Does more generous income assistance discourage work? Evidence from Canada

Yutong Lu


Policy makers often fear high social assistance benefit levels will have negative employment and labor force participation effects. However, do these negative effects actually exist, and if so, how big are they?

My thesis uses new detailed data on social assistance benefit rules and changes across Canada to estimate the effects of social assistance benefit levels on employment. I find that large increases in assistance levels are associated with a modest decrease in the labor force participation rate of singles and single parents with one child. However, higher assistance levels actually increase the labor force participation of couples with two children.