Since the hours of work are reduced there are income

Info icon This preview shows pages 2–4. Sign up to view the full content.

reaches a point where the credit equals zero, which represent a line that is downward sloping. Since the hours of work are reduced, there are income effects, but no substitution effects (Ehrenberg and Smith 203). However, as individual’s consumption and income increase, both income and substitution effects occur which decreases labor supply. Markedly, when an individual’s wage is increased, the substitution effect causes them to work more and reduce their leisure. Significantly, a person who has been on welfare for long is less likely to exit unless the benefits are exhausted due to their state of dependence on aid and individual heterogeneity. It is significant to note that a person who has been using welfare for long is likely to continue using welfare (Lang 244). Prominently, when compared to the welfare program, the earned income tax credit results in more work incentives. A lifetime limit on how an individual can spend on welfare case people to exit the welfare before they hit their time limit because since strong work disincentives are created as benefits are reduced when people have other incomes. Importantly, by knowing that their interests will be soon ending, individuals will not look for ways to avoid the work requirements, but they will find ways of becoming self-sufficient (Lang 248). Notably, welfare reforms increased the labor-force participation among low skilled women with children. Seemingly, changes in the way transitional assistance to Needy Families (TANF) is funded as compared to Aid to Families with Dependent Children (AFDC) change the incentives to provide welfare since the state can receive money from the federal government that
Image of page 2

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Surname 3 they can use in designing their welfare programs that are subject to a number of limitations. The states under the TANF are free to set the requirements for eligibility, and they may require the recipients to participate in training programs.
Image of page 3
Surname 4 Works Cited Ehrenberg, Ronald G., and Robert S. Smith. Modern Labor Economics: Theory and Public Policy . London New York, Routledge: 2016, pp. 199-206. Lang, Kevin. Poverty and Discrimination . Princeton, New Jersey: Princeton University Press, 2011, pp. 70-300.
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern