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Alternative Labor Market Policies to Increase Economic Self-Sufficiency: Mandating Higher Wages, Subsidizing Employment, and Increasing Productivity

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David Neumark

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Abstract

I review evidence on alternative labor market policies that could potentially improve economic self-sufficiency via mandating higher wages, subsidizing employment, or increasing productivity. The evidence indicates that the minimum wage is an ineffective policy to promote economic self-sufficiency, entailing employment losses without any corresponding distributional benefits via higher wages. In contrast, living wage laws appear to present a more favorable tradeoff. Labor supply incentives, in particular the EITC, appear effective, as a more generous EITC boosts employment of single mothers and in so doing raises incomes and earnings of low-income families. There is some evidence that wage subsidies increase employment and earnings, but problems of stigmatization resulting from eligibility for wage subsidy programs can dissipate the gains, and wage subsidies entail substantial administrative difficulties. Finally, a newer but growing literature on school-to-work provides some evidence that school-to-work programs boost labor market attachment, skill formation, wages, and earnings.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14807.

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Date of creation: Mar 2009
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Handle: RePEc:nbr:nberwo:14807

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J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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  1. Scott Adams & David Neumark, 2004. "The Economic Effects of Living Wage Laws: A Provisional Review," PPIC Working Papers 2004.10, Public Policy Institute of California.
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  2. Betts, Julian R, 1995. "Does School Quality Matter? Evidence from the National Longitudinal Survey of Youth," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 231-50, May. [Downloadable!] (restricted)
  3. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June. [Downloadable!] (restricted)
  4. Christopher Cornwell & David B. Mustard & Deepa J. Sridhar, 2006. "The Enrollment Effects of Merit-Based Financial Aid: Evidence from Georgia's HOPE Program," Journal of Labor Economics, University of Chicago Press, vol. 24(4), pages 761-786, October. [Downloadable!]
  5. Abowd, John M. & Kramarz, Francis & Margolis, David N. & Philippon, Thomas, 2000. "The Tail of Two Countries: Minimum Wages and Employment in France and the United States," IZA Discussion Papers 203, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Neumark, David & Wascher, William, 2003. "Minimum wages and skill acquisition: another look at schooling effects," Economics of Education Review, Elsevier, vol. 22(1), pages 1-10, February. [Downloadable!] (restricted)
  7. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
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  8. Scott Adams & David Neumark, 2004. "When Do Living Wages Bite?," PPIC Working Papers 2004.09, Public Policy Institute of California.
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  9. Scott Adams & David Neumark, 2003. "Living Wage Effects: New and Improved Evidence," NBER Working Papers 9702, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. David Fairris & Roberto Pedace, 2004. "The Impact of Minimum Wages on Job Training: An Empirical Exploration with Establishment Data," Southern Economic Journal, Southern Economic Association, vol. 70(3), pages 566-583, January.
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  11. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2006. "What Mean Impacts Miss: Distributional Effects of Welfare Reform Experiments," American Economic Review, American Economic Association, vol. 96(4), pages 988-1012, September. [Downloadable!]
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  12. Janet Currie & Bruce Fallick, 1993. "The Minimum Wage and the Employment of Youth: Evidence from the NLSY," NBER Working Papers 4348, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Richard V. Burkhauser & Joseph J. Sabia, 2007. "The Effectiveness Of Minimum-Wage Increases In Reducing Poverty: Past, Present, And Future," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 262-281, 04. [Downloadable!] (restricted)
  14. Peter Cappelli & David Neumark, 2001. "Do "high-performance" work practices improve establishment-level outcomes?," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 54(4), pages 737-775, July.
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  15. Maria Cancian & Arik Levinson, 2005. "Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin Supplemental Benefit for Families with Three Children," NBER Working Papers 11454, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
  17. John T. Addison & McKinley L. Blackburn, 1999. "Minimum wages and poverty," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 52(3), pages 393-409, April.
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  18. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September. [Downloadable!] (restricted)
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