Question

Traditional welfare is commonly attacked for its negative effect on labor supply. Compare and contrast traditional welfare with an income tax benefit (earned income tax credit or working income tax benefit). In particular, focus on the incentives for work and likely impact on the labor supply decision.

Answer 1

Labours always face their low income. From that point of income tax benefit is good tool for that category of labours because this tools mainly credit on earned income tax and tax benefit on working these two are best applied tools positively affect the labour supply and it is a part of traditional welfare.The tax only charged the above income class and is not tax based transfer or charging not applied in the traditional welfare program.

It is a type of incentive to the workers which making a positive impact on the labor supply decision.
But in other point of view the tax credit on earned income is higher some individual employees if the are prevailing the limit..
So as a part of traditional welfare is commonly better to low income class groups at the same time negatively affect on middle income group.