IDEAS home Printed from
   My bibliography  Save this paper

Welfare and Labor Earnings: An Evaluation of the Financial Gains to Work


  • Gurgand, Marc

    () (Paris School of Economics)

  • Margolis, David N.

    () (Paris School of Economics)


In this paper, we estimate the difference in long-run after-tax and transfer income from employment and from non-employment available in January 1998 to families in France that received the Guaranteed Minimum Income (RMI) in December 1996. Based on estimated wages we compute potential increases in disposable income (without accounting for opportunity costs such as child care or transportation). The observed wages received by welfare recipients are very low because of a high probability of part-time work, including for men. Based on the wage distribution, and supposing that the adult in the household with the highest potential earnings is the one employed, we find that 74% of welfare households would have an increase in disposable income if they were to be employed, relative to their disposable income in the absence of employment, and that the median gain would be around 198 euros per month. Very low gains are frequent however. In addition, single mothers are the group for which the fewest number of households (43%) would gain from employment. The share of households that would have in increase in income grows to 96% when we focus exclusively on couples and consider both members working. As the wage distribution used is very atypical, we build an upper bound estimate, using a representative survey of the working population in 1998. This is equivalent to assuming that RMI beneficiaries do not differ from the rest of the population in terms of their unobserved heterogeneity. The share of households that have an increase in disposable income from working goes from 74% to 89%, with the shares for single mothers still the lowest.

Suggested Citation

  • Gurgand, Marc & Margolis, David N., 2002. "Welfare and Labor Earnings: An Evaluation of the Financial Gains to Work," IZA Discussion Papers 461, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp461

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Rebecca M. Blank, 2003. "U.S. Welfare Reform: What's Relevant for Europe?," CESifo Economic Studies, CESifo, vol. 49(1), pages 49-74.

    More about this item


    transfers; labor earnings; Welfare; tax system;

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp461. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.