This chapter identifies central aspects of the design of welfare-to-work and make-work-pay programs, and examines which of their policies work. It highlights the two broad types of schemes. The first is an individually based active labour market programme that assists in job search and provides a wage or earnings subsidy once employment is found. Eligibility typically depends on a minimum duration of unemployment insurance or welfare; the subsidy is typically individually based and time limited. The second type of programme is an earned income tax credit which also provides a wage or earnings supplement. However, in this case the level of the supplement is tested according to family income and varies with family size and composition. It is also not time limited and has no welfare or unemployment insurance duration eligibility. The analysis emphasizes five central design features: targeting, time limits, working hours conditions, incentives for wage progression, and job search assistance.
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