How Means-Tested Transfer Programs Respond to Household Earned-Income Increases: Policy and Practice

ABSTRACT We use data from the 2008 Survey of Income and Program Participation to estimate how four means-tested transfer programs respond to household earned-income increases. In general, the programs respond as we would expect based on the program laws and regulations, with some important exceptions, including that benefits received under some programs take much longer to fully adjust to earned-income increases than we would expect. We explore the reasons for these departures from our expectations and discuss the implications for policymakers’ efforts to balance the programs’ goals of poverty alleviation, cost effectiveness, and work promotion.