Examining the Impact of Welfare Reform, Labor Market Conditions, and the Earned Income Tax Credit on the Employment of Black and White Single Mothers

Using the Annual Demographic Files of the March Current Population Survey, we determine the extent to which change in welfare policies, labor market conditions, and the earned income tax credit (EITC) account for the changes in employment of black and white single mothers from 1991-2003. Compared to white single mothers, black single mothers are more likely to be high school dropouts, never married, and central city residents, and our results show that policy and labor market changes had a more profound affect on the employment of these groups. However, these demographic differences and interaction effects are not substantial enough to produce dissimilar explanations for the changes in employment by race. During the period 1991-2000, the increase in the EITC was the most important factor, accounting for approximately 25 percent of the increase in employment. Declines in the unemployment rate and welfare reform were less important, together accounting for an additional 25 percent of the increase. Our results also show that the decline in employment between 2000 and 2003 for both black and white singl