The Interaction of UI and Welfare, and the Dynamics of Welfare Participation of Single Parents

The main goal of this paper is to analyze the impact of the unemployment insurance (UI) program on the rates of entry into and exit from welfare by single-parent households in Quebec. The database we used comes from Quebec welfare records and comprises over 11,180 single parent households, most of which (92 percent) are headed by a woman. Our results show that tightening the conditions of eligibility to UI causes a reduction of exits from welfare, especially for the older group, and an increase in re-entries. Similarly, a cut in the UI replacement rate raises the rate of re-entry into welfare. Our results indicate that cuts in the UI program may partially explain the increase in the welfare participation of lone mothers observed recently.