CHANGING EXPECTATIONS: SOLE PARENTS AND EMPLOYMENT IN NEW ZEALAND.

• Author: Goodger, Kay
• Position: Statistical Data Included

INTRODUCTION

This paper(1) examines a range of factors that might explain trends in the employment rates of sole mothers in New Zealand since the 1970s. These factors include changes in the economy and the labour market, changes in family structure and the characteristics of sole mothers, and changes in the benefit system and other areas of government policy. We find that the level of economic activity and underlying demographic trends are important in explaining the employment rate of sole mothers. Examining government policy in isolation from economic and demographic factors can produce misleading conclusions.

BACKGROUND

In February 1996, the New Zealand Government announced a Tax Reduction and Social Policy Programme which included three significant changes affecting sole parents receiving social security benefits:

* The benefit abatement schedule was changed so that a greater share of earnings could be kept before benefits were reduced (effective 1 July 1996);

* A new tax credit (Independent Family Tax Credit) was introduced for employed parents not receiving benefits (effective 1 July 1996);

* A work test was introduced for the first time since sole parent benefits were established on a statutory basis (1912 for widows; 1973 for other sole parents).

The work test came into effect on 1 April 1997. Since then, sole parents whose youngest child is aged 14 or over have been required to meet part-time work or training requirements (for at least 15 hours per week) as a condition of receiving a domestic purposes or widows benefit.

In the 1998 Budget, the Government announced that from February 1999, the part-time work test will be extended to sole parent benefit recipients with a youngest child aged 6-13 years, and those with children aged 14 and over will be required to look for full-time work (for at least 30 hours per week). The Childcare Subsidy will be extended to include children in after-school care.

These measures represent a change in the Government's work expectations of sole mothers. They have been motivated by long-standing concerns about the rising numbers of sole parents and children dependent on the domestic purposes benefit (DPB); the rising fiscal burden of benefit provision; and the incentive effects of the benefit system on sole parents' levels of employment. They are part of a programme of welfare reform initiated by the Government in 1991 to reduce welfare dependency.

RESEARCH ON SOLE MOTHERS' EMPLOYMENT IN NEW ZEALAND

The development of the statutory DPB took place at a time when the employment of mothers generally was undergoing change, although evidence of this change was not readily accessible from official statistics. The limited evidence available suggests that sole mothers were more likely to be employed than partnered mothers in the early 1970s. For example, divorced and separated women had far higher labour force participation rates than married women. In the 1971 Census, 64% of divorced women and 56% of separated women were in the labour force, compared with 28% of married women (Hyman 1978:160).

A survey of 319 sole mothers undertaken in Christchurch by the Society for Research on Women in 1971/72 showed that the majority (56%) were employed (35% for 20 or more hours, 21% for under 20 hours). Even among the 34% with children aged under five years, over a third (35%) were employed (SROW 1975:54). In many cases, however, these mothers of very young children lived with their parents, who cared for the children while they worked. Among all sole mothers not working, the most common reason given was the age of the children and their need for care at home. The second most common reason, cited by 19% of those not employed, was the state of their own or their children's health (SROW 1975:60).

The 1976 Census was the first from which information on families with dependent children could be extracted. Using a 10% sample of 1976 Census data, Carmichael (1983) found little difference in the labour force participation rates of sole and partnered mothers, except that between the ages of 20 and 49, sole mothers were more likely to work full-time (defined as 30 or more hours per week). After standardising the rates of sole mothers to those of husband-present mothers (to equalise the distribution by number of children and age of youngest child), he found that the labour force participation rates of sole mothers were lower overall, but that full-time participation rates were generally higher. Carmichael explained this as the effect of disincentives in the benefit structure, which discouraged part-time employment.

In 1980 the Department of Social Welfare commissioned a small (n=82), qualitative survey to identify the factors affecting sole mothers' employment (Wylie 1980). Wylie found that sole mothers in paid employment were better educated and more highly skilled than those not in employment. This study was instrumental in the establishment of the Training Incentive Allowance in 1983.

A decade later, a similar study (n=95) was conducted by researchers within the department (Levine et al. 1993). One of the aims of this study was to determine whether aspects of social welfare benefits and the tax structure affect the employment of sole parents. The researchers found that respondents regarded the income test and abatement regime as significant disincentives to their preferred option of part-time employment and a common response was to earn only up to the threshold of $60 per week. The tax structure also contained disincentives to gradual movement into paid work since earnings were taxed at a higher rate and Family Support debts could result if income rose in the course of the tax year.

The Department of Social Welfare has also published three census-based studies of sole parents that examine trends in their employment (Dominick et al. 1988, Rochford et al. 1992, Rochford 1993). Each of these studies identified educational qualifications and age of youngest child as the two factors most strongly associated with sole mothers' employment.

The first study, based on a 10% sample from the 1981 Census, identified a number of factors associated with the employment rates of sole parents but was unable to explain the declining employment rate of sole parents between 1976 and 1981 from census data (p.34). It was argued that more general reasons, such as fewer employment opportunities, or increased difficulty obtaining childcare, would not explain why mothers in two parent families increased their rate of employment over the same period (p.27). Changes in the relationship between average female wages and benefit levels could not explain the downward trend as the gap had widened, rather than narrowed.

The second DSW study was based on the 1986 Census and was the first to include ethnicity as a possible factor. It found that European sole mothers were far more likely to be employed than Pacific Islands or Maori sole mothers. However, when age of youngest child and education were also taken into account, ethnic differences in employment rates were reduced (p.47).

This study noted that declines in rates of employment for both sole mothers and sole fathers needed to be considered in the context of a more general trend of rising unemployment between 1976 and 1986. It also observed that while the proportion of sole parents employed full-time had declined, the number had grown over the period. Another finding was that there was a large increase in the number of sole parents receiving benefits other than DPB or widows benefit between 1986 and 1991, mostly unemployment benefits. Thus, by the early 1990s, trends in DPB numbers had become a less accurate guide to the employment levels of sole parents.

The profile of sole parents from the 1991 Census echoed the conclusions of the previous report. It also documented a further decline in the employment of sole mothers and an even sharper drop among sole fathers. The study suggested that this indicated an increasing tendency for both mothers and fathers to reduce their paid labour force participation upon becoming sole...