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Notwithstanding quirks in the Social Security system, public policy has sharply reduced the reward to work since 2007.
Unemployment insurance extensions add to the marginal tax rate, and subtract from the reward to work, because they provide income to people when they do not work.
Transfer spending helps poor people, but paying people for low incomes or for unemployment has the effect of reducing the reward to work, rather than increasing it as government employment programs might.
It turns out that low-wage workers will also see a reduction in their reward to work over the next couple of years, and to a greater degree than workers in the middle will.
The solid series is the index of employees' financial reward to work after taxes and subsidies.
The U.S. created or expanded a number of safety net programs that eroded the reward to work by adding to implicit employment and income taxes.
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Policies that raise the marginal tax rate reduce the reward to working and vice versa.
The left bar shows that the Massachusetts law did, on average, increase marginal tax rates and thereby reduce the reward to working.
Adam and Browne (2013), as well as OECD (2012), also calculate the reward to working a full tax year rather than not working at all.
A reduction in that threshold hardly affects the reward to working at all during the tax year but doubles the disincentive from the income tax for working an additional week.
For them, the reward to working falls significantly because the benefit reduction rate after 2010 was four points greater than it was in 2007 when their after-tax share was already as low as 20percentt.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com