Effect of Rising Welfare Benefits on the Employment Income: Evidence from single mothers in Japan

This study empirically examines the effect of increased welfare benefits on the earned income of single-mother households. Japan’s public assistance system reduces the amount of assistance provided to recipients as their household income rises, which disincentivizes individuals from seeking employment. Concerns about the impoverishment of single-mother households have necessitated an investigation into how changes in welfare benefits affect the labor market behavior of single-mother households. This study utilizes microdata containing information on all members of households receiving public assistance benefits. The analysis focuses on the October 2018 revision of public assistance standards, and leverages regional variations in the increase in public assistance benefits for single-mother households. The results reveal that for single mothers with children in junior high or high school, an increase in public assistance benefits significantly reduces earned income, particularly when the analysis is limited to women in good health condition. However, most cases reveal no such statistically significant effect. Given the increasing concern over poverty among single-mother households, understanding whether higher welfare benefits discourage employment is crucial for designing effective policies.