From Welfare to Workfare: Did the Earned Income Tax Credit Reduce Long-Term Poverty among Children?

Lloyd D. Grieger, Yale University
Jessica J. B. Wyse, University of Michigan

We compare rates of long-term child poverty experienced for cohorts before and after 1996, when significant increases were made to the Earned Income Tax Credit (EITC). The EITC is widely credited with reducing short term (annual) poverty by supplementing the earnings of low-income workers with children; however, persistently poor children often reside with parents who face multiple barriers to employment and, therefore, may not reap the benefits of a wage supplement. Because the increased generosity of the EITC coincided with a broader social policy shift away from cash entitlements toward work supplements, long-term poverty may have been unaffected or worsened for children who lived with parents with low levels of employment. We find that long-term poverty dropped substantially for children of the post-reform cohort, resulting from increasing wages coupled with benefits obtained from the EITC. We will investigate whether this substantial drop was experienced across all levels of parental employment.