One of the principle aims of the Working Families' Tax Credit in the UK was to increase the participation of those with low labour market attachment. The literature to date concludes that for lone mothers there was approximately a 5% point increase in employment. The differences-in-differences methodology that is typically used compare lone mother with single women without children. However, the characteristics of these groups are both observably and unobservably different, such that the identifying assumption may not be satisfied. We find that when we control for differential trends between people with and without children, the employment effect of Working Families' Tax Credit falls significantly. Moreover, by looking at movements in the hour's distribution, it is clear that any Working Families' Tax Credit effect is solely borne on those working full-time (30 hours or more). Another concern is that we find that the policy did not induce people into the labour market from inactivity.
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