(Posted 1-24-00)
IMMEDIATE RELEASE
News Service Contact: Steve Gilliam, 336-334-5371
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EARNED INCOME TAX CREDIT SENDS SINGLE MOTHERS
INTO THE WORKPLACE IN GREATER NUMBERS
By Steve Gilliam
GREENSBORO--Single mothers are the group of wage earners who have entered the workforce in the largest numbers over the past decade, and the earned income tax credit appears to be driving that increase, according to a new study.
The study estimates that between 1984 and 1996, the number of single mothers in the workforce grew by six to eight percentage points--a growth rate that was greater than any other demographic group during that time. Co-authors for the study are Dr. Dan T. Rosenbaum of The University of North Carolina at Greensboro and Dr. Bruce D. Meyer of Northwestern University.
While other federal incentive programs have been at work, the study estimates that the earned income tax credit (EITC) accounts for approximately 63 percent of the single mothers who entered the work place. The study was cited in a White House press release on Jan. 12 that discussed President Clinton's proposal to expand the EITC, which was made in his address to the Democratic Leadership Council.
"During the period, 1984 to 1996, welfare and tax policy changed dramatically, and many of the program changes were intended to encourage low-income earners to work" said Rosenbaum. "We found evidence that the larger share of the increase in work by single mothers can be attributed to the EITC, with smaller shares for welfare benefit reductions, welfare waivers, changes in training programs and child care expansions."
The research takes a broad look at changes in social welfare programs, said Rosenbaum. During the 12-year period, real dollars received through the EITC, which go primarily to working families with children, increased more than tenfold. During that same period, the number of children receiving Medicaid increased by 77 percent, while the number of covered adults with dependent children grew by 35 percent.
In addition, the data show that the weekly employment of single mothers with children increased by six percentage points, while their annual employment increased by nearly nine points. Over the same time period, both weekly and annual employment for single women with no children decreased by one percentage point.
"We feel this is an important finding," said Rosenbaum. "A lot of these increases in the employment gains of single mothers and, alternatively, dips in the welfare case loads have been attributed to the economy or changes in the welfare program, but we find the changes in the EITC to be the driving force."
Their work was recently published by the National Bureau of Economic Research as a working paper titled "Welfare, the Earned Income Tax Credit, and the Labor Supply for Single Mothers." Their data came from the Current Population Survey, a national representative monthly survey of approximately 60,000 households in the United States. Other relative demographic groups examined include working mothers, single women with no children, and black men in the comparison.
Rosenbaum is continuing the project in a new study, "Welfare, the Earned Income Tax Credit, and Family Structure," through a $19,700 grant from the Joint Poverty Center of the University of Chicago and Northwestern University. A faculty member at UNCG since 1998, Rosenbaum specializes in labor economics, public economics, health education and welfare.
Tax credits in the EITC increased fifteen-fold from $1.6 billion in 1984 to $25.1 billion in 1996, with single mothers receiving about two-thirds of the benefits, said Rosenbaum. As an example, he cited a single woman with two children who earned approximately $10,000 in 1996 received a 40 percent credit on dollars earned, up to a maximum credit of $3,556. Because the credit was refundable, and a mother of two is not subject to any federal income tax, she would have received a check from the IRS for the credit.
One of the most striking features of the study, Rosenbaum said, is the increases that came in the 1990s, especially the EITC expansions of 1994-96. This was particularly true for single women with two or more children. The take-home pay difference for women with $7,500 of earnings increased only about $600 between 1984 and 1993, but it increased over $1,500 between 1993 and 1996.
"Unlike earlier expansions, those since 1993 dramatically increased the take-home pay difference for women with earnings of less than $10,000 due to large increases in the credit maximum rate," said Rosenbaum.
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