[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/iza/izawol/journl2021n153.html
   My bibliography  Save this article

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

Author

Listed:
  • Richard V. Burkhauser

    (Cornell University, USA, and IZA, Germany)

  • Kevin Corinth

    (University of Chicago, USA)

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, the 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 & Kevin Corinth, 2021. "The minimum wage versus the earned income tax credit for reducing poverty," IZA World of Labor, Institute of Labor Economics (IZA), pages 153-153, September.
    • Handle: RePEc:iza:izawol:journl:2021:n:153
    as

    Download full text from publisher

    File URL: https://wol.iza.org/uploads/articles/153/pdfs/minimum-wage-versus-earned-income-tax-credit-for-reducing-poverty.pdf
    Download Restriction: no
    File URL: https://wol.iza.org/articles/minimum-wage-versus-earned-income-tax-credit-for-reducing-poverty
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, April.
    2. 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.
    3. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    4. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    5. V. Joseph Hotz, 2003. "The Earned Income Tax Credit," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 141-198, National Bureau of Economic Research, Inc.
    6. 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).
    7. 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.
    8. 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;National Tax Journal, vol. 54(2), pages 281-318, June.
    9. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    10. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. 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.
    2. Tim Obermeier, 2023. "Individual Welfare Analysis: A tale of consumption, time use and preference heterogeneity," POID Working Papers 082, Centre for Economic Performance, LSE.
    3. Ms. Enrica Detragiache & Mr. Christian H Ebeke & La-Bhus Fah Jirasavetakul & Koralai Kirabaeva & Mr. Davide Malacrino & Florian Misch & Mr. Hyun Park & Ms. Yu Shi, 2020. "A European Minimum Wage: Implications for Poverty and Macroeconomic Imbalances," IMF Working Papers 2020/059, International Monetary Fund.
    4. Tim Obermeier, 2023. "Individual welfare analysis: A tale of consumption, time use and preference heterogeneity," CEP Discussion Papers dp1954, Centre for Economic Performance, LSE.
    5. Obermeier, Tim, 2022. "Individual Welfare Analysis: What's the Role of Intra-Family Preference Heterogeneity?," VfS Annual Conference 2022 (Basel): Big Data in Economics 264101, Verein für Socialpolitik / German Economic Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Neumark, 2016. "Policy levers to increase jobs and increase income from work after the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-38, December.
    2. Bosch, Gerhard & Weinkopf, Claudia, 2014. "Zur Einführung des gesetzlichen Mindestlohns von 8,50 € in Deutschland," Arbeitspapiere 304, Hans-Böckler-Stiftung, Düsseldorf.
    3. Peter Harasztosi & Attila Lindner, 2019. "Who Pays for the Minimum Wage?," American Economic Review, American Economic Association, vol. 109(8), pages 2693-2727, August.
    4. Richard V. Burkhauser & Kosali I. Simon, 2008. "Who Gets What From Employer Pay or Play Mandates?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 11(1), pages 75-102, March.
    5. Nazila Alinaghi & John Creedy & Norman Gemmell, 2020. "The Redistributive Effects of a Minimum Wage Increase in New Zealand: A Microsimulation Analysis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(4), pages 517-538, December.
    6. Holzer, Harry J., 2019. "The US Labor Market in 2050: Supply, Demand and Policies to Improve Outcomes," IZA Policy Papers 148, Institute of Labor Economics (IZA).
    7. Claus Thustrup Kreiner & Daniel Reck & Peer Ebbesen Skov, 2020. "Do Lower Minimum Wages for Young Workers Raise Their Employment? Evidence from a Danish Discontinuity," The Review of Economics and Statistics, MIT Press, vol. 102(2), pages 339-354, May.
    8. Burkhauser, Richard V., 2014. "Why Minimum Wage Increases Are a Poor Way to Help the Working Poor," IZA Policy Papers 86, Institute of Labor Economics (IZA).
    9. Meer, Jonathan, 2018. "Recent Research on the Minimum Wage: Implications for Missouri," MPRA Paper 93926, University Library of Munich, Germany.
    10. Medrano-Adán, Luis & Salas-Fumás, Vicente, 2023. "Do minimum wages deliver what they promise? Effects of minimum wage on employment, output, and income inequality from occupational choice theory," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 366-383.
    11. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
    12. International Monetary Fund, 2016. "Cross-Country Report on Minimum Wages: Selected Issues," IMF Staff Country Reports 2016/151, International Monetary Fund.
    13. Caliendo, Marco & Fedorets, Alexandra & Preuss, Malte & Schröder, Carsten & Wittbrodt, Linda, 2018. "The short-run employment effects of the German minimum wage reform," Labour Economics, Elsevier, vol. 53(C), pages 46-62.
    14. Oren M. Levin-Waldman, 2015. "Why the Minimum Wage Orthodoxy Reigns Supreme," Challenge, Taylor & Francis Journals, vol. 58(1), pages 29-50, January.
    15. Richard G. Anderson & Areerat Kichkha, 2017. "Replication, Meta-analysis, and Research Synthesis in Economics," American Economic Review, American Economic Association, vol. 107(5), pages 56-59, May.
    16. Charlotte Alexander & Anna Haley-Lock, 2015. "Underwork, Work-Hour Insecurity, and A New Approach to Wage and Hour Regulation," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(4), pages 695-716, October.
    17. Umedjon Ibragimov & Stephanie Beane & Samuel R Friedman & Kelli Komro & Adaora A Adimora & Jessie K Edwards & Leslie D Williams & Barbara Tempalski & Melvin D Livingston & Ronald D Stall & Gina M Wing, 2019. "States with higher minimum wages have lower STI rates among women: Results of an ecological study of 66 US metropolitan areas, 2003-2015," PLOS ONE, Public Library of Science, vol. 14(10), pages 1-18, October.
    18. George L. Wehby & Dhaval M. Dave & Robert Kaestner, 2020. "Effects of the Minimum Wage on Infant Health," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 411-443, March.
    19. William E. Even & David A. Macpherson, 2019. "Where Does the Minimum Wage Bite Hardest in California?," Journal of Labor Research, Springer, vol. 40(1), pages 1-23, March.
    20. Andrew Hanson & Zackary Hawley, 2014. "The $10.10 Minimum Wage Proposal: An Evaluation across States," Journal of Labor Research, Springer, vol. 35(4), pages 323-345, December.

    More about this item

    Keywords

    minimum wage; earned income tax credit; working poor;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    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:izawol:journl:2021:n:153. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Institute of Labor Economics (IZA) (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.