SPONSORED:

More cash for childless workers: A poor way to help the poor

More cash for childless workers: A poor way to help the poor
© Getty Images

Embedded in President Biden’s $1.9 trillion stimulus package is a significant and counter-productive expansion of the welfare state. The bill would increase the Earned Income Tax Credit for childless workers, a welfare program that gives cash grants to low-income individuals. This policy would waste taxpayer funds because it’s poorly targeted and harmful to low-income communities.

Advocates of the plan contend that the cash grants would be substantially increase work and employment. However, random-assignment controlled experiments on this policy show that isn’t the case.

Worse, the policy intensifies penalties against marriage within the welfare system. Healthy marriage has dramatic positive effects on children, parents and society at large. Introducing new policies that actively undermine marriage is a misstep. 

ADVERTISEMENT

A decade after the federal government declared a war on poverty, Congress created the Earned Income Tax Credit (EITC), originally called “the work bonus plan.” The aim was to assist low-income parents who needed help supporting their families but to do so in a way that wouldn’t undermine parental employment.

The EITC requires work, unlike most other means-tested welfare programs. As a general rule, parents cannot obtain the credit unless they are employed (although the work requirement does have loopholes.) The credit increases as parents log more hours and slowly phases out as they make more than the poverty level. 

In this way, the EITC helps low-wage parents who struggle to keep their families afloat without substantially weakening their commitment to work. (However, claims that increases in EITC benefit levels positively increase parental employment are unfounded.)

In recent years, however, there has been a push for a substantial increase in EITC cash grants for adults without dependent children. For example, the Obama administration proposed doubling the value of their benefits. President Biden’s stimulus package nearly triples the maximum cash grant to individuals without children from around $500 to $1,500. It allows individuals without children to qualify when they are 19 instead of 25 (full-time students are excluded until 24).

Today, the EITC provides a single mother with three children a maximum benefit of $6,557, while a single adult with no children to support currently receives $527. The single mother receives more benefits because she has three children to support. Remarkably, however, some contend that the benefit difference is unfair and wish to raise benefits for those without dependents to rectify the inequity.

ADVERTISEMENT

Further, advocates argue that expanding the amount that non-parent adults receive would: substantially increase employment and marriage rates while reducing poverty and incarceration rates and benefiting all of society by reducing crime. 

Thankfully, we have data on how this idea has fared in scientific experiments. Random-assignment experiments on the effects of raising the EITC for childless adults have been conducted in New York City and Atlanta. Called Paycheck Plus, these experiments quadrupled the maximum value of the EITC for childless adults from $500 to $2,000 and raised the income point at which the credit phased down to zero from around $15,000 to around $30,000.

The Paycheck Plus experiments refuted most of the optimistic expectations of those who advocated for higher EITC benefits for childless adults.

The take-away: for the most disadvantaged groups such as low-wage males, noncustodial parents and former inmates, the program had zero effect on employment and earnings and no impact on crime or recidivism. 

Overall, quadrupling the maximum value of the EITC credit failed to increase earnings in either city. The experimental program also had no statistically significant increase on employment among the eligible group in Atlanta and increased employment by only 1.8 percentage points among the eligible group in New York City.

While the experiment did not reduce poverty, it did weaken family formation without having an impact on overall family income, physical health, mental health, happiness, material hardship or hunger.

Additionallythe Biden EITC expansion also intensifies disincentives to marriage within the welfare system. If a father and mother are not married, one parent can claim the childless worker cash grant. However, if the couple marry, they lose eligibility to the grant. The loss of the grant exacerbates the anti-marriage incentives already built into the general EITC and most other welfare programs. Increasing the value of the credit for couples when they are not married and then taking it away when they do marry only intensifies the anti-marriage impact.

Expanding the EITC for childless adults would add six million new welfare recipients at a cost of $7 billion a year in new spending. But this large-scale program expansion would have the least effect on the most disadvantaged workers. Critically, the welfare system should strengthen not undermine marriage, as the Biden plan does. More effective and more wisely targeted policies are needed.

Robert Rector is a senior research fellow in domestic policy studies at The Heritage Foundation (heritage.org), where Leslie Ford is a visiting fellow in domestic policy studies.