Stepping Stone or Dead End? The Effect of the EITC on Earnings Growth

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Stepping Stone or Dead End? The Effect of the EITC on Earnings GrowthMolly Dahl Thomas DeLeire Jonathan Schwabish The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. ABSTRACTStepping Stone or Dead End? The Effect of the EITC on Earnings Growth * While many studies have found that the EITC increases the employment rates of single mothers, no study to date has examined whether the jobs taken by single mothers as a result of the EITC incentives are "dead-end" jobs or jobs that have the potential for earnings growth. Using a panel of administrative earnings data linked to nationally representative survey data, we find no evidence that the EITC expansions between 1994 and 1996 induced single mothers to take "dead-end" jobs. If anything, the increase in earnings growth during the midto-late 1990s for single mothers who were particularly affected by the EITC expansion was higher than it was for other similar women. The EITC encourages work among single mothers, and that work continues to pay off through future increases in earnings. JEL Classification:J3, H2

Educational Progress and Parenting Among Mexican Immigrant Mothers of Young Children

“…Of the 38% of women registering a gain of income, almost half moved up only one category. The degree of income change in this sample is in line with the level of income volatility in the American population at large (Dahl, DeLeire, & Schwabish, 2007). …”

Do single mothers in the United States use the Earned Income Tax Credit to reduce unsecured debt?

“…We think it is important to examine results for all single women-even those who are not household heads-because research emphasizes the high prevalence of co-habitation for single mothers (Folk, 1996;Bumpass & Raley, 1995 We focus our investigation around the exogenous changes to the EITC that are straddled by the twelve-year study period 1988-1999. This study period closely mirrors the ones used by Dahl et al, 2009 andSullivan, 2004. 1995 (realized in 1996), this had grown to $2,683 for families with one child, and nearly tripled for families with 2 or more children to $3,985.…”

“…The credit remains at its maximum amount until it begins to decrease in the phase-out range, finally falling to zero at an annual income level around 200 percent of poverty. A number of studies have considered the EITC's effects on labor force participation (Dahl, DeLeire & Schwabish, 2009;Ellwood, 2000;Meyer & Rosenbaum, 2001;Hotz & Scholz, 2003;Eissa & Liebman, 1996). These studies generally find that the EITC has a positive effect on the labor force participation of single mothers (at the extensive margin-results for the intensive margin are ambiguous), and a negative effect on the labor force participation of lowwage working married women (Hoynes, 2008).…”

Unemployment Insurance and Low-Educated, Single, Working Mothers before and after Welfare Reform

“…Most studies find that single mothers increased their labor force participation in the 1990s in response to a combination of the 1996 welfare reform, expansions of the Earned Income Tax Credit (EITC), increases to the minimum wage, and the booming economy of the 1990s (Blank 2006;Dahl, DeLeire, and Schwabish 2009;Dickert, Houser, and Scholz 1995;Eissa and Liebman 1996;Ellwood 2000;Hotz and Scholz 2003;Meyer and Rosenbaum 2001). The EITC expansions and the 1996 welfare reform fundamentally changed antipoverty policy by raising the benefits of work while ending an entitlement to cash assistance.…”