Testing New Ways to Increase the Economic Well-Being of Single-Parent Families: The Effects of Child Support Policies on Welfare Participants

Single-parent families are economically vulnerable. Some child support policies have been aimed at improving the economic well-being of these families, while others have been focused on decreasing welfare costs. Since 1996, states have been free to decide how to treat child support when it is paid on behalf of a welfare participant. States decide both how much child support income to ignore in the calculation of benefits (the disregard) and whether to send a separate child support check to the participant (the pass-through). Disregard and pass-through policies have potential impacts on economic well-being and on governmental costs, but little research has focused on their effects. This paper uses variation in child support disregard and pass-through policy across states and years to estimate whether these policies are associated with paternity establishment, child support collections, and the average dollar amount of child support collected, as reflected in state-level administrative data. We find that the disregard is positively associated with paternity establishment in all models, and is positively associated with collections in two of the four models examined. The pass-through has insignificant, or negative, effects. Testing New Ways to Increase the Economic Well-Being of Single-Parent Families: The Effects of Child Support Policies on Welfare Participants In the United States, single-parent families with children are economically vulnerable: they had poverty rates of 36 percent in 2004, compared to 7 percent for husband-wife families with children (DeNavas-Walt et al., 2005). Several programs attempt to address this vulnerability. Key federal efforts date back to 1935, with the beginning of the Aid to Dependent Children (ADC) program, later renamed Aid to Families with Dependent Children (AFDC). This program was supported by a mix of federal and state government funding, with states making some decisions (for example on the benefit level) within parameters set by federal policy. Providing support to single-parent families has often been controversial, however. Some believe that the government should not provide support unless there are no other resources available to the single parent. In the early years of ADC, when most single parents were widows, support from the children’s father was not an issue. But as the caseload increasingly included mothers who were separated or divorced and those who had never been married to the father of their children, the appropriate division of responsibilities between the government and the nonresident parent (typically the father) received more attention. Child support enforcement, motivated in large part by a desire to offset public welfare expenditures, became a formal federal and state responsibility in 1975 (Garfinkel et al., 1998). As child support began to be collected for families receiving welfare, a key question emerged: When noncustodial parents pay on behalf of a family receiving public benefits, what should happen to that child support? States have adopted different approaches to this issue. Currently, some states disregard no child support in calculating a mother’s welfare benefits, effectively fully taxing away any child support paid to women receiving public assistance (Justice, 2007). A minority of states allow women on welfare to keep up to $50 per month of child support. From 1997 to December 2005, Wisconsin disregarded all For ease of exposition, in this paper we use “mother” and “custodial parent” interchangeably. While rates of father custody have increased, mothers remain the custodial parent in the vast majority of the cases.