Does part-time employment help or hinder single mothers?

By Roger Wilkins

A significant demographic trend in recent decades, in Australia and a number of other developed countries, has been the growth in lone parent families as a proportion of all families. As the graph shows, in 1981, 13 per cent of Australian mothers with dependent children were lone parents; by 2006, this had risen to 20 per cent. Associated with this increase has been growth in welfare dependency of mothers of dependent children, women who may otherwise have depended on a combination of partner income and income from their own part-time employment.

These concomitant trends have led to considerable policy interest in the welfare dependence and employment of single mothers. A particular concern is that an extended period of withdrawal from the labour market creates a ‘disengagement’ effect, with long-term adverse consequences for employment prospects. Such disengagement effects are an issue for all mothers, almost all of whom withdraw from the labour market for at least some period of time due to childbearing. However, policy interest in avoiding or minimising this disengagement effect is considerably heightened for single mothers because of the close correspondence between non-employment and welfare dependence for this demographic group. Aside from direct fiscal implications of such welfare dependency, the concern is that, if sustained long-term, it will have adverse implications for the financial wellbeing of single mothers and their children, as well as other potential adverse outcomes, such as intergenerational transmission of welfare dependence.

Care requirements of children suggest that full-time employment is often not appropriate or desirable for single mothers when the children are young — even given the availability of affordable and high-quality child care. However, part-time employment may be viable, and it is therefore an important empirical question whether part-time employment can mitigate the disengagement effect. That is, by reducing the length of time completely out of employment, part-time employment may improve the longer-term employment prospects of single mothers. Clearly, the policy emphasis placed on accommodating, or even mandating (search for) part-time employment of welfare-dependent single mothers hinges on whether such an effect does indeed exist. Moreover, evidence on the scale and nature of the effect can also inform the particulars of policy settings—for example, how policies depend on the age of the youngest child.

Of course, it is in principle also possible that part-time employment actually hinders movements into full-time employment. Indeed, for some years now, welfare policy in Australia with respect to lone parents—in common with a number of other developed economy countries—has facilitated the combining of welfare receipt with part-time employment via a relatively generous allowance for earnings before benefit entitlements reduce (the earnings ‘disregard’), as well as reasonably low rates of withdrawal of benefits as earnings increase beyond this allowance. This creates significant potential for part-time employment, combined with welfare receipt, to be a substitute for full-time employment on a long-term basis.

This social, economic and policy context provides the motivation for our investigation of the causal effect of part-time employment on subsequent labour force status of single mothers. By estimating dynamic models of the determinants of labour force status of single mothers using household longitudinal data, we are able to identify whether part-time work represents a ‘stepping stone’ to full-time employment.

We find strong support for the argument that part-time work is more help than hindrance to transitions to full-time employment. Estimates imply that part-time employment in one year on average increases the probability of full-time employment in the next year by approximately 5 percentage points. Somewhat surprisingly, we find no evidence that the stepping stone function depends on the age of the youngest child or the number of children. This is not to say that these factors are unimportant to labour force status—far from it: estimates show large effects of these factors on labour force status. It is simply that no evidence is found that the stepping stone function of part-time employment depends on these factors. Another way of expressing this is that the increase in likelihood of moving into full-time employment as the youngest child ages, and the decrease in likelihood as the number of dependent children increases, are approximately the same for non-employed single mothers as for part-time employed single mothers.

From a policy perspective, it would seem that the Australian welfare system’s facilitation of part-time employment of lone parent welfare recipients does not promote entrenched welfare reliance. Indeed, our findings imply that policies to promote part-time employment of single mothers will in turn tend to promote full-time employment over the longer-term. Correspondingly, welfare reliance of single mothers over the long-term may be reduced by such a policy stance. Of course, reduced welfare reliance and increased full-time employment could probably also be achieved in the short-term by treating single mothers in the same manner as unemployment benefit recipients – for example, requiring active search for full-time employment – but, at least in the case of mothers with young children, the care needs of the children would suggest this is not in the interests of single mother families or the broader community.

Roger Wilkins is Principal Research Fellow at the Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. He is Deputy Director (Research) of the HILDA Survey, Australia’s household panel study. He is a labour economist with a strong interest in the use of panel data to investigate labour market behaviour and outcomes. His research interests also extend to the determinants and dynamics of household wealth, and issues of income inequality, poverty and welfare dependence. He is a co-author of the article ‘Does part-time employment help or hinder single mothers’ movements into full-time employment?’, which appears in the journal Oxford Economic Papers.

Oxford Economic Papers is a general economics journal, publishing refereed papers in economic theory, applied economics, econometrics, economic development, economic history, and the history of economic thought.

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Image credit: (i) Graph, author’s own. Do not reproduce without permission. (ii) Blocks still life. By matzaball, via iStockphoto.