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The minimum wage versus the earned income tax credit for reducing poverty

Author

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  • Richard V. Burkhauser

    (Cornell University, USA, University of Melbourne, Australia, and IZA, Germany)

Abstract

Minimum wage increases are not an effective mechanism for reducing poverty. And there is little causal evidence that they do so. Most workers who gain from minimum wage increases do not live in poor (or near-poor) families, while some who do live in poor families lose their job as a result of such increases. The earned income tax credit is an effective way to reduce poverty. It raises only the after-tax wage rates of workers in low- and moderate-income families, its tax credit increases with the number of dependent children, and evidence shows that it increases labor force participation and employment in these families.

Suggested Citation

  • Richard V. Burkhauser, 2015. "The minimum wage versus the earned income tax credit for reducing poverty," IZA World of Labor, Institute for the Study of Labor (IZA), pages 153-153, May.
  • Handle: RePEc:iza:izawol:journl:y:2015:n:153
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    References listed on IDEAS

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    1. Peter Dolton & Chiara Rosazza Bondibene & Jonathan Wadsworth, 2012. "Employment, Inequality and the UK National Minimum Wage over the Medium‐Term," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(1), pages 78-106, February.
    2. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, January.
    3. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    4. Kai-Uwe Müller & Viktor Steiner, 2013. "Distributional Effects of a Minimum Wage in a Welfare State: The Case of Germany," SOEPpapers on Multidisciplinary Panel Data Research 617, DIW Berlin, The German Socio-Economic Panel (SOEP).
    5. Müller, Kai-Uwe & Steiner, Viktor, 2013. "Distributional effects of a minimum wage in a welfare state: The case of Germany," Discussion Papers 2013/21, Free University Berlin, School of Business & Economics.
    6. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    7. R. Aeberhardt & P. Givord & C. Marbot, 2012. "Spillover Effect of the Minimum Wage in France: An Unconditional Quantile Regression Approach," Documents de Travail de la DESE - Working Papers of the DESE g2012-07, Institut National de la Statistique et des Etudes Economiques, DESE.
    8. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    9. Neumark, David & Wascher, William, 2001. "Using the EITC to Help Poor Families: New Evidence and a Comparison With the Minimum Wage," National Tax Journal, National Tax Association, vol. 54(2), pages 281-318, June.
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    Cited by:

    1. repec:bla:ecinqu:v:55:y:2017:i:4:p:1986-2007 is not listed on IDEAS
    2. Brady P. Horn & Johanna Catherine Maclean & Michael R. Strain, 2017. "Do Minimum Wage Increases Influence Worker Health?," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1986-2007, October.

    More about this item

    Keywords

    minimum wage; earned income tax credit; working poor;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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