New Report Finds Expanding EITC Can Increase Work Rates and Child Support Payments

By Lauren Pescatore

A new report from MDRC, unveiled at this morning’s TCWF policy briefing on Capitol Hill, finds that expanding the Earned Income Tax Credit (EITC) for workers without dependent children not only boosts income and employment rates, but also helps to increase child support payments and reduce severe poverty among disadvantaged groups.

The report, Boosting the Earned Income Tax Credit for Singles, shares results from MDRC’s Paycheck Plus pilot program, which has been testing an enhanced EITC worth up to $2,000 for workers without dependent children in Atlanta and New York City. The findings cover the first three years of the program’s implementation in New York, where more than 6,000 low-income workers enrolled in the study in late 2013.

The findings show that Paycheck Plus:

  • Increased after-bonus earnings by an average of 6 percent and reduced severe poverty – defined as income below 50 percent of the poverty line – by 3.4 percentage points,
  • Boosted employment rates, especially among women and the more disadvantaged men in the study (those who owed child support and/or had been previously incarcerated) by 10 percent in Year 3,
  • Increased child support payments from noncustodial parents by 7.3 percentage points in Year 3, and
  • Improved tax filing rates and led to large increases in the use of free tax preparation at Volunteer Income Tax Assistance sites.

“The findings from the New York City test of Paycheck Plus are encouraging — higher earnings, more work, less severe poverty,” said Gordon Berlin, MDRC President. “The effects for the subgroup of disadvantaged men are particularly promising. For a significant number of workers in this new and changing labor market, the EITC continues to be an important part of the safety net. The findings here show that expanding this benefit can help make work pay again for low-wage workers.”

You can find the full version of “Boosting the Earned Income Tax Credit for Singles” here.

Missed our policy briefing this morning? Stay tuned to our blog over the next several days for a full video of the discussion, including a presentation on the Paycheck Plus findings by MDRC senior fellow Cynthia Miller.