The Lerman ratio, named after economist Robert I. Lerman, suggest that a government benefit to the underemployed, such as

welfare Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...

, will presumably reduce their overall hours of work. The ratio of the actual increase in income compared to the benefit is the Lerman ratio, which is ordinarily between zero and one. Moffitt (1992) estimates it in regard to the

Aid to Families with Dependent Children Aid to Families with Dependent Children (AFDC) was a federal assistance program in the United States in effect from 1935 to 1997, created by the Social Security Act (SSA) and administered by the United States Department of Health and Human Ser ...

(AFDC) program in the US at about .625.

References

*Robert Moffitt, ''Incentive Effects of the U.S. Welfare System: A Review'',

Journal of Economic Literature The ''Journal of Economic Literature'' is a peer-reviewed academic journal, published by the American Economic Association, that surveys the academic literature in economics. It was established in 1963 as the ''Journal of Economic Abstracts'',

, March 1992, p. 17. Household income Employment compensation Labour economics indices {{Econ-stub