vage is aopäied by a reduction in the costs of the EITC? 17. A number of researc

Question

vage is aopäied by a reduction in the costs of the EITC? 17. A number of researchers have studied the effects that the EITC has on motivating more people to work (extensive margin) and on the hours worked among low-income recipients. The research results consistently find that the EITC increases labor force participation among those who previously did not work and does not discourage hours worked among those already in the workforce. Are these findings consistent with what might be expected by the theory on how the EITC might affect labor force participation and the number of hours worked? Chapter 21 last slide

Explanation / Answer

The EITC is an effective weapon in America's anti-poverty arsenal, but it is crucial to understand what it does and does not achieve. The credit rewards those who work and helps keep them working, but it does little to get them to go to work in the first place. To raise work levels, we still need the sorts of administrative work requirements seen in the last major welfare reform.The EITC was popular with policymakers because it appeared to raise work levels through incentives and without TANF's punitive measures. The credit was reformed and somewhat expanded in 2001 with changes intended to help mitigate its marriage penalty and was then expanded further for families with three or more children as part of the 2009 stimulus package.Thus, on-the-ground research on welfare reform offers essentially no reason to think that the EITC deserves much credit for driving recipients off of AFDC or TANF and into jobs.

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