The Single Parent Law (1992) has had a negative effect on employment of single mothers in the workforce but has helped reduce the level of poverty among single mothers, according to a Bank of Israel study released today.
The research, carried out by Dr Karnit Flug, Nitza Kasir (Kaliner) and Irena Meadan, of the Bank of Israel Research Department, analyzed the effects of the Single Parent Law passed in 1992 and the laws enacted in 1994 and 1995 to reduce income inequality.
This legislation increased the benefit paid to single parent families and raised the number of those entitled to receive the benefit, and allowed recipients to work at a relatively high wage without losing the full benefit.
The research shows that these laws acted to reduce the labor supply of single mothers in the veteran population (i.e., not new immigrants), in contrast to the continued expansion in the labor supply of married mothers.
The research shows that while the employment rate of married mothers rose constantly from 44% at the beginning of the 1980s to 57% in 2002, there was a clear trend change in the employment rate of single mothers at the beginning of the 1990s. Their employment rate, which, at about 55% , had been higher than that of married women at the beginning of the 1980s, continued rising until the beginning of the 1990s. With the changes introduced in the allowances paid, the employment rate of single mothers leveled off and actually declined slightly until 2002, when the gap between their employment rate and that of married women disappeared.
It was found that the legislative changes acted to reduce all aspects of the labor supply of single mothers: they led to a reduction in their participation rate in the labor force, their employment rate, and the number of hours they worked, and raised the share of those working part time.
It was also found that the effect of the legislative changes in lowering the labor supply of single mothers gained strength as time went by, and at the end of the 1990s resulted in a reduction of about 8% in the participation rate of single mothers and of about 10% in their employment rate.
The research shows that the change in the law affected mainly single mothers who had not worked prior to the change, and mainly young mothers. The effects were felt at all levels of education, but most strongly by single mothers with low educational levels to whom the labor market is less attractive.
Nonetheless, it can be seen that the change in the structure of the benefit itself, which enabled single mothers to work at a relatively high wage without losing the benefit in full, incorporated a greater incentive to increase their labor supply than that incorporated in the structure of the income support benefit for married women. Hence, single mothers potentially entitled to income support had a higher tendency to work than their married counterparts.
With regard to the effects of the changes on the extent of poverty, the researchers found that the changes in the scope of the benefits and the rules of entitlement helped reduce poverty of single parent families by about 4%, but increased their dependence on the system of benefits and reduced their labor income.
The policy measures adopted in 2002, which included a sharp cut in payments to single mothers and in associated benefits, and the introduction in August 2003 of an employment subsidy and subsidized costs of going out to work were intended to reverse the trend and to place single mothers back in the labor market. And indeed, as expected, since 2003 and even more markedly since 2004 their participation rate and employment have risen. Nevertheless, the order in which the changes were introduced -- the benefits were cut before the employment subsidy was introduced -- was reflected in a sharp rise in the poverty rate among single parent families in 2003 and in a steep drop in the share that were rescued from poverty via the system of benefits.
Employment rate of Israeli mothers1 in the veteran population, by marital status
1Mothers whose children are less than 18 years old. In 1998 and 2001 methodology changes were introduced in the Israel Labor Force Survey.
SOURCE: Based on the Labor Force Surveys of the Central Bureau of Statistics 1982--2004.
Changes in the employment rate of Israeli mothers1 in the veteran population, between 1991 and 2002 (%)
1Mothers whose children are less than 18 years old. Not including the Arab and ultra-orthodox sectors of the population.
SOURCE: Based on the Labor Force Surveys of the Central Bureau of Statistics 1982--2004.
Published by Globes [online], Israel business news - www.globes.co.il - on Sunday, July 17, 2005