ECONOMIC

TABLE 47.—Trends in the employment status of mothers in the AFDC program, selected years,1961-73Status of mother1961 1967 1969 1971 1973Total mothers (thousands) *_743.2 1,109. 0 1, 463. 0 2, 345. 7 2,795. 3Total mothers (percent)100.0100.0100.0100.0100.0Mothers not employedActively seeking work84.385.56.585.35.985.15.783.811.5Mothers employedFull-timePart-time15.75.610.114.57.07.514.78.36.415.09.06.016.29.96.31 Limited to mothers jn the Aid to Families with Dependent Children (AFDC) program who were living at home.2 Not available.Note.—Data refer to status in January of each year. Detail may not add to totals because of rounding.Source: Department of Health, Education, and Welfare (Social and Rehabilitation Service).of some of the AFDC grant but also in the loss of some food stamp, housing,and other benefits. According to this view, while the 1967 amendmentsalone would have given an incentive to work, their effects may well havebeen offset by the increasing benefits in kind, some of which would be lostfor each increase in labor market earnings.It is not clear, however, how important in practice this factor could be,since the reduction in cash benefits as earnings rise has become very small.Many States exempt large amounts of earnings before any reduction in benefitsoccurs, and this reduction is in addition to the $30 a month income disregardestablished by the 1967 amendments. In Mississippi, for example,the State income disregard is large, and it is unlikely that the reduction incash benefits ever exceeds 10 percent of earnings net of work expenses(the average cash benefit tax rate). Moreover, a change in 1969 in themethod of entering work-related expenses into the cash benefits reductionformula further lowered the effective tax rate. One study estimated thatthe average net tax rate paid by the average working AFDC mother in Illinoisand New Jersey (two relatively high tax States) fell from 94 percent to42 percent between 1967 and 1971. In general, it would appear that theaverage tax rate on earnings must have fallen since 1969, even after accountingfor the growth of in-kind benefits and their effect on the overall implicittax rate.An important factor discouraging work may have been the increasein the benefit level itself (including in-kind benefits), which—since manypersons eligible for AFDC have low potential earnings—made it possiblefor many to maintain a higher living standard than could be obtainedthrough work. Moreover, the average AFDC mother incurs substantialwork expenses including child care, payroll taxes, transportation, and additionaloutlays for clothing and food. These expenses are likely to make upa large proportion of earnings that are not high to begin with. Thus, theactual dollar increment of earnings that could be retained, even if thebenefit tax rates were zero, could well be too low to make it profitable towork.172