The labour supply effect of Education Maintenance Allowance and its implications for parental altruism

Abstract

Education Maintenance Allowance (EMA) was a UK government cash transfer paid directly to children aged 16-18 in post-compulsory full-time education. Using data from the Longitudinal Study of Young People in England, we find an EMA payment of £30 per week reduces teenagers’ labour supply by 3 hours per week. We show this is consistent with parents withdrawing cash and in-kind transfers from their child to a value between £7.80 and £20.10 per week. We therefore argue that making this cash transfer directly to the child produces higher child welfare than if the equivalent transfer were made to parents.