Income Security Policy Paper No. 8
Public Policies for the
Working Poor:
The Earned Income Tax Credit Versus Minimum
Wage Legislation
Richard V. Burkhauser and Andrew J. Glenn
February 1994
Abstract: This paper first documents the decades-long
erosion of the link between low wages and low
household income. It then simulates the
consequences of this determination on the
relative gains of programs designed to help
the working poor-minimum wage increases under
the Fair Labor Standards Act and increases in
the Earned Income Tax Credit (EITC). Using
data from the Current Population Survey it is
found that increases in the EITC between 1989
and 1992 were far more target-efficient than
was the increase in the minimum wage from
$3.35 to $4.25 and that the 1993 extension of
the EITC is far more target-efficient than
raising the minimum wage from $4.25 to $5.00.
The paper concludes that the EITC is a far
more effective mechanism for targeting low
income workers than are increases in the
minimum wage.
A revised version of this paper which
included co-author Kenneth A. Couch was
published in Research in Labor Economics,
15 (1996): 65-109. Those interested in this
work should see that journal.
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Security Policy Paper Series
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