Single parents, and especially single mothers, participate in the labour force at a lower rate than other demographic groups. Combining childcare with work can be difficult for single parents, and the financial incentives to pursue employment are limited for low-paid jobs. Any additional income earned often leads to a corresponding reduction in non-work-related benefits, which means that increasing working hours becomes unappealing. Prolonged periods outside the labour market diminish prospects of securing employment in the future when the children are a bit older. If, on the other hand, single parents on welfare engage in part-time employment, they can accumulate valuable work experience, potentially facilitating easier access to full-time employment opportunities in the future, enabling them to transition away from welfare dependency. In order to improve the labour market participation of single parents in the Netherlands, the Dutch Government implemented an earnings disregard for single parents receiving welfare between 2009 and 2010, as part of a broader experiment. In the Netherlands, welfare benefits guarantee a minimum income for all unemployed or part-time employed workers. Welfare benefits usually decrease one to one with any additional income that is earned. At the time of the experiment, about 300 000 individuals in the Netherlands received welfare benefits. Of these, a substantial 26% were single parents, predominantly single mothers. Out of all Dutch single parents, 10.6% relied on welfare benefits.
Earnings disregard for single parents on welfare - Netherlands
Abstract
As part of the experiment, 14 Dutch municipalities implemented the earnings disregard for single parents on welfare who had at least one child below the age of 12. The earnings disregard took the following form: single parents were allowed to keep EUR 4 for each hour worked, with a cap at EUR 120 net per month. To provide context, the minimum wage during that period was EUR 7.50 per hour and the net welfare benefit was approximately EUR 900 for single parents aged 21 to 65, while those under 21 received EUR 480. Importantly, the earnings disregard was not crafted to prompt an immediate outflow from welfare. Instead, its primary goal was to foster increased work experience, thereby potentially easing the path for single mothers to secure full-time employment later in life.
Between 2009 and 2010, 5‑6% of single parents in the target group received an earnings disregard. Some municipalities had over 10% of single parents applying for the disregard, while others stayed below 3.5%. For single mothers, the earnings disregard boosted part-time employment within 2 years by 13.9 percentage points on average (from 4.2% to 18.1%). Parents who were already working while receiving benefits increased their number of working hours, resulting in a 13.1% income boost for those who previously earned between EUR 250 and EUR 500. A difference‑in-difference analysis of the experiment revealed that the earnings disregard not only stimulated earnings for all single mothers but also notably increased (part-time) employment for immigrant single mothers. The experiment also showed that policies should focus on effective communication strategies to inform single parents about the availability of the earnings disregard, as one‑third of those interviewed in a study were unaware of these measures in their municipality.
Further reading
[2] Knoef, M., J. Leenheer and M. Von Bergh (2011), Experiment Bevordering Arbeidsparticipatie Alleenstaande Ouders WWB, Tweede Kamer, https://www.tweedekamer.nl/kamerstukken/detail?id=2011D51775&did=2011D51775.
[1] Knoef, M. and J. Ours (2016), “How to stimulate single mothers on welfare to find a job: evidence from a policy experiment”, Journal of Population Economics, Vol. 29/4, pp. 1025-1061, https://doi.org/10.1007/s00148-016-0593-0.
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