Effect of Earned Income Tax Credit (EITC) on Labor Supply

Effect of Earned Income Tax Credit (EITC) on Labor Supply Michael Lederman How does the EITC affect labor supply? The Earned Income Tax Credit (EITC) provides a tax credit for those who qualify with positive earnings, low income, and minimal capital gains. It is more so directed at working families, whether it is 2 parents or a single mother. It is intended to push more people into the work force, especially low-income women. In fiscal year 1998 the EITC is expected to cost the federal government $24.5 billion, $7 billion of which will result from expansions incorporated in the 1993 Omnibus Budget Reconciliation Act (OBRA93) (Houser Scholz, 2). It pushes for a â€Å"make-work pay† strategy of welfare reform so people do not rely as heavily on welfare programs. There are many articles that discuss what effect the Earned Income Tax Credit has on labor supply in America and the way the policy has affected so many. In â€Å"The Impact of the Earned Income Tax Credit and Social Policy Reforms on Work, Marriage, and Living Arrangements† by Ellwood, he examines how changes in social reforms, such as the EITC, have impacted labor supply, marriage, and cohabitation. Ellwood acquired and used the current population survey from March 1995 of women ages 18-44 who worked at least 26 weeks, also separating between married or single, with children. Then he used a wage equation to predict a potential 1998 wage for the women. Then the predicted wage was used to place the women into predicted wage/skill quartiles after accounting for education level. The incentives were much higher for low skill single mothers to work. Differentiating the women between skill and wage levels is critical in determining which group of people receives benefits and which don’t get affected at all. In 1986, she could hope to earn just $2,800 more and her effective tax rate being 76 percent; but by 1998, the number ha d jumped to $7,600 with her effective tax rate falling to 31 percent (Ellwood). The lowest quartile showed the greatest amount of change, and the following quartiles showed change, but nothing too drastic. Employment rates were rising for unmarried mothers. For married women, incentives to work were sharply reduced for low-income women, with effective tax rates falling slightly for women in other quartiles. A large change in work by the lowest quartile occurred with employment rates shooting up from 34 percent in 1992 to 55 percent in 1999. In regard to married women, some cases led to them being discouraged to work. Roughly 54 percent of married women in the bottom quartile would have faced penalties up to $1,288 (had they been earning $10,000) whose husbands likely were earning less than the EITC maximum. Another 28 percent would have had no incentive to work because their husband’s income surpassed the EITC maximum. The EITC encouraged more work force participation by sing le mothers, but hadn’t had such an effect on married mothers. Overall, based on the number of mothers in each group affected, this article concluded the EITC results in a net increase of working women. In â€Å"The Earned Income Tax Credit and Transfer Programs: A study of Labor Market and Program Participation† by Dickert and Scholz, they focus on the degree to which welfare policies, like the EITC, that alter after-tax wages affect hours of work, labor market participation, and welfare program participation. They used the following empirical model to study the effect of wages, taxes, and program benefits on labor market and program participation; bivariate probit models of labor market and transfer program participation. They included variables for income, transfers, and demographic characteristics in both participation equations. Two models are estimated separately: one for one-parent families and the other for primary earners in two-parents families. Net wages are key in influencing participation when it comes to the EITC. The empirical results for the single parent model found that net wages positively affected labor market participation. A 10 percent increase in the af ter-tax wage raises the single parent’s probability of working by two percent (Dickert Scholz). Two-parent families do not show any significant changes in labor market decisions for primary earners. Tax rates were also found to exert a strong negative effect on the probability of labor force participation. For single parents, the probability of working generally increases with predicted wage rates. In the bivariate probit model for single-parents families, a highly significant negative correlation is found between the labor market and transfer program participation. The article also examines the offset between the new participants in the labor force and the decrease in hours worked by those already working. The simulations show the EITC increases net wage of single parents by 15 percent, which in turn increases their probability of working by 3.3 percentage points. Assuming they work on average 20 hours a week for 20 weeks a year, this implies hours worked by single-parent f amilies would increase by 72.8 million hour per year (Dickert Scholz). Overall, the simulation results imply that greater labor market participation will lead to an increase of 74.4 million hours, compared to the 54.5 million hours less worked by those already in the work force, more than enough to offset. This article accounts for both the positive and negative effects EITC has on the labor force, and explains how the two cancel each other out with extra benefits to society. In the article â€Å"Welfare, The EITC, and the Labor Supply of Single Mothers† by Meyer and Rosenbaum, they focus on the effect that tax and transfer program had on incentivizing single mothers to work. They use the Current Population Survey Outgoing Rotation Group Files and the March CPS files. Estimates from these specifications suggest that EITC and other tax changes account for 60 percent of the 1984-1996 increase in employment of single mothers (relative to single women without children). The article highlights the fact that the EITC credits increased from $1.6 billion in 1984 to $25.1 billion in 1996. A structural model was created, which accounts for taxes, welfare, Medicaid, welfare waivers and time limits, training and childcare, education, unemployment rate and macroeconomic conditions, and hours worked. These variables of empirical evidence are absolutely essential when making informed policy decisions. Every factor must be taken into account when making policy dec isions, and the more evidence and information you get involved, the more solidified your conclusion. A one thousand dollar reduction in income taxes if a woman works increases employment last week by 2.7 percentage points and last year by 4.5 percentage points; labor supply of single mothers responds to taxes. A one thousand dollar reduction in annual welfare maximum benefit increases employment last week by 3.4 percentage points and increases employment by 3 percentage points. Also, a 10 percent cut in the maximum benefit increases both annual and weekly employment rate by 1 percentage point (Meyer Rosenbaum). The period between 1984 and 1996 where tax and transfer policy was being pushed encouraged single mothers to work more. The one flaw I can find in this article is no discussion about the different phases that EITC entails. An individual experiences different incentives at different points of the EITC, and that is something that must be accounted for. A matter in question I believe needs changing is a way to figure out how to get change the fact that two-thirds of recipients, and 84 percent of total earnings, are in the phase-out range of EITC (Browning). It must be more focused on the phase-in region, where the growth of labor supply is actually occurring. The favorable benefits and results happen during the phase-in region, but sadly this is a small proportion of the population of recipients. A policy recommendation I would suggest would be to somewhat change the structure of the EITC to prevent this waste of money from transpiring. Perhaps a brand new welfare program needs to be put into place instead of the EITC that focuses more on the increased net wages for those who truly need it. An possible option would be for a recipient entering the phase-out region to report their earnings so that it may be determined whether they still should qualify to receive these net wage increases. In conclusion, these articles all feed off of one another to build up knowledge of the exact effects the EITC has on society. Single mothers experience higher incentives to join the work force, along with other low-income individuals. When structuring a model to research the effect of policy, it is crucial to take every variable into account. The EITC does cause decrease hours worked, but the increase in labor supply makes up for it. Increased net wages with the EITC is a big enough incentive to push people into work. It is important to doubt empirical methods and be suspicious of results. For example, some women with children may not be able to work to due the need to take care of their children, or any other possible factors as so. With the evidence stated here, we can claim EITC positively affected labor supply. Reference List Browning, E. K. (1995). EFFECTS OF THE EARNED INCOME TAX CREDIT ON  INCOME AND WELFARE. National Tax Journal, 48(1), 23-43. Dickert, S., Houser, S., Scholz, J. K. (1995). The earned income tax credit and  transfer programs: a study of labor market and program participation. In  Tax Policy and the Economy, Volume 9(pp. 1-50). MIT Press. Ellwood, David T. 2000. â€Å"The Impact of the Earned Income Tax Credit and Social  Policy Reforms on Work, Marriage, and Living Arrangements.† National Tax Journal, no. 4: 1063-1105. Business Source Complete, EBSCOhost Meyer, B. D., Rosenbaum, D. T. (2001). Welfare, the earned income tax credit, and  the labor supply of single mothers.The Quarterly Journal of Economics,116(3), 1063-1114. Michael Lederman

It’s about me Essay

On August 28, 1963 Dr. Martin Luther King gave an unforgettable speech. This speech helped establish civil rights for people of color. The speech I am referring to is â€Å"I Have a Dream†. In â€Å"I Have a Dream† by Dr. Martin luther King eloquently discusses segregation and injustices against African Americans. Kings speech uses rhetoric to captivate the audience’s attention on that August day. The first example of King’s rhetoric is in the form of ethos. Dr. Martin Luther King analogizes president Lincoln in his speech, â€Å"Five score years ago, a great American, in whose symbolic shadow we stand today, signed the emancipation proclamation.† This line uses Lincoln’s power and position on civil rights to develop a sense credibility with the audience. Another archetype of rhetoric in the â€Å"I Have a Dream† speech is a pathos. On page four of his speech King says â€Å"And so even though we face the difficulties of today and tom orrow, I still have a dream. It is a dream deeply rooted in the American dream.† King is using the American dream to address not just colored people, but all Americans. By saying this, King letting his audience know that American dream is freedom and that is all he asking for, freedom.  One of the other rhetorical strategies Dr. Martin Luther King uses is a logo. On page two King proclaims â€Å"America has given the Negro people a bad check, a check which has come back marked ‘insufficient funds.’ This statement is using deductive reasoning to aid his audience in understanding that African Americans have been allowed to certain rights, but robbed of others. Dr. Martin Luther King used rhetoric to the best of his ability. By doing so he aided the civil rights movement and helped improve the lives of many colored people. Even though American society is steal dealing with racism and discrimination without Dr. Martin Luther King’s rhetorical strategies, we might have still been a segregated nation.

The Idiots Manual to Sample Essay Samples Explained

The Idiot's Manual to Sample Essay Samples Explained If you chance to be in college, the variety of essays you're expected to produce is increased. How you organize your essay is based on the outline. Therefore, you must practice a lot by learning from assorted essay prompts you will discover online. Writing your very first APA format essay can be a bit intimidating at first, but learning a number of the basic rules of APA style can provide help. If you're confused, you could have a look with an essay format before reading further. Sometimes, you might be missing some great suggestions for your reflective essay topics. Try to remember, any source employed in your essay has to be included in your reference section. Follow this guide and you will be writing an impressive reflective essay immediately. For this reason, you should choose the proper word choice to completely describe what you desire. It is essential to select the appropriate words and phrases while reflecting your ideas and showing what you feel. You'll learn how to take pleasure in the attractiveness of moments. The reason I include this bit of jewelry inside this essay is because this is what ties my mother to my nature and my emotions. Naturally, you will require an adequate plan to come up with your paper. You've got to remember although you are your own supervisor which you still must be diligent about your work. The next portion of your outline is perhaps the most crucial. You should take a while to reflect on your own personal experience and to consider instructions about how to compose an academic paper. There's, naturally, a limit on the variety of pages even our very best writers can produce with a pressing deadline, but generally, we figure out how to satisfy all the clients seeking urgent assistance. For instance, your belongings may be stolen, or you are going to be in a scenario where the plan of your trip doesn't work since you weren't conscious of the challenges you would face in a new country or state. Ideally, your conclusion is likely to leave a long-lasting effect on your audience. You should have your reasons, and our primary concern is that you find yourself getting an excellent grade. The Hidden Gem of Sample Essay Samples There are several positive facets of the MDT meeting. You must return to your prior life experiences and provide a very clear account of a specific event, happening or feeling. Y ou have to tell what happened, and what exactly you felt before and after the function. Additionally, you'll need to reveal the way the events connect with your experience. One of them is that the wellness professionals of unique specialities are employed as a team to accomplish precisely the same targets. You just have to share an experience. Our customer support will gladly tell you whether there are any special offers at the present time, and make sure you are getting the very best service our business can deliver. Our service is turning into one of the very best in its class and can become your very best assistant. The Upside to Sample Essay Samples Self reflective essay do not demand much research as with other kind of research. Reflection is an everyday procedure and is extremely personal issue. Since you may see, the notion of the way to compose a reflection essay is versatile and can be managed in a large number of scenarios. Because you should share your private experience, it may not be quite as simple to compose such paper, and developing an important reflection essay about yourself might grow to be an ordeal. Therefore, you have a trusted supply of writing wisdom round-the-clock. When you make an outline, you are going to have clearer view of the additional maturation of your literature work. In general, the process proved to be a challenging one that introduced me to the iterative character of fieldwork. Therefore, the procedure for writing will grow to be much simpler. The Demise of Sample Essay Samples Furthermore, however, you wish to guarantee a conclusion that returns to the major point. Locke provides the subsequent justification because of his system. Conclusion Whenever you would like to start your conclusion, use transition words for a conclusion, as an example, a word like finally. The very first objective in my action program is to fulfill my mentor so as to discuses the entire circumstance and obtain feedback. The Gibbs (1988) model of reflection implies that the procedure for reflection is systematic and follows lots of particular actions to be able to be prosperous. The structure permits the reflection to be written in a crystal clear way.

Measuring Racial And Ethnic Inequality - 1508 Words

Measuring racial and ethnic equality is not a simple or straightforward task. As Gary M. Klass points out in the â€Å"Measuring Racial and Ethnic Inequality† chapter of his book Just Plain Data Analysis:Finding, Presenting, and Interpreting Social Science Data, â€Å"Numbers never speak for themselves.† Klass’s purpose for this chapter is to demonstrate the range of data that is derived from social indicators and that can be used to analyze racial and ethnic disparities in different spheres such as income and wealth, health, education, and criminal justice. After summarizing the content covered in the chapter, Klass’s methodology and findings can be discussed and evaluated. Klass introduces the chapter by telling a brief anecdote about Bill Cosby and how he responded to criticism he received regarding a speech he gave to commemorate the Brown v. Board of Education case. 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