Earnings supplementation as a means to reintegrate the unemployed

This paper presents evidence from two randomized experiments testing the us e of financial incentives to encourage labour market participation. The Sel f-Sufficiency Project shows that supplementing earnings from low-paying, fu ll-time jobs can increase employment among single parents who are long-term welfare recipients, can raise their earnings and incomes, and may entail l ittle net increase in government transfers net of taxes. In the Earnings Su pplement Project, however, the offer to partially compensate unemployment i nsurance recipients who returned to work quickly and experienced earnings l osses had no impact on the labour force behaviour of repeat users of UI and only a small and short-lived impact with displaced workers. The paper incl udes a discussion of the issues that need to be addressed in trying to stim ulate work effort using financial incentives and concludes with some lesson s drawn from the research findings.