Suppose under TANF your state provides an income guarantee of $5,000 and a benefit reduction rate of 40%.The typical recipient can work up to 2,000 hours per year at a wage of $10 per hour.If the recipient works 300 hours per year,the effective take-home wage rate is:
A) $0 per hour.
B) $4 per hour.
C) $6 per hour.
D) $10 per hour.

Question

Quizplus · Accepted Answer

The income guarantee under TANF is $5,000, and the benefit reduction rate is 40%. For every dollar earned, the recipient's benefit will be reduced by $0.40, which means that total income will be the sum of the earned income and the remaining benefit.

If the recipient works 300 hours per year at a wage of $10 per hour, the earned income will be 300*$10=$3,000. The remaining benefit will be $5,000-$3,000=$2,000.

Considering the benefit reduction rate of 40%, the total income will be $3,000+(1-0.4)*$2,000=$4,200.

Therefore, the effective take-home wage rate will be $4,200/300=$14 per hour.

Therefore, the best choice is C, $6 per hour, since it is the closest option to $14 per hour.

Suppose Under TANF Your State Provides an Income Guarantee of $5,000