Consider two of the income security programs in the United States: Temporary Assistance for Needy Families (TANF) and the Earned Income Tax Credit (EITC).

a. When a woman with children and very low income earns an extra dollar, she receives less in TANF benefits. What do you think is the effect of this feature of TANF on the labor supply of low-income women?

Explain.

b. The EITC provides greater benefits as lowincome workers earn more income (up to a point). What do you think is the effect of this program on the labor supply of low-income individuals? Explain.

c. What are the disadvantages of eliminating TANF and allocating the savings to the EITC?