Does Time on Welfare Affect Women's Wages?

Mary C. Noonan, University of Iowa
Colleen Heflin, University of Kentucky

Many scholars have examined the effect of a work interruption on women's wages, but few have analyzed the wage implications of welfare participation. It is often assumed that time on welfare will have the same negative impact on wages as other work breaks. We present justifications for why welfare participation is qualitatively different from other generic work interruptions, and discuss how these differences may result in welfare participation having a positive effect, negative effect, or no effect on wages. Using longitudinal data from the 1996 Survey of Income and Program Participation, our results indicate that time spent on welfare while unemployed results in a larger wage penalty compared to other non-welfare work breaks. Time spent on welfare while employed has a positive effect on wages, but the effect is much smaller compared to the impact of non-welfare work periods. Results are consistent with theories of human capital deterioration and welfare stigma.