The effects of the earned income tax credit on the occupational group wages of low income workers

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Title: The effects of the earned income tax credit on the occupational group wages of low income workers
Author: Meade, Erica Elaine
Abstract: Annually , over 25 million people in the United States receive the federal Earned Income Tax Credit (EITC ) . Nearly 5 million of those people are lifted out of poverty by the wage supplement the credit provides . A wide body of literature supplies evidence for the positive labor force participation effects of the EITC . However , little is known about the effects of the additional labor supply on the wages of low -income workers . This report employs state -level panel data to estimate the influence of EITC visibility and benefit levels on the wages of occupation groups with high shares of EITC eligible workers . Using OLS regression , I find that a 10 percent increase in the share of the population claiming the EITC corresponds with a 0 .3 to 2 .2 percent decrease in the median wages of high -EITC eligible sectors , relative to overall median wages . Further , a 10 percent increase in the maximum benefit level of the EITC corresponds with a 0 .1 to 0 .8 percent decrease in median wages in occupation groups with large shares of EITC eligible workers , relative to overall median wages . These findings provide useful information to policymakers regarding the unintended consequences of the EITC . Policy recommendations include increasing the credit value for childless adults , regularly adjusting the minimum wage for inflation , and financially penalizing employers who engage in unsavory wage behavior .
URI: http : / /hdl .handle .net /2152 /ETD -UT -2010 -05 -1095
Date: 2010-11-17

Citation

The effects of the earned income tax credit on the occupational group wages of low income workers. Master's thesis, University of Texas at Austin. Available electronically from http : / /hdl .handle .net /2152 /ETD -UT -2010 -05 -1095 .

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