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MDRC:
Between the end of World War II and 1973, the percentage of Americans living in poverty fell by half. Since then, however, the overall poverty rate has remained largely unchanged. Why didn't poverty continue to decline? Falling wages and increasing rates of lone parenting are the two principal explanations.
This paper was originally prepared for the conference, "Identifying Policies That Would Reduce Poverty," on April 17-18, 2006, co-sponsored by the Joyce Foundation and the Brookings Institution.
A strategy that used the federal Earned Income Tax Credit (EITC) to supplement the earnings of all low-wage workers age 21 to 54 who work full time --- whether they have children or not and whether they marry or not --- would counter three decades of wage stagnation and persistent poverty, with significant positive corollary effects on employment and parental support.
By conditioning the benefit on full-time work, by targeting individuals regardless of their family status, and by calculating EITC eligibility on the basis of individual income rather than joint income for tax filing purposes (as Canadians and Europeans do), this earnings-based supplement would restore equity to the American social compact while distorting incentives to work, marry, and bear children as little as possible.
Encouragingly, there is a reliable body of evidence demonstrating that work-based earnings supplements --- such as the EITC --- can be an effective strategy for boosting employment and earnings, and reducing poverty, without distorting work incentives.
Posted on February 8, 2007 01:19 PM
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