The Impact of Earnings Disregards on the Behavior of Low-Income Families

This paper investigates the impact of changes in earnings disregards for welfare assistance received by single mothers following welfare reform in 1996. Some states adopted much higher earnings disregards (women could work full-time and still receive substantial welfare benefits), while other states did not. We explore the effect of these changes on women's labor supply and income using several data sources and multiple estimation strategies. Our results indicate these changes had little effect on labor supply or income. We show this is because surprisingly few women used the earnings disregards. We discuss several explanations for why this might occur. (C) 2013 by the Association for Public Policy Analysis and Management.