In forthcoming research, my colleagues and I find that minimum wages are counterproductive, leading to higher poverty and an increased reliance on public assistance in disadvantaged neighborhoods. The EITC, in contrast, reduces poverty and dependence on public assistance, with one caveat: It may be less effective in severely disadvantaged neighborhoods where there is insufficient labor demand to absorb more people looking for work.
In the period before the 1996 welfare reform, more-generous welfare benefits increased poverty and the share on public assistance. These adverse effects evaporated after welfare reform, when work incentives and support were strengthened.
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