The Largest Five-year Drop in Child Poverty in More than Three Decades. While the child poverty rate remains too high, between 1993 and 1998, the child poverty rate has declined from 22.7 percent to 18.9 percent -- that is the lowest child poverty rate since 1980 and the largest five-year drop in nearly 30 years (1965-1970). [Source: U.S. Census Bureau]
The Poverty Rate for Children in Families with Three or More Children is More than Double the Poverty Rate for Children in One or Two-Children Families. Although the poverty rate for children in families with three or more related children has fallen from 32.3 percent in 1993 to 28.5 percent in 1998, this is still more than twice the 11.9 percent poverty rate for children in families with one or two related children. 7.7 million children in families with three or more children were growing up in poverty in 1998. [Source: Calculations by the Department of the Treasury using data from the U.S. Census Bureau.]
THE EVIDENCE IS OVERWHELMING THAT THE EITC ENCOURAGES WORK
More Single Mothers With Children Are Working Than Ever Before. After staying essentially constant in the 1980s and early 1990s, the percentage of singe mothers aged 16 to 45 who work and receive no welfare has risen from 60.9 percent in 1992 to 75.0 percent in 1998. The percentage of single mothers who worked rose from 73.7 percent in 1992 to 86.6 percent in 1998. [Source: Calculations by Professor Jeffrey Liebman using data from the Bureau of Labor Statistics’ March Current Population Surveys.]
According to One Study, More Than 60 Percent of the Increase In the Employment of Single Mothers Has Been Due to Expansions of the EITC. Bruce Meyer and Dan Rosenbaum find that 63 percent of the change in the employment of single mothers between 1984 and 1996 can be explained by the expansions of the EITC. [Source: “Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers.” National Bureau of Economic Research Working Paper No. 7363. September 1999.]
Another Study Predicted That the 1993 EITC Expansion Would Induce 516,000 Families To Move From Welfare to Work. Stacy Dickert, Scott Houser, and John Karl Scholz found that the 1993 EITC expansion would induce 516,000 families to move from welfare to work. [Source: “The Earned Income Tax Credit and Transfer Programs: A Study of Labor Market and Program Participation.” Tax Policy and the Economy No. 9, MIT Press: Cambridge, 1995.]
Another Study Shows that Increasing the Reward to Work, Increases Labor Force Participation. Nada Eissa and Jeffrey Liebman found that the EITC significantly increases labor force participation among single mothers, especially less educated women. [Source: “Labor Supply Response and the Earned Income Tax Credit.” Quarterly Journal of Economics 111(2), 1996.]
Comment January 2000, that still stands in 2004: These are still relatively small effects. In that sense we should not overestimate the impact of the 1993 EITC change on the increase in competition on the labour market and the US booming economy. And having a higher gross minimum wage does not help - the Card & Krueger argument does not convince for the general situation. /TC