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Reforming the Financial Incentives of the Welfare System

Author

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  • Card, David

    (University of California, Berkeley)

Abstract

This paper summarizes the findings from the Self Sufficiency Project: a large scale social experiment that is being conducted in Canada to evaluate the effect of high-powered financial incentives for full time work among former welfare recipients. The experimental results confirm the importance of financial incentives in the welfare participation and work decisions of low-income single mothers. Enhanced incentives induce a significant fraction of welfare recipients to leave the program and enter work. They also have a relatively large anti-poverty effect. Moreover, when incentives are offered to relatively short-term recipients, they can actually save the government money.

Suggested Citation

  • Card, David, 2000. "Reforming the Financial Incentives of the Welfare System," IZA Discussion Papers 172, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp172
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    References listed on IDEAS

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    1. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 1063-1114.
    2. Card, D. & Michalopoulos, C. & Robins, P.K., 2001. "Measuring Wage Growth Among Former Welfare Recipients," Papers 2001-5, Gouvernement du Canada - Human Resources Development.
    3. David Card & Philip K. Robins & Winston Lin, 1998. "Would Financial Incentives for Leaving Welfare Lead Some People to Stay on Welfare Longer? An Experimental Evaluation of 'Entry Effects' in the SSP," NBER Working Papers 6449, National Bureau of Economic Research, Inc.
    4. 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 133, Northwestern University/University of Chicago Joint Center for Poverty Research.
    5. Rebecca M. Blank & David Card & Philip K. Robins, 1999. "Financial Incentives for Increasing Work and Income Among Low-Income Families," NBER Working Papers 6998, National Bureau of Economic Research, Inc.
    6. repec:mpr:mprres:2635 is not listed on IDEAS
    7. 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.
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    Citations

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    Cited by:

    1. Kate Andersen & Ruth Patrick, 2022. "The two-child limit & ‘choices’ over family size: When policy presentation collides with lived experiences," CASE Papers /226, Centre for Analysis of Social Exclusion, LSE.
    2. Meyer, Wolfgang & Gerlach, Knut, 2005. "Zusammenlegung von Arbeitslosen- und Sozialhilfe: Wirkungen auf Löhne, Beschäftigung und gewerkschaftliche Tarifpolitik (The merging of uneployment assistance and social aissistance * effects on wages," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 383-395.
    3. Patrick, Ruth & Andersen, Kate, 2022. "The two-child limit & 'choices' over family size: when policy presentation collides with lived experiences," LSE Research Online Documents on Economics 121570, London School of Economics and Political Science, LSE Library.
    4. Spermann, Alexander & Strotmann, Harald, 2005. "The Targeted Negative Income Tax (TNIT) in Germany: Evidence from a Quasi Experiment," ZEW Discussion Papers 05-68, ZEW - Leibniz Centre for European Economic Research.
    5. Michael Fertig & Jochen Kluve & Christoph M. Schmidt, 2006. "Der erweiterte Minijob für Arbeitslose – Ein Reformvorschlag," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(2), pages 227-255, May.
    6. Meyer, Wolfgang & Gerlach, Knut, 2005. "Zusammenlegung von Arbeitslosen- und Sozialhilfe: Wirkungen auf Löhne, Beschäftigung und gewerkschaftliche Tarifpolitik (The merging of uneployment assistance and social aissistance * effects on wages," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 383-395.
    7. Pierre Cahuc, 2002. "A quoi sert la prime pour l'emploi ?," Revue Française d'Économie, Programme National Persée, vol. 16(3), pages 3-61.
    8. Hujer, Reinhard & Caliendo, Marco, 2000. "Evaluation of Active Labour Market Policy: Methodological Concepts and Empirical Estimates," IZA Discussion Papers 236, Institute of Labor Economics (IZA).
    9. Wolfgang Ochel, 2001. "Financial Incentives to Work - Conceptions and Results in Great Britain, Ireland and Canada," CESifo Working Paper Series 627, CESifo.
    10. Meyer, Wolfgang & Gerlach, Knut, 2005. "Zusammenlegung von Arbeitslosen- und Sozialhilfe: Wirkungen auf Löhne, Beschäftigung und gewerkschaftliche Tarifpolitik (The merging of uneployment assistance and social aissistance * effects on wages," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 383-395.
    11. Michael Fertig & Jochen Kluve & Christoph M. Schmidt, 2005. "Der erweiterte Minijob für Arbeitslose – Ein Reformvorschlag," RWI Materialien, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 38, 01.

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    Keywords

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    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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