Essay: Work-based Programs in America
The tilting of benefits away from the neediest families is a consequence of the emergence since the mid 1990s of a work-based income support system for working age families, spearheaded by the EITC and a large expansion of subsidized child care. To encourage work and self-sufficiency – goals that are best supported by Economists – a work-based approach, by design, delivers more benefits as earnings increase.
But only up to a point because, in America’s income tested work-based approach, the benefits eventually must start to phase out. If the work-based strategy keeps expanding and comes to dominate the income tested transfer system, benefits will tilt further away from the neediest families and the equity effects that worry BC may become important. The efficiency effects may also become problematic though, as the EITC experience shows, the net effect on work may actually be positive (Hotz and Scholz 2008).
If the U.S. does embark on a major expansion of work-based programs, the political motivation primarily will be to align its income support system for working age families more closely with core American values about the importance of work and financial self-sufficiency. Moving in this direction will, indeed, tilt the benefit structure in favor of families close to the poverty line. One can see this result as an inevitable side effect of pursuing the goal of supporting work, not a strategy stemming from political motivation to maximize the number of families pulled out of poverty.
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