NCPA - National Center for Policy Analysis

Welfare Reform: Consumption and Income of Single Mothers

April 24, 2002

Tax and transfer programs targeted at low income families have changed dramatically in recent years, often encouraging work and discouraging welfare receipt. Studies of single mothers leaving welfare due to policy changes have found that although more of them are working, a considerable number report difficulty paying for food, rent or utilities.

And despite the fact that employment rates for single mothers rose each year from 1993 to 1998, studies have found that total family income for the poorest single mothers fell from 1995 to 1998, suggesting that losses in income transfers outstripped earnings gains.

But paradoxically, total consumption by most single mothers increased slightly over the years from 1984 to 1995, and then rose more noticeably after 1995. That is possible because consumption may not be paid for just from reported cash income -- it may come, for example, from noncash benefits, savings, increased debt or gifts from family members.

  • From the late 1980s to the period from 1996 to 1998, inflation-adjusted consumption rose on average by more than 8 percent for single mothers.
  • For each $1 of reported income, households headed by single mothers consumed $1.14 worth of goods and services.
  • Less educated single mothers (high school or less) consumed $1.16 for each $1 of reported income.
  • Moreover, total consumption by single mothers increased relative to single childless women and married mothers.

The fact that consumption for single mothers and their children increased relative to other groups of women suggests that only a small part of the increase is attributable to the economic growth that characterized much of this period.

Source: Linda Gorman, "The Effects of Welfare and Tax Reform," NBER Digest, November 2001; based on Bruce D. Meyer and James X. Sullivan, "The Effects of Welfare and Tax Reform: The Material Well-Being of Single Mothers in the 1980s and 1990s," NBER Working Paper No. 8298, May 2001, National Bureau of Economic Research.

For NBER Digest text


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