Fiscal policy affects labor force participation through spending policies and taxation, with safety net programs potentially discouraging work when combined with other assistance. Tax policies must be carefully designed to avoid disincentivizing work, as demonstrated in the 1990s when reforming welfare and expanding the earned income tax credit led to an unprecedented increase in employment. Low-wage workers and those near retirement are most sensitive to work incentives, with their employment decisions often hinging on whether the trade-off between working income and non-working support makes employment worthwhile.
Learn more about the launch of the Hoover Institution’s Fiscal Policy Initiative.
WATCH THE VIDEO
Featuring:
- Scott Winship, American Enterprise Institute
- Bruce Meyer, University of Chicago
- Richard Burkhauser, Cornell University
