Executive Summary: “Child Care Policy Reform and the Employment of Single Mothers” by Jay Bainbridge, Marcia Meyers, and Jane Waldfogel

Single mothers’ employment has grown substantially in recent years, with particularly sharp increases in the 1990s, when a number of policies designed to discourage welfare use and encourage employment among low income and single-parent families were enacted. Major changes to federal cash assistance policy began in 1988 with the passage of the Family Support Act (FSA). Beginning in the early 1990s, states initiated other policy changes under waivers from the laws governing the federal Aid to Families with Dependent Children (AFDC) program. These state reforms laid the groundwork for the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), which replaced AFDC with a new time-limited program, Temporary Assistance to Needy Families (TANF).

During this same period, federal and state policy officials expanded a number of programs designed to support the employment of low-income parents. The expansion of childcare assistance was particularly notable. Congress created a variety of categorical childcare programs in the late 1980s and early 1990s, and, under the 1996 PRWORA, consolidated and expanded funding through a single federal block grant (the Child Care and Development Fund). Congress also expanded the Earned Income Tax Credit (EITC) for parents with low earnings in 1991, with further increases in 1994, 1995, and 1996. The federal minimum wage was raised in 1993, and health insurance coverage for low-income children was extended throughout the 1990s.

These and other federal and state policy changes during the 1990s created new barriers to welfare receipt and new employment incentives for low-income and single mother families. Social policy changes in the 1990s were also notable for the extent to which they devolved authority for policy design from federal to state government, increasing state-to-state variation and creating a natural experiment for examining the contribution of policy to household level outcomes.

In this paper, we capitalize on over-time and cross-state variation to estimate the contribution of childcare and related policies to the rise in single mothers’ employment during the early 1990s. We extend prior work by developing new measures of childcare policy that more precisely distinguish between assistance for employed and non-employed families. We find that per-capita public child care assistance grew very modestly between 1991 and 1996, with most of the growth benefiting welfare recipient, primarily non-working families. After controlling for family, economic, and other policy effects, we estimate that state spending on subsidies for working poor families had substantial and significant positive effects on the employment of single mothers with young children – dollar for dollar these effects were similar to, or greater than, those associated with tax policy changes. Per capita tax benefits increased more dramatically than per capita child care benefits, however, so tax policies are estimated to explain a larger share of the growth in single mothers’ employment for this period.