Minimum Wages, the Earned Income Tax Credit, and Employment: Evidence from the Post-Welfare Reform Era
AbstractWe study the effects of minimum wages and the EITC in the post-welfare reform era. For the minimum wage, the evidence points to disemployment effects that are concentrated among young minority men. For young women, there is little evidence that minimum wages reduce employment, with the exception of high school dropouts. In contrast, evidence strongly suggests that the EITC boosts employment of young women (although not teenagers). We also explore how minimum wages and the EITC interact, and the evidence reveals policy effects that vary substantially across different groups. For example, higher minimum wages appear to reduce earnings of minority men, and more so when the EITC is high. In contrast, our results indicate that the EITC boosts employment and earnings for minority women, and coupling the EITC with a higher minimum wage appears to enhance this positive effect. Thus, whether or not the policy combination of a high EITC and a high minimum wage is viewed as favorable or unfavorable depends in part on whose incomes policymakers are trying to increase.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2610.
Length: 38 pages
Date of creation: Feb 2007
Date of revision:
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Find related papers by JEL classification:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-24 (All new papers)
- NEP-LAB-2007-03-24 (Labour Economics)
- NEP-LTV-2007-03-24 (Unemployment, Inequality & Poverty)
- NEP-PBE-2007-03-24 (Public Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Wolfgang Franz & Wolfgang Wiegard & Beatrice Weder di Mauro, 2008. "Hände weg von Mindestlöhnen," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 61(06), pages 08-12, 03.
- Addison, John T. & Blackburn, McKinley L. & Cotti, Chad, 2008. "New Estimates of the Effects of Minimum Wages in the U.S. Retail Trade Sector," IZA Discussion Papers 3597, Institute for the Study of Labor (IZA).
- William Scarth & Lei Tang, 2007. "An Evaluation of the Working Income Tax Benefit," Social and Economic Dimensions of an Aging Population Research Papers 220, McMaster University.
- William Scarth & Lei Tang, 2007. "An Evaluation of the Working Income Tax Benefit," Quantitative Studies in Economics and Population Research Reports 424, McMaster University.
- Dube, Arindrajit & Lester, T. William & Reich, Michael, 2011.
"Do Frictions Matter in the Labor Market? Accessions, Separations and Minimum Wage Effects,"
IZA Discussion Papers
5811, Institute for the Study of Labor (IZA).
- Dube, Arindrajit & Lester, T. William & Reich, Michael, 2011. "Do Frictions Matter in the Labor Market? Accessions, Separations, and Minimum Wage Effects," Institute for Research on Labor and Employment, Working Paper Series qt4t3342nd, Institute of Industrial Relations, UC Berkeley.
- Addison, John T. & Blackburn, McKinley L. & Cotti, Chad, 2008. "The Effect of Minimum Wages on Wages and Employment: County-Level Estimates for the United States," IZA Discussion Papers 3300, Institute for the Study of Labor (IZA).
- Pia M. Orrenius & Madeline Zavodny, 2008.
"The effect of minimum wages on immigrants' employment and earnings,"
0805, Federal Reserve Bank of Dallas.
- Orrenius, Pia M. & Zavodny, Madeline, 2008. "The Effect of Minimum Wages on Immigrants’ Employment and Earnings," IZA Discussion Papers 3499, Institute for the Study of Labor (IZA).
- Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2009. "Do minimum wages raise employment? Evidence from the U.S. retail-trade sector," Labour Economics, Elsevier, vol. 16(4), pages 397-408, August.
- Dube, Arindrajit & Lester, T. William & Reich, Michael, 2012. "Minimum Wage Shocks, Employment Flows and Labor Market Frictions," Institute for Research on Labor and Employment, Working Paper Series qt76p927ks, Institute of Industrial Relations, UC Berkeley.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.