Childcare Subsidies and the Transition from Welfare to Work

We address how childcare subsidies help in the welfare-to-work transition relative to other factors. We examine how the policy operates, whether childcare problems differ by subsidy receipt, and the effect of subsidy on work. Data are from a random sample panel study of welfare recipients after 1996. Findings show that subsidy receipt reduces costs but not parenting stress or problems with care. It predicts earnings and work duration net of other factors. Increased use of subsidies by eligible families and greater funding for child care would help meet the demand for this important support for working-poor families. Key Words: child care, mothers' employment, subsidy, welfare. (Family Relations, 2004, 53, 219-228) Access to subsidized child care is an important concern for many women moving from welfare to work. Because access to a subsidy program varies by state, here we describe the policy context in Michigan, where the study was conducted. We examine whether demographic characteristics and other factors that may affect work differ by childcare use and subsidy receipt. We assess whether subsidies reduce childcare problems and increase a woman's percent of months worked and monthly earnings. Using data from the Women's Employment Study (WES), a random sample panel survey of women who received welfare, we draw policy and program implications regarding how child care financial assistance can better promote the welfare reform objective of self-sufficiency through employment. Background Policies that help families find and pay for nonparental child care can facilitate the employment of women, especially single mothers. All else being equal, mothers facing lower childcare costs are more likely to be employed, particularly low-income or single mothers (Meyers, Han, Waldfogel, & Garfinkel, 2001). Low-income single mothers also report being more likely to work when care is more available (Mason & Kuhlthau, 1992) and when they are more satisfied with the quality of care (Meyers, 1993). Problems with child care can lead single mothers to leave jobs and also can adversely affect attendance, work hours, and career advancement (Henly & Lyons, 2000). In theory, subsidies can reduce both childcare costs and childcare problems and thereby promote work. As such, subsidies are one policy strategy that can help address the childcare needs of low-income working families. In addition to childcare problems and childcare costs, many factors can affect the transition from welfare to work. Previous research has identified a wide range of factors that can potentially increase or hinder the success of low-income mothers in the labor force, including women's physical or mental health status, their children's health, women's human capital (her education and training), their personal and social or family problems, and access to transportation. High rates of health and mental health problems among welfare recipients have been identified (Danziger, Kalil, & Anderson, 2000; Ensminger, 1995; Loprest & Acs, 1996; Olson & Pavetti, 1996; Zedlewski & Alderson, 2001). Some studies found employment effects for low-income or welfare-recipient mothers who had one or more of these barriers, such as depression (Lennon, Blome, & English, 2001). Previous work with the Women's Employment Study found that child health problems, maternal health, and mental health problems reduced work outcomes (Danziger, Corcoran et al., 2000). Analyses with these data also showed reduced work outcomes among women with less than a high school degree relative to women with more education, and among those who lacked access to a car or driver's license (Danziger, Corcoran, et al.). Findings on the work effects of social or familial factors are more mixed, such as the effects of domestic violence for welfare and work outcomes (Tolman & Raphael, 2000) and the effects of having social support (Henly, 2000; Newman, 1999). …