Australian welfare reforms in 2006 were meant to promote work among lone mothers. But they may have had an unintentional side effect.
A new study published in the Economic Journal suggests the reforms led to low-income mothers repartnering more quickly after a relationship breakdown. This was especially pronounced for Australian-born mothers and those with a history of Income Support receipt.
The 2006 ‘welfare to work’ reforms
The reforms made newly separated parents with a dependent child aged eight to fifteen ineligible for welfare payments aimed at single mothers (Parenting Payment Single (PPS)), offering a lower unemployment payment (Newstart Allowance) instead. This reduced lone mothers’ household income by up to 17 per cent.
Specifically, the reforms affected mothers separating from 1 July 2006. Those already receiving PPS before 1 July 2006 were grandfathered under the prior rules. They were eligible to receive the higher PPS payment until their youngest child reached the age of sixteen or when their eligibility stopped for some other reason (for example due to repartnering). These grandfathered lone parents were, however, subject to the new participation requirements from the later of 1 July 2007 or when their youngest child turned seven.
For mothers who had recently separated, the reforms increased the chance that they repartnered within six months by six percentage points. This represents a 64 per cent increase. The effect is persistent, with higher repartnering rates remaining four years after separation.
Why we are able to link changes in the repartnering rate to the reforms?
Due to the way the reform was implemented, the researchers are able to definitively link changes in the repartnering rate to changes in the welfare policy, and to exclude the influence of other factors. This is because mothers separating before 1 July 2006 were exempt from the policy change, with only mothers separating after this date affected. This means that the authors can compare repartnering behaviour between two groups of lone mothers with similarly aged children and who had comparable levels of education, income and wealth. Though the policy also introduced participation requirements, the authors attribute the changes in the repartnering behaviour to changes in the amount of government cash support.
For the analysis, the authors relied on administrative welfare records from 2001 to 2013. These data include information on the number and ages of all household members as well as the mother’s relationship status. The authors also used a nationally representative longitudinal survey, the Household, Income and Labour Dynamics Australia (HILDA) survey, for the years 2001 to 2015. The survey includes rich information on economic wellbeing, labour and family dynamics.
This increase in the rate of repartnering does not necessarily imply that the policy was bad for affected mothers. For example, the researchers find no evidence of lower life satisfaction or poorer health for mothers, and mothers’ new partners were more likely to have high incomes and were in better health.
Policymakers may not have anticipated the effect
But policymakers intending to increase work among single mothers may not have anticipated how their welfare reforms would also alter the family dynamic. When low-income lone mothers have less financial support from the government, they may be more likely to turn to alternative sources of income including that of a new partner. This may be especially true for Australian mothers who have weaker attachment to the workforce compared to mothers from other OECD countries, according to OECD statistics.
The results deepen our understanding of how the design of the welfare system affects family structure. In contrast to welfare reform in the United States, the 2006 Australian reforms generated a clear reduction in the financial resources provided to affected mothers and did not include a range of other features such as time limits and family caps. Compared to the United Kingdom’s reforms to income support and tax credits in the late 1990s, the Australian reform (weakly) reduced financial resources for all affected mothers and so our results do not incorporate offsetting incentives from different policies.
The authors’ findings reinforce evidence from previous research: increasing employment is not the only way low-income families respond to these type of Welfare-to-Work policies. Yet the increase in repartnering is a new and somewhat surprising result as we often think of finding a new partner as an organic process – not one motivated by a change in a welfare program.
Further Reading
Fisher, H & Zhu, A 2019, ‘The effect of changing financial incentives on repartnering’, Economic Journal, vol. 129, no. 623, pp. 2833-2866.
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