The Impact of Income Maintenance Programs on Hours of Work and Incomes of the Working Poor

Some Empirical Results

David H. Greenberg, Marvin H. Kosters

Expert InsightsPublished 1970

Most welfare reform programs incorporate negative income tax principles. However, if a program reduces the work incentive and therefore the hours of work of its new participants, projected income increases will be lower and subsidy costs higher than expected, unless the labor reduction is offset by increased work by those under current welfare programs. A simulation of alternative assistance plans indicates that about one-third of the subsidy under the Administration's proposed Family Assistance Plan and Food Stamp Program (FAP-FSP) would be devoted to the purchase of increased leisure by the male heads of participating families among the working poor. These male heads would reduce their hours of work by about 20 percent, though labor's contribution to national output would be reduced by only 0.03 percent. For families eligible for FSP but not for FAP, the subsidy would bring no net increase in family income. State supplements would affect total FAP-FSP program costs negatively. 13 pp.

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Greenberg, David H. and Marvin H. Kosters, The Impact of Income Maintenance Programs on Hours of Work and Incomes of the Working Poor: Some Empirical Results. Santa Monica, CA: RAND Corporation, 1970. https://www.rand.org/pubs/papers/P4544.html.
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