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Earnings Supplementation as a Means to Re-integrate the Unemployed

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  • John Greenwood
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    Abstract

    This paper presents evidence from two randomized experiments testing the use of financial incentives to ecourage labour market participation. The Self-Sufficiency Project shows that supplementing earnings from low-paying, full-time jobs can increase employment among single-parents who are long-term welfare recipients, can raise their earnings and incomes, and may entail little net increase in government transfers net of taxes. In the Earnings Supplement Project, however, the offer to partially compensate unemployment insurance recipients who returned to work quickly and experienced earnings losses had no impact on the labour force behaviour of repeat users of UI and only a small and short-lived impact with displaced workers. The paper includes a discussion of the issues that need to be addressed in trying to stimulate work effort using financial incentives and concludes with some lessons drawn from the research findings.

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    Bibliographic Info

    Article provided by University of Toronto Press in its journal Canadian Public Policy.

    Volume (Year): 26 (2000)
    Issue (Month): s1 (July)
    Pages: 235-256

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    Handle: RePEc:cpp:issued:v:26:y:2000:i:s1:p:235-256

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    1. Philip K. Robins, 1985. "A Comparison of the Labor Supply Findings from the Four Negative Income Tax Experiments," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 567-582.
    2. Card, David & Robins, Philip K., 2005. "How important are "entry effects" in financial incentive programs for welfare recipients? Experimental evidence from the Self-Sufficiency Project," Journal of Econometrics, Elsevier, Elsevier, vol. 125(1-2), pages 113-139.
    3. Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
    4. Belzil, Christian, 1996. "Relative Efficiencies and Comparative Advantages in Job Search," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(1), pages 154-73, January.
    5. Scholz, John Karl, 1996. "In-Work Benefits in the United States: The Earned Income Tax Credit," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 106(434), pages 156-69, January.
    6. Christofides, Louis N & McKenna, C J, 1996. "Unemployment Insurance and Job Duration in Canada," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(2), pages 286-312, April.
    7. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(1), pages 1-61, March.
    8. Charles Michalopoulos & Philip K. Robins & David Card, 2000. "When Financial Incentives Pay for Themselves: Early Findings from the Self-Sufficiency Project's Applicant Study," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 133, Northwestern University/University of Chicago Joint Center for Poverty Research.
    9. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, American Economic Association, vol. 81(1), pages 319-24, March.
    10. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 29(4), pages 1679-1727, December.
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