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

Molly Dahl · Thomas DeLeire · Jonathan A. Schwabish

61 citations0/0 files storedNational Tax Journal

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Gender, Labor, and Family Dynamics Economic and Fiscal Studies Labor market dynamics and wage inequality

Abstract

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 mid-to-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.

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References

2000Making Single Mothers Work: Recent Tax and Welfare Policy and its Effects 2005Welfare to Temporary Work: Implications for Labor Market Outcomes

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2015The Earned Income Tax Credit (EITC)2021Do EITC expansions pay for themselves? Effects on tax revenue and government transfers 2012Do single mothers in the United States use the Earned Income Tax Credit to reduce unsecured debt?2020The Long-Run Effects of the Earned Income Tax Credit on Women's Labor Market Outcomes 2011Income Mobility and the Earned Income Tax Credit 2011Unemployment Insurance and Low-Educated, Single, Working Mothers before and after Welfare Reform

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