Economic outcomes depend on where we live: many studies show how important place is for the opportunities people have, and as a result for the choices they can make. If that is the case, people’s response to a change in institutions – such as welfare reform – should also depend on their economic environment, but this is rarely studied: most evaluations of reform impacts only focus on a national average response to a reform. This study seeks to fill this gap by analysing the 2006 Welfare-to-Work reform and how its impact varied on the local level. We ask if we can find patterns in local area characteristics and local reform impacts. What are the characteristics of areas that experienced desirable effects, and which experienced undesired or unintended consequences?
- We find that the 2006 Welfare-to-Work reform – which decreased income support payments to single mothers and tightened eligibility criteria – reduced reliance on income support but also reduced earnings while receiving income support. This is likely because in the new payment structure, income support was withdrawn faster as own earnings increased.
- We find that the reform’s intended effect of reducing welfare reliance, occurred more strongly in economically advantaged regions. Conversely, the reforms unintended side effect of reducing earnings, occurred primarily in disadvantaged regions. Taken together, this means that the reform led to greater economic independence in some places and to greater poverty in others.
Policymakers need to be aware that reform successful on the national level, could mask quite severe negative impact in certain regions, especially disadvantaged regions. Those regions may need targeted support to turn any changes to income support regulations into a success.