Queen's Economics Department Working Paper No. 982
Redistribution programs are constrained because those not working may be either unable to work, voluntarily unemployed or involuntarily unemployed. The inability to distinguish among these three cases inhibits the targeting of transfers to those most in need. Enabling the government to monitor whether unemployed individuals are searching for work and accepting any offered jobs increases its ability to redistribute income. We show that these monitoring activities are complementary, and consider how a minimum wage might be a useful adjunct to monitoring contingent tax-transfer policies.