David Neumark discusses the long-term effect minimum wages, the Earned Income Tax Credit, and welfare reform have had on earnings.
by Dan Paley | February 14, 2019
How have the core anti-poverty policies in the U.S. affected long-term outcomes in terms of people’s earnings and their ability to escape poverty? That’s the question being asked by ESSPRI director, David Neumark, in a set of new studies discussed in the video below that think beyond the short-term effects of anti-poverty policies.
The first study focuses on the effects of multiple policies that evolved and changed over the past decades, including welfare reform changes made in the late 1990s that tried to increase the work incentives associated with welfare. In this study, Neumark looks at census tract data over many decades, specifically comparing how disadvantaged tracts fared relative to more advantaged tracts when states implemented different policies regarding minimum wages, the Earned Income Tax Credit, and welfare reform.
Two results stand out. The first is that the Earned Income Tax Credit is strongly associated with longer-term reductions in poverty. In states that implemented a more generous EITC the poverty difference between disadvantaged and advantaged areas fell. The second result is that, in the longer run, tighter welfare time limits reduced both poverty and public assistance. This suggests that the reform has had at least some of the intended effects in terms of people doing more to support themselves with earnings.
The second study looks at the cumulative effect of the Earned Income Tax Credit over women’s 20s and 30s on their earnings near age 50. The results show that single women with children who were exposed to the positive work incentives of the EITC in their 20s and 30s earn substantially more by age 40. This study adds to a growing body of evidence that the EITC reduces poverty in both the short and long term.
To learn more about ESSPRI visit esspri.uci.edu.