Recent expansions of the Child Tax Credit (CTC) have generated interest in how the credit affects parental labor supply and child poverty. However, there is limited empirical evidence of the labor supply effects of the CTC outside of the context of the COVID-19 pandemic. We address this knowledge gap using 1997-2019 data from the Panel Study of Income Dynamics (PSID) to provide updated estimates of how low and middle-income parents’ employment responds to changes in incentives for three groups of parents: unmarried mothers, married mothers, and married fathers. We find the most elastic employment response for unmarried and married mothers, with estimated elasticities of 0.39 and 0.38, respectively, in response to changes in the return to work. Married fathers are least sensitive, with an estimated elasticity of 0.07. We then estimate small but statistically significant income elasticities of -0.025 and -0.132 for unmarried and married mothers, respectively. We also examine how parameter estimates differ based on children’s age and the parent’s education or race-ethnicity, as well as test the possibility that individuals respond differently to a change in cash wages than they do to economically equivalent changes in tax and transfer program incentives. We use these estimated parameters to simulate the employment effects of eight CTC policy options. We estimate that restoring the fully refundable CTC benefit schedule in place during 2021 would reduce overall employment by about one percentage point, while a fully refundable CTC only for children under age two would reduce overall employment by about 0.1 percentage points. Other reforms to make the CTC more valuable for lower-income workers would modestly increase employment. Our results show that policymakers could expand access to the CTC - including for low-income workers and parents of very young children – while having little effect on parental employment. These are timely considerations as policymakers consider whether to renew the current law CTC provisions – which are set to expire after 2025 – or expand eligibility.
Poverty
Measuring the economic status of low-income individuals and families is a central focus of poverty scholars and is at the fore of much public policy debate. The stakes are substantial as changes in poverty (and poverty thresholds) influence the scale and scope of redistributive tax and transfer programs at all levels of government.
UKCPR Director James Ziliak chaired a recent National Academies of Science, Engineering, and Medicine panel of experts that recommended that the current Official Poverty Measure used by the U.S. Census Bureau be replaced by a new measure called the Principal Poverty Measure, which is a revision to the alternative Supplemental Poverty Measure annually produced by Census. Among other changes, the panel recommended that the new measure incorporate health insurance and child care as a basic need, and revise how housing is valued as a need. Balancing those changes to the poverty thresholds, the panel recommended that subsidies for health insurance and child care provided by employers and the government be included as a household resource, as well as the implicit rental income derived from owner-occupied housing. The full report is available for free download at the National Academies, with a summary published in a 2024 issue of The ANNALS of the American Academy of Political and Social Science.
2025
2024
Measuring Poverty: Advances to the Supplemental Poverty Measure
Measuring poverty is complex, requiring extensive research and a number of expert judgments on how to define resources and needs, as well as the data infrastructure necessary to operationalize measurement. In this paper, we briefly summarize the evolution of poverty measurement in the United States and discuss the recommended changes to the Supplemental Poverty Measure from a recently concluded National Academies panel. Emphasis is placed on the treatment of medical care, childcare, and housing, as well as the need to incorporate administrative data records with survey data.
2021
The Child Tax Credit and labor market outcomes of mothers
This paper examines the effect of the Child Tax Credit (CTC) on the labor supply of single and married mothers using the numerous policy reforms in the credit generosity and eligibility criteria since its inception in 1997. I use variation in the simulated benefits for a nationally representative sample to estimate the labor supply response at the extensive and intensive margins. Using 25 years of data from the Current Population Survey my results suggest that an increase of $1,000 in the average CTC benefit leads to a 1.7 percentage point increase in employment of single mothers and a 35-hour increase in annual work. I find a greater effect when I restrict the sample to single mothers with high school or less education. For married mothers, I find that an additional $1,000 in the average CTC benefit is associated with a 28-hour increase in annual work. The results are robust to an alternative identification strategy using only variation in the maximum credit across time.
2020
Covid-19 and the U.S. safety net
We examine trends in employment, earnings, and incomes over the last two decades in the United States, and how the safety net has responded to changing fortunes, including the shutdown of the economy in response to the Covid-19 Pandemic. The U.S. safety net is a patchwork of different programs providing in-kind as well as cash benefits and had many holes prior to the Pandemic. In addition, few of the programs are designed explicitly as automatic stabilizers. We show that the safety net response to employment losses in the Covid-19 Pandemic largely consists only of increased support from unemployment insurance and food assistance programs, an inadequate response compared to the magnitude of the downturn. We discuss options to reform social assistance in America to provide more robust income floors in times of economic downturns.
2019
Relative poverty in Great Britain and the United States, 1979-2017
This article examines the major changes to the face of poverty in Britain over the past few decades, assessing the role of policy, and compares and contrasts this with the patterns seen in the United States, using harmonized household survey data. There are various commonalities between the countries, including a shift in the composition of those in poverty toward working-age households without children, who have not been the focus of policy attention. There are also big differences, with a steadily increasing share of poverty in Britain – but a stable share in the US - found in households with an adult in paid work. This perhaps explains why the anti-poverty focus in Britain is now squarely on the plight of working households, while in the US it is focused on labor force participation among the low skilled – even though, as we show, the US has for decades been used to in-work poverty comprising a significantly higher proportion of overall poverty than in Britain.
The antipoverty impact of the EITC: New estimates from survey and administrative tax records
This version of DP2019-01 is a June 2020 update. Evaluations of the EITC, including its antipoverty effectiveness, are based on simulated EITC benefits using either the Census Bureau’s tax module or from external tax simulators such as the National Bureau of Economic Research’s TAXSIM or Jon Bakija’s model. Each simulator utilizes model-based assumptions on who is and who is not eligible for the EITC, and conditional on eligibility, assumes that participation is 100 percent. However, recent evidence suggests that take-up of the EITC is considerably less than 100 percent, and thus claims regarding the impact of the program on measures of poverty may be overstated. We use data from the Current Population Survey Annual Social and Economic Supplement (CPS ASEC) linked to IRS tax data on the EITC to compare the distribution of EITC benefits from three tax simulation modules to administrative tax records. We find that significantly more actual EITC payments flow to childless tax units than predicted by the tax simulators, and to those whose family income places then well above official poverty thresholds. However, actual EITC payments appear to be target efficient at the individual tax unit level, whether correctly paid or not. We then compare the antipoverty impact of the EITC across the survey and administrative tax measures of EITC benefits. In 2016, about 3.1 million persons were lifted out of poverty by the EITC, substantially less than prior estimates. Further analysis reveals that the efficacy of the survey tax simulators holds across the entire low-income distribution, and not just at the threshold delineating poverty status. Because these results are contingent on dropping CPS ASEC observations with imputed earnings and incomes, our recommendation is that users of the CPS ASEC drop observations with imputed earnings and at a minimum reweight the sample when conducting distributional research.
2018
Economic change and the social safety net: Are rural Americans still behind?
This aim of this paper is to assess the economic status of rural people five decades after publication of President Johnson's National Commission on Rural Poverty report The People Left Behind. Using data from the Annual Social and Economic Supplement of the CPS, along with county data from the Regional Economic Information System, I focus on how changes in employment, wages, and the social safety net have influenced the evolution of poverty and inequality in rural and urban places. The evidence shows that large numbers of rural Americans are disengaged from the labor market, gains in human capital attainment have stagnated, and the retreat from marriage continues for the medium- and less-skilled individuals. However, the social safety net has been more effective in redistributing income within rural areas than in urban centers. Work, education, and marriage are the three main pathways out of poverty for most Americans, whether residing in urban or rural locales, and thus making progress against poverty and inequality faces major economic and demographic headwinds.
2017
The changing safety net for low income parents and their children: Structural or cyclical changes in income support policy?
Refundable tax credits and food assistance are the largest transfer programs available to able-bodied working poor and near-poor families in the United States, and simultaneous participation in these programs has more than doubled since the early 2000s. To understand this growth, we construct a series of two-year panels from the 1981–2013 waves of the Current Population Survey Annual Social and Economic Supplement to estimate the effect of state labor-market conditions, federal and state transfer program policy choices, and household demographics governing joint participation in food and refundable tax credit programs. Overall, changing policy drives much of the increase in the simultaneous, biennial use of food assistance and refundable tax credits. This stands in stark contrast from the factors accounting for the growth in food assistance alone, where cyclical and structural labor market factors account for at least one-half of the growth, and demographics play a more prominent role. Moreover, since 2000, the business cycle factors as the leading determinant in biennial participation decisions in food programs and refundable tax credits, suggesting a recent strengthening in the relationship between economic conditions and transfer programs.
2014
Income, Program Participation, Poverty, and Financial Vulnerability: Research and Data Needs
The aim of this paper is to assess the adequacy of the data infrastructure in the United States to meet future research and policy evaluation needs as it pertains to income, program participation, poverty, and financial vulnerability. I first discuss some major research themes that are likely to dominate policy and scientific discussions in the coming decade. This list includes research on the long-term consequences of income inequality and mobility, issues of transfer-program participation and intergenerational dependence, challenges with poverty measurement and poverty persistence, and material deprivation. I then summarize what information we currently collect in the U.S. that is used to address these issues, with particular focus on ten national panel datasets that cover these domains and continue to be fielded by the various federal agencies. Included in this section is a discussion of challenges posed by rising income nonresponse and underreporting in many panel surveys. I then conclude with a discussion of how the current panel surveys can be improved to address growing need for social science research on inequality, poverty, and material well being.
The role of CPS nonresponse on the level and trend in poverty
The Current Population Survey Annual Social and Economic Supplement (ASEC) serves as the data source for official income, poverty, and inequality statistics in the United States. There is a concern that the rise in nonresponse to earnings questions could deteriorate data quality and distort estimates of these important metrics. We use a dataset of internal ASEC records matched to Social Security Detailed Earnings Records (DER) to study the impact of earnings nonresponse on estimates of poverty from 1997-2008. Our analysis does not treat the administrative data as the “truth”; instead, we rely on information from both administrative and survey data. We compare a “full response” poverty rate that assumes all ASEC respondents provided earnings data to the official poverty rate to gauge the nonresponse bias. On average, we find the nonresponse bias is about 1.0 percentage point.