour income, composed of universal benefits such as One-Parent and Child Benefit as well as income from fathers' maintenance payments and from investments. Ermisch and Wright separated the GHS data into those women whose non-labour income made them ineligible for SB and those whose benefit entitlement exceeded their non-labour income. Their estimates confirmed that a higher benefit entitlement reduced the probability that a lone mother whose benefit entitlement exceeds her non-labour income takes a job, but had no effect on this probability among mothers whose non-labour income exceeds their benefit entitlement. Furthermore, higher non-labour income increased the likelihood of working among the first group, but reduced it among the ineligible. Women who can earn a higher wage are also more likely to take a job. Ermisch also reported simulations, based on these estimates from the GHS, of how changes to the structure of the UK benefit system would affect lone parents' participation in paid work. This analysis was restricted to women with benefit entitlements exceeding their other non-labour income. If Supplementary Benefit entitlements were increased by £13 (1988 prices), or about 20%, then the proportion of lone mothers in work would fall from 40% to around 35%. Lone parents' non-labour income could be increased by raising One-Parent Benefit, enforcing maintenance payments or guaranteeing them from the state (as in Sweden), or offering a tax rebate or cash grant for working lone mothers' childcare expenses. An increase of £13 in any of these would raise their probability of working by about 5 percentage points. Higher Child Benefits also raise the probability of working. A childcare subsidy paid to working mothers of 45p per hour would cover 25% of the average costs of childminders and would raise the probability of working by 5-6 percentage points. Between 1978-80 and 1982-84 the proportion of lone mothers in work fell from 48% to 39%. According to Ermisch's results from the GHS, the main reason for this fall was the increase in the overall unemployment rate; the increase in the real level of benefits played a comparatively small part. In Discussion Paper No. 303, Ermisch and Wright used the WES data to estimate how lone mothers' monthly probability of remarrying is affected by their demographic and family characteristics and by variables such as welfare benefits, average women's pay and unemployment. The analysis indicated that half of previously married lone mothers remain lone parents less than 5 years, and half of never married lone mothers remain so less than 3 years. Many observers have argued, and applications of search theory to the marriage market would suggest, that higher welfare benefits should discourage remarriage. Ermisch could find absolutely no evidence to support this hypothesis. This conclusion includes the possibility that benefits may affect remarriage indirectly, by influencing whether a woman is in paid employment. His estimates indicated that, all else equal, a lone mother with a job in any particular month is about 30% less likely to remarry. This may suggest either that mothers with better earning opportunities find remarriage less attractive, or that women who are not very interested in remarrying look to the labour market for their present and future livelihood. As higher benefit entitlements make it less likely that a lone mother is employed, they may if anything actually encourage remarriage, Ermisch concluded |