Self-Sufficiency Project (SSP) – The Effects of Human Capital and Earnings Supplements on Income Assistance Dependence in Canada

March 2006


This working paper uses data from the Self-Sufficiency Project (SSP) Applicant study to analyze the effects of educational attainment, work experience, work-related training, and earnings supplements on income assistance (IA) dependence. The main objective of the empirical analysis is to estimate the effects of these factors on both IA exit and IA re-entry rates. This paper suggests that, contrary to conventional wisdom, formal education has no significant causal effect on IA use. The paper also finds substantial educational upgrading by single parents in receipt of IA. Higher formal education does not cause lower welfare use. Instead, the paper finds that favourable unobserved characteristics — such as labour market ability, motivation, and preferences — cause some welfare clients to have both higher levels of education and shorter, less frequent spells on welfare. Consequently, the paper concludes that a policy aimed at improving the educational attainments of former welfare recipients may have only limited effects on the reliance on income assistance.