Human capital and welfare dynamics in canada

This paper analyzes the effects of human capital on welfare dynamics in Canada using data from the Self-Sufficiency Project (SSP). SSP offered a time-limited earnings supplement to a randomly assigned group of new welfare applicants who remained on welfare for one year and, in the subsequent year, left welfare for full-time employment. The results suggest that high school completion has no significant impact on the exit rate from welfare or on the re-entry rate. Moreover, full-time work experience is found to reduce the risk of returning to welfare but not for respondents who were assigned to the treatment group. This finding suggests that the provision of an earnings subsidy encourages welfare recipients to accept low-wage jobs with little gains from work experience. Thus, the rationale for such a policy that work today will raise experience and consequently future wages is not supported by the results in this paper.