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Why do welfare programs create work disincentives? What is the added worker effect? Summarize the evidence...

Why do welfare programs create work disincentives?

What is the added worker effect?

Summarize the evidence regarding the impact of the minimum wage on employment.

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Answer #1

A Very simple example: if someone makes too much money in the US, their kids could be thrown off Medicaid. Because the insurance markets still suck so bad, they could stand to lose an enormous amount of money by making a little bit "too much".

Let's say you have a two-income family where the mother works 1/2 time and their kids qualify for state Medicaid. Working 3/4 or full time would put the family income over the Medicaid limit. Sure, they still might end up making more, but a huge chunk of that additional income would go right into the mouths of the insurance companies. Not exactly a great incentive to work more.

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