This project is part of the Australian Research Council Linkage Grant “Intergenerational Disadvantage: Causes, Pathways, and Consequences” (LP190100117).
The challenge
Most research on the effects of economic disadvantage on children conflates actual income reductions with the anticipation of income loss. Yet the two may operate through very different mechanisms: chronic stress and uncertainty can affect parenting, household investment decisions, and child wellbeing independently of whether income ultimately falls. Disentangling these channels requires a research design that generates variation in anticipated insecurity while holding actual income constant—a rare empirical opportunity that the grandfathering provision of the 2006 reform provides.
The research
This project examines how anticipated economic insecurity affects child development, using the 2006 Australian Welfare-to-Work reform as a natural experiment. The reform grandfathered some low-income parents under existing benefit rules while subjecting others to future benefit reductions, creating quasi-random variation in anticipated income insecurity without immediate changes to actual income. This design isolates the developmental effects of living under the threat of income loss from the effects of income changes themselves—a distinction that is central to understanding how welfare policy design shapes child outcomes.
The impact
The findings will inform the design and cost-benefit analyses of welfare-to-work policies across Australia and internationally. By demonstrating whether the anticipation of benefit reductions—independent of actual income changes—affects child developmental outcomes, the research provides evidence on a mechanism that current policy evaluations typically overlook. Results are relevant to ongoing debates about the design of income support transitions, conditionality in welfare systems, and the broader relationship between economic security and child wellbeing.
Our researchers
Melbourne Institute - Nicolás Salamanca, Sarah Dahmann
University of Sydney - Deborah Cobb-Clark
Erasmus University Rotterdam - Anne Gielen