Swings and Swings and RoundaboutsRoundabouts

Lone mothers and the Lone mothers and the Australian Welfare Australian Welfare

SystemSystem

R G GregoryR G Gregory

Australian National UniversityAustralian National University

►Provides income to individuals of Provides income to individuals of workforce age, subject to income tests workforce age, subject to income tests and without time limits, if the individual and without time limits, if the individual isis Unemployed and actively seeking workUnemployed and actively seeking work A lone parent caring for a dependent childA lone parent caring for a dependent child A parent caring for a child whose partner is A parent caring for a child whose partner is

disabled or unemployeddisabled or unemployed A person with a disabilityA person with a disability

►We focus on lone parentsWe focus on lone parents

The Australian Welfare SystemThe Australian Welfare System

►One in five Australian children live with One in five Australian children live with one parent.one parent.

►Ninety per cent of these parents Ninety per cent of these parents (mothers) rely on the welfare system (mothers) rely on the welfare system for incomefor income

►Their average welfare income is about Their average welfare income is about 70 per cent of that of a full-time 70 per cent of that of a full-time employed single womanemployed single woman

The key lone parent factsThe key lone parent facts

► These facts were thought not to pose a These facts were thought not to pose a problem because the government asked the problem because the government asked the wrong questionwrong question

► The government used longitudinal administrative The government used longitudinal administrative data and calculated that the average completed spell data and calculated that the average completed spell on the lone parent welfare program was three years. on the lone parent welfare program was three years.

► More sophisticated duration analysis of an inflow More sophisticated duration analysis of an inflow group derived a similar answer group derived a similar answer

► It was concluded that long stayers on welfare did not It was concluded that long stayers on welfare did not pose a substantial policy problem. pose a substantial policy problem.

► This was the wrong conclusion based on the wrong This was the wrong conclusion based on the wrong choice of research questionchoice of research question

► If they had understood the system they would not If they had understood the system they would not have made this mistakehave made this mistake

Asking the wrong questionAsking the wrong question

► We show that lone parents stay on We show that lone parents stay on welfare welfare systemsystem is not three years but for a substantial part is not three years but for a substantial part of their life, of their life,

► A single spell is not typical and hence of limited A single spell is not typical and hence of limited interestinterest

► Lone parents often find partners and leave the lone Lone parents often find partners and leave the lone parent welfare program only to enter into another parent welfare program only to enter into another welfare program.welfare program.

► For single mothers For single mothers movements from one welfare movements from one welfare program to anotherprogram to another is more important than is more important than movements to and from the labour marketmovements to and from the labour market

► These findings changed policyThese findings changed policy

What is the right question?:What is the right question?:Main findingsMain findings

How women use the welfare systemHow women use the welfare systemWomen

Receipt of Income Support by Age and Payment TypeJune 1999

0

10

20

30

40

15 19 23 27 31 35 39 43 47 51 55 59

Age in years

Per

Cen

t

Widows

Partners/Carers

Partnered Mothers

Lone Mothers

Disability/Sickness

Unemployment Payments

► There are no welfare time limits. A young There are no welfare time limits. A young woman couldwoman could (i) begin as unemployed and receive welfare (i) begin as unemployed and receive welfare

without time limit (unemployment benefits), thenwithout time limit (unemployment benefits), then (ii) become a lone parent and receive welfare (ii) become a lone parent and receive welfare

without time limit (Parenting Payment Single without time limit (Parenting Payment Single (PPS)), then(PPS)), then

(iii) partner an unemployed man and receive (iii) partner an unemployed man and receive welfare without time limit (Parenting Payment welfare without time limit (Parenting Payment Partnered (PPP)), thenPartnered (PPP)), then

(iv) when the child is no longer dependent (iv) when the child is no longer dependent receive a disability pension without time limit.receive a disability pension without time limit.

(v) then retire on an old age pension(v) then retire on an old age pension

Welfare life-cycle?Welfare life-cycle?

Welfare history: Female 1995 PPS and PPP Inflow

Proportion of Average Duration** Share of Total Income Support 1995 Inflow on Program Income Support

(percent) (years) (percent)

PPS PPP PPS PPP PPS PPP

Leave after One Spell 18.8 22.1 1.7 1.4 9.0 10.5 Continue on One Spell 22.5 9.2 5.0 5.0 31.2 15.6 Multiple Same spell type 16.2 26.3 3.1 2.3 13.7 20.3 Multiple Mixed spell types* 42.5 42.4 3.9 3.7 46.2 53.6

Total*** 100.0 100.0 3.6 2.9 100.0 100.0

Proportion of PPS who have a PPP 31.0 Proportion of PPP who have a PPS 32.5

* The more important other spell type is Newstart.** Duration is a mixture of complete and incomplete spells.*** The average potential time for income support is five years because the 1995 inflow extendsfrom January to December 1995. The end of the data window is June, 2000.

►1/5 of mothers leave welfare after 1/5 of mothers leave welfare after one spell. one spell.

►1/5 continue their initial spell for five 1/5 continue their initial spell for five and a half years and a half years

►3/5 have multiple spells.3/5 have multiple spells.►Majority of multiple spells are across Majority of multiple spells are across

programsprograms► It is common for single mothers to It is common for single mothers to

partner with a welfare recipient and partner with a welfare recipient and change her welfare programchange her welfare program

►A single spell consist of three groupsA single spell consist of three groups one spell and leave welfare not to one spell and leave welfare not to

return, return, one spell and leave welfare and later one spell and leave welfare and later

return to the lone parent program return to the lone parent program one spell and move to another welfare one spell and move to another welfare

program. program. ►These three groups should be treated These three groups should be treated

differently in a duration analysis.differently in a duration analysis.

LessonsLessons

►To see the relevance of single and To see the relevance of single and multiple spells consider the following multiple spells consider the following diagramdiagram

..

Welfare Support Patterns 1995 lone parent Inflow

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0 10 20 30 40 50 60 70 80 90 100 110 120 130 140

Fortnights since Entry Date on Initial PPS Spell

Per

cen

t

Income Support - First PPS Spell Continuing

Income Support - Multiple Spells

Not on Income Support - One PPS Spell Only

A

B

C

Not on Income Support - Multiple Spells

►After the first spell the time spent on After the first spell the time spent on welfare depends on welfare depends on How soon the individual returns to How soon the individual returns to

welfare andwelfare and How long the subsequent spells last.How long the subsequent spells last.

►The next figure shows that the The next figure shows that the survival functions for the three main survival functions for the three main programs that lone parents enter are programs that lone parents enter are different:different: Lone parentsLone parents Partner parentsPartner parents UnemployedUnemployed

Survival Fnctn. for Initial PPS and 2nd Income Support Spells

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100

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105 110

Fortnights

Pe

rce

nt

PPP

UB

Second PPS

Initial PPS

►But the most interesting issue is the But the most interesting issue is the time gap between leaving a welfare time gap between leaving a welfare program and returning to the welfare program and returning to the welfare systemsystem

►These results are really surprising and These results are really surprising and had not been known had not been known

Second Income Support Spell Destination Elapse time between first and second spell

PPS UB PPP Other Total

Destination of Second Spell 40% 14% 42% 4% 100%

% % % % %

Elapse time between first and second spell

One month 22 75 75 69 53

Two months 36 81 82 71 63

Three months 44 82 84 77 67

Six months 60 85 87 80 75

Note: 81% of those who leave a first PPS spell return for a second spell of income support.

►We can summarize the time spent on We can summarize the time spent on the first lone parent welfare spell and the first lone parent welfare spell and the time spent on all welfare programs the time spent on all welfare programs in the next figure.in the next figure.

Female 1995 PPS Inflow to July 2004

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0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220

Fortnights since Entry Date on Initial PPS Spell

Pe

rce

nt

A Completed First PPS SpellE1 Aggregate Time Spent on Income Support for 5.4yrsE2 Aggregate Time Spent on Income Support for 8.5yrs

M

N1

A

E1

E2N2

►Remember the key point is that Remember the key point is that multiple spells are the norm and a multiple spells are the norm and a single spell may not contain that single spell may not contain that much information.much information.

►The first spell a researcher observes The first spell a researcher observes is often not the first but a second or is often not the first but a second or subsequent spellsubsequent spell

►This is illustrated in the next figure This is illustrated in the next figure which takes an inflow group to see which takes an inflow group to see whether they had a previous spellwhether they had a previous spell

Female 2000-2001 PPS Inflow Percent who have a Pre-Income Support Experience

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-145 -135 -125 -115 -105 -95 -85 -75 -65 -55 -45 -35 -25 -15 -5

Fortnights before PPS spell in 2000-01

Pe

rce

nt

On Income Support

On Income Support at Least Once

F

G

► A focus on a single spell misses most of the key A focus on a single spell misses most of the key issues.issues.

► The Australian welfare must be modeled as a general The Australian welfare must be modeled as a general equilibrium system with special attention given to equilibrium system with special attention given to movements across programs and multiple spellsmovements across programs and multiple spells

► Most flows occur within the system and not between Most flows occur within the system and not between an individual welfare programs and employmentan individual welfare programs and employment

► Partnership formation is more important than Partnership formation is more important than employment as a means of leaving the lone parent employment as a means of leaving the lone parent welfare programwelfare program

► Lone mothers remain on welfare for long periods of Lone mothers remain on welfare for long periods of time. Consequently welfare programs are about long time. Consequently welfare programs are about long term income support and not short run insuranceterm income support and not short run insurance

► Policy is now directed toward reducing lifetime Policy is now directed toward reducing lifetime dependence on welfare. The understanding of the dependence on welfare. The understanding of the nature of the welfare system has changed nature of the welfare system has changed

SummarySummary

►Who are the mothers who experience Who are the mothers who experience a long time on welfare? a long time on welfare?

►Could easily be those who have a short Could easily be those who have a short spell in the initial inflow? spell in the initial inflow?

► Key IssuesKey Issues► Why are lone mothers on welfare so long?Why are lone mothers on welfare so long?► What is the role of multiple spells? What is the role of multiple spells? ► What is the role of different survival What is the role of different survival

functions for different programs?functions for different programs?► What is the role of program changes? What is the role of program changes? ► Most inflows are not new inflows but Most inflows are not new inflows but

returnees. Hence a survival function is not returnees. Hence a survival function is not about new inflows.about new inflows.

Second Spell - Parenting Payment Partner Movement to third and subsequent spells by Income Support Type

Total TotalPPS NSA PPP Other IS Total Continuing Left

Spell Number1 307 0 0 0 307 0 02 0 0 307 0 307 33 323 167 12 57 6 242 61 164 37 11 111 6 165 37 135 69 7 34 5 115 37 106 21 4 40 3 68 18 4

Total Spells 676 43 598 32 1349 228 79

Second Spell - PPS Movement to third and subsequent spells by Income Support Type

Total TotalPPS NSA PPP Other IS Total Continuing Left

Spell Number1 230 0 0 0 230 0 02 230 0 0 0 230 74 523 65 13 24 2 104 29 254 32 8 7 3 50 18 75 12 3 7 3 25 3 66 10 0 4 2 16 9 2

Total Spells 582 26 44 11 663 136 94