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Making Work Pay, Wage Insurance for the Working Poor

  • Barry Bluestone
  • Teresa Ghilarducci

Barry Bluestone, of the University of Massachusetts, and Teresa Ghilarducci, of the University of Notre Dame, show that although the poverty rate for elderly Americans has declined over the past three decades, the total number of persons in poverty has grown and the number of poor nonelderly dults in poverty has nearly doubled since 1970. The authors argue for a comprehensive and coherent strategy aimed at the working poor and those susceptible to highly fluctuating incomes. Two essential components of a wage insurance system already exist in the earned income tax credit (EITC) and the minimum wage. Neither by itself is an ideal solution to the wage poverty problem, but the two programs complement one another. What makes the two fit together so existence of a higher minimum wage actually reduces the negative productivity, fiscal impact, and moral hazard effects of the EITC, while the EITC makes up for the weak target efficiency and income adequacy of the minimum wage.

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Paper provided by Levy Economics Institute in its series Economics Public Policy Brief Archive with number ppb_28.

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Handle: RePEc:lev:levppb:ppb_28
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  1. 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.
  2. R. V. Burkhauser & K. A. Couch & A. J. Glenn, . "Public policies for the working poor: The earned income tax credit versus minimum wage legislation," Institute for Research on Poverty Discussion Papers 1074-95, University of Wisconsin Institute for Research on Poverty.
  3. Rebecca M. Blank, 1991. "Why Were Poverty Rates So High in the 1980s?," Economics Working Paper Archive wp_57, Levy Economics Institute.
  4. Gary Burtless, 1996. "Trends in the Level and Distribution of U.S. Living Standards: 1973-1993," Eastern Economic Journal, Eastern Economic Association, vol. 22(3), pages 271-290, Summer.
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