MDRC in the News

Biden Wants to Boost the EITC for Workers Without Dependent Children — What Does the Research Say?

Op-Ed by Cynthia Miller and Lawrence F. Katz, The Hill
 

02/2021

The precarious life of a low-wage worker in the U.S. is nothing new. Inequality has been increasing and real wages have been stagnant for those at the bottom of the labor market for decades. The pandemic has exacerbated labor market inequality and made these longstanding problems more visible. 

The Earned Income Tax Credit (EITC) has for decades boosted the incomes of low-wage workers — helping to make low-wage work “pay.” Currently, a single mother with two children who earns $25,000 a year would be eligible for an EITC of about $4,700, boosting her income by almost 20 percent. However, a worker with similar earnings but without dependent children would receive nothing. The current maximum EITC benefit for a single worker is just over $500 and phases out at about $16,000 in annual earnings.

As part of its COVID relief package, the Biden administration has proposed tripling the current EITC credit for single workers to $1,500 and raising the eligibility limit to $21,000…..

…..Paycheck Plus, evaluated by MDRC, tested an expanded credit for workers without dependent children, quadrupling the maximum credit of $510 to $2,000. Results from New York City and Atlanta show that workers who claimed the credit received about $1,400 on average each year. The expanded credit increased incomes and, in New York, led to a small increase in employment rates, particularly for women and disadvantaged men. Paycheck Plus also reduced severe poverty and other measures of hardship in New York City. Effects in Atlanta were more muted, given greater challenges there of marketing the new program and encouraging participation. There was also no evidence from either city that it induced higher earners to cut back on their work hours, one common concern expressed about the EITC….

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