The Earned Income Tax Credit and Rural Families: Differences Between Non-participants and Participants

Differences between rural low-income mothers who were non-participants and participants in the Earned Income Tax Credit (EITC) were examined. About one-third (35%) of the 224 eligible mothers in a multi-state USDA study, Rural Families Speak, did not claim the tax credit. The EITC non-participants were more likely to be Hispanic, be less educated, have larger families, perceive their income as being inadequate, live in more rural counties, and possess little understanding of the EITC. Participating mothers were more likely to be single, food secure, and satisfied with life. Analysis of qualitative data revealed that the mothers had many misconceptions about the EITC. These findings assist in formulating policies and outreach efforts that may increase rural low-income families’ EITC participation.     

Do single mothers in the United States use the Earned Income Tax Credit to reduce unsecured debt?

The Earned Income Tax Credit (EITC) is a refundable credit for low-income workers mainly targeted at families with children. This study uses the Survey of Income and Program Participation’s topical modules on Assets and Liabilities to examine associations between the EITC expansions during the early 1990s and the unsecured debt of the households of single mothers. We use two difference-in-differences comparisons over the study period 1988–1999, first comparing single mothers to single childless women, and then comparing single mothers with two or more children to single mothers with exactly one child. In both cases we find that the EITC expansions are associated with a relative decline in the unsecured debt of affected households of single mothers. While not direct evidence of a causal relationship, this is suggestive evidence that single mothers may have used part of their EITC to limit the growth of their unsecured debt during this period.     

Effects of Work Incentive Policies and Determinants of the Socioeconomic Status of Welfare Leavers in an Economically Disadvantaged Area

Abstract

This study explores how work incentive policies influence the socioeconomic status of welfare leavers. Logistic and ordinal regression methods were used to analyze 1999 statewide survey data on West Virginia WORKS leavers. This study found that people who had more months of eligibility remaining for TANF were more likely to have jobs than those with fewer months of eligibility. People who had been sanctioned for noncompliance with work requirementswere less likely to have jobs than those who had not been sanctioned. However, childcare assistance had a significant influence on the employment of welfare leavers. EITC was significantly associated with the expectation of high economic status. Policy implications are discussed.     

TIMING IS MONEY: DOES LUMP‐SUM PAYMENT OF THE EARNED INCOME TAX CREDIT AFFECT SAVINGS AND DEBT?

Earned income tax credit (EITC) benefit income is paid out in a lump‐sum around tax time. We investigate whether savings and debt among EITC‐eligible families reflect the timing of payments. Using nationally representative, individual‐level data on self‐reported debt and savings outcomes, we search for differences in monthly behavior between EITC‐eligible and ‐ineligible households. We find evidence that credit card and unsecured debt holding among EITC‐eligible families reflects the timing of the EITC, with low debt levels at tax time relative to other months. Debt holding among ineligible families with children does not exhibit a similar pattern. We find limited evidence of intrayear patterns in savings behavior among EITC‐eligible families. (JEL D14, I38, H23)     

Poverty among long-term united states immigrants

In this paper we analyze the economic and social characteristics of impoverished long-term immigrants. We investigate in what ways this group differs from poor natives and what factors contribute towards the economic success or failure of long-term immigrants. We found that poor long-term immigrants are more likely than poor natives to live in central cities and to work full-time, and less likely to live in non-female-headed households. Long-term immigrants from refugee countries are over six times as likely ana immigrants from Mexico over three times as likely to be poor as long-term immigrants from Europe, even after considering family structure, education, and citizenship. Also, immigrants who live in single female-headed families are considerably more likely to be poor than those who live in married-couple families, and immigrants in extended families are less likely to be poor than those who are not. The welfare reform bill redefines eligibility criteria for immigrants with respect to participation in Food Stamps, SSI and AFDC. Because of the high risk of poverty among long-term immigrants (particularly refugees), their low rates of naturalization, and the predominance of extended families, it is likely that long-term immigrants will suffer economic setbacks as a result of welfare reform. We posit that this economic hardship is exacerbated by the fact that anti-poverty policies are not tailored to the circumstances of long-term immigrants, many of whom already work full-time     

The Role of Family Income in the Intergenerational Association of AFDC Receipt

Daughters from low‐income families who did not receive Aid to Families with Dependent Children (AFDC) are compared to daughters from low‐income families who did receive assistance to better account for family income in the intergenerational association of AFDC. The research models the timing of a daughter's first birth and, for those who become mothers, the number of years a daughter receives any AFDC. Women whose families received AFDC during their childhood are more likely to receive AFDC as adults relative to those women whose families did not receive AFDC. Controlling for family income in a more careful and comprehensive way than past research explains part but not all of the effects of childhood AFDC receipt. Among daughters from chronically poor families, however, parental AFDC use is not associated with additional years of AFDC participation. Although the present research cannot confirm or deny a causal role for parental welfare use, the intergenerational transmission of financial resources does explain part of the intergenerational association of welfare use.     

The EITC and the labor supply of adult dependents: direct effects and family income effects

Tax data suggest that the population of adult dependents—adults relying on the support of others for the majority of their financial needs—has more than doubled over the last decade. However, little is known about how taxes affect the labor supply decisions of this population. This paper provides an initial investigation, studying the impact of the Earned Income Tax Credit (EITC) expansions of the early 1990s on the labor supply of adult dependents living with their relatives. I find that dependent individuals who were not a part of the nuclear family responded to the EITC expansions, increasing labor force participation by about 5 percentage points. For adult children, I show that the absence of a net response is likely due to an unexpected consequence of the EITC: expanded family credits led to a decrease in their labor force participation.     

Can ‘refundable’ state Earned Income Tax Credits explain child poverty in the American states?

This study estimates the effect of ‘refundable’ state Earned Income Tax Credits (EITCs) on child poverty from 1994 through 2003. Research results indicate that a refundable state EITC is associated with reductions in child poverty, holding all other variables constant. For example, states with refundable state EITCs have observed a 40% greater reduction in child poverty rates compared to states without refundable state EITCs. This study also discusses policy implications for implementing the ‘refundable’ state EITC.     

Medicare on life support: will it survive?

This Issue Brief discusses Medicare reform. The Balanced Budget Act of 1997 reduces spending in the Medicare program by $115 billion between 1998 and 2002. Most of the reduction in spending comes from reducing payments to providers, and most of the savings (36 percent) occur in 2002. By 2007, the Part A trust fund is expected to be insolvent, four years before the baby-boom generation reaches the current Medicare eligibility age of 65. Congress is likely to revisit Medicare reform in the near future. A number of reforms received a significant amount of attention during the Medicare reform debate, but were not included in the final legislation. The Senate-passed legislation would have increased the Medicare eligibility age from 65 to 67, imposed means testing on Medicare Part B, and imposed a Part B home health copayment of $5. While these provisions were not included in the Balanced Budget Act of 1997, they may be the focal point of future Medicare reform. Many changes to the Medicare program are likely to significantly affect employment-based health plans for both active and retired workers. Raising the Medicare eligibility age would undoubtedly affect both workers and retirees. Unless workers are willing to work until age 67, their likelihood of becoming uninsured would increase. In 1995, 15.8 percent of retirees ages 55-64 were uninsured, compared with 11.5 percent of workers in the same age group. Early retirees might also find themselves unable to afford health insurance in the private market. An Employee Benefit Research Institute/Gallup poll indicates a direct link between the availability of retiree health benefits and a worker's decision to retire early. In 1993, 61 percent of workers reported that they would not retire before becoming eligible for Medicare if their employer did not provide retiree health benefits. If workers responded to an increase in the retirement age by working longer, employment-based health plans would probably experience an increase in costs, because older workers are the most costly to cover. Some employers might respond to an increase in the Medicare eligibility age by dropping coverage altogether. The message for future beneficiaries is becoming very clear: expect less from Medicare at later ages and higher premiums. As was true prior to the enactment of Medicare in 1965, workers will increasingly need to include retiree health insurance as an expected expense as they plan and save for retirement.     

Sources of health insurance and characteristics of the uninsured. Analysis of the March 1992 Current Population Survey

Eighty-three percent of nonelderly Americans and 99 percent of elderly Americans (aged 65 and over) were covered by either public or private health insurance in 1991, according to EBRI tabulations of the March 1992 Current Population Survey (CPS). The March 1992 CPS is the most recent data available on the number and characteristics of uninsured Americans. In 1991, 16.6 percent of the nonelderly population--or 36.3 million people--were not covered by private health insurance and did not receive publicly financed health assistance. This number compares with 35.7 million in 1990 (16.6 percent), 34.4 million in 1989 (16.1 percent), and 33.6 million in 1988 (15.9 percent). The most important determinant of health insurance is employment. Nearly two-thirds (64 percent) of the nonelderly have employment-based coverage. Workers were much more likely to be covered by group health plans than nonworkers (71 percent versus 40 percent). Even though workers and members of their families were more likely to be covered by health insurance than nonworkers, 85 percent of the uninsured lived in families headed by workers in 1991, primarily because most people lived in families headed by workers. More than 60 percent of uninsured were in families headed by full-year workers with no unemployment. Nearly all persons who were covered by an employment based-plan received at least some contribution to that plan from their employer. The estimated average annual contribution among those receiving a contribution to employee or family plans was $2,129. Although many individuals in poor families are covered by public health plans, that coverage is far from universal. In 1991, only 52 percent of the nonelderly with income below the poverty line were covered by a public plan--49 percent by Medicaid. The number of children who were uninsured in 1991 was 9.5 million, or 14.7 percent of all children, compared with 9.8 million or 15.3 percent of all children in 1990. Twenty-three percent of children were covered by public health insurance, with 21 percent being covered by Medicaid. In 11 states and the District of Columbia, more than 20 percent of the population was uninsured in 1991. These states and their uninsured rates were the District of Columbia (30.3 percent), Texas (25.3 percent), New Mexico (24.5 percent), Louisiana (23.8 percent), Florida (23.5 percent), Mississippi (22.1 percent), Oklahoma (22.1 percent), Nevada (21.8 percent), California (21.7 percent),Arizona (21.1 percent), Alabama (20.6 percent), and Idaho (20.6 percent).     

Encouraging workers to save: the 2005 Retirement Confidence Survey

This Issue Brief reports findings of the 15th annual Retirement Confidence Survey (RCS), which points to potential solutions to the American retirement savings problem, specifically ways that could help workers save more through their employment-based retirement plans. IMPORTANCE OF EMPLOYER MATCH: More than 7 in 10 workers not currently contributing to their employer-sponsored retirement plan say an employer contribution of up to 5 percent of their salary would make them much more or somewhat more likely to participate (72 percent). SIMPLIFIED OPTIONS: Other retirement plan options that nonparticipants say would make them more likely to contribute are an investment option that automatically becomes more conservative as their retirement date approaches (66 percent) and a feature that automatically raises workers' contributions by a fixed amount or percentage when they receive a pay raise (55 percent). Two-thirds of nonparticipants indicate they would be very or somewhat likely to remain in their employer's plan if they were automatically enrolled (66 percent). SOCIAL SECURITY: Nearly 7 in 10 of today's workers are skeptical that Social Security will continue to provide benefits of at least equal value to those received by current retirees (68 percent). This proportion has remained relatively constant in recent years, but is below the 1995 level (79 percent). Workers continue to be unable to identify the age at which they will be eligible for full Social Security benefits. MOST BEHIND SCHEDULE IN SAVING: A majority of workers believe they are behind schedule when it comes to planning and saving for retirement (55 percent). Most of those behind schedule say that high expenses, particularly everyday expenses (49 percent), child-rearing expenses (39 percent), and medical costs (35 percent), are a major factor in keeping them from saving. LESS THAN HALF HAVE TRIED TO CALCULATE NEEDED SAVINGS: Approximately 4 in 10 workers say they have tried to calculate how much they need to accumulate for retirement. More than one-third of these workers say they asked a financial advisor to calculate this number or used their own estimates; 10 percent say they simply guessed how much they will need in retirement.     

Do People Save or Spend Their Inheritances? Understanding What Happens to Inherited Wealth

Almost $4 trillion dollars of wealth is currently held by families with a life expectancy of less than 10 years. When that wealth is inherited, will it be retained or spent quickly? Results from the NLSY79, a longitudinal survey covering people in their 20s, 30s, and 40s suggest roughly half of all money inherited is saved and the other half spent or lost investing. These spending and saving decisions are made by a concentrated group with about one-fifth of all families getting an inheritance and about one-seventh expecting to receive an inheritance. Suggestions to increase savings from inheritances are discussed.     

The retirement system in transition: the 2007 Retirement Confidence Survey

WORKERS SLOW TO SEE OR ADAPT TO A CHANGING U.S. RETIREMENT SYSTEM: The 17th annual wave of the Retirement Confidence Survey (RCS) suggests that American workers may be slow to recognize how the U.S. retirement system is changing, and those who are aware of these changes may not be adapting to them in ways that are likely to secure them a comfortable retirement. HALF OF WORKERS LESS CONFIDENT ABOUT PENSION BENEFITS: The RCS finds pension-plan changes by employers have left nearly half of workers less confident about the benefits they will receive from a traditional pension plan, but that those experiencing a decline in retirement benefits often fail to react constructively. Moreover, although Americans will rely increasingly on 401(k) retirement savings plans and other personal savings and investments to fund their retirement security, data suggest that many may not follow professional investment advice when it is offered to them. MANY WORKERS COUNTING ON BENEFITS THAT WON'T BE THERE: Many workers are counting on employer-provided benefits in retirement that are increasingly unavailable. Only 41 percent of workers indicate they or their spouse currently have a defined benefit pension plan, yet 62 percent say they are expecting to receive income from such a plan in retirement. Likewise, workers are as likely to expect as retirees are to receive retiree health insurance through an employer, even though the number of employers offering this benefit to future retirees is declining. MANY WORKERS UNLIKELY TO HEED INVESTMENT ADVICE EVEN IF THEY GET IT: More than half of workers indicate they would be likely to take advantage of professional investment advice offered by companies that manage employer-sponsored retirement plans. However, two-thirds of these workers say they would probably implement only some of the recommendations they receive and 1 in 10 think they would implement none of them. AMERICANS OVERESTIMATE LONG-TERM CARE COVERAGE: One-quarter of workers and more than one-third of retirees report they have long-term care insurance (separate from health insurance, Medicare, and Medicaid) to help pay for care they might need in a nursing home, assisted living facility, or at home. But only 10 percent of Americans age 65 and older are estimated to have had private long-term care insurance in 2002, suggesting that many are counting on coverage they do not actually have. MOST SAVINGS LEVELS ARE MODEST: Almost half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $25,000. The majority of workers who have not put money aside for retirement have little in savings at all: Seven in 10 of these workers say their assets total less than $10,000. CONTINUED IGNORANCE ABOUT SOCIAL SECURITY COVERAGE: Despite the longstanding increase in the eligibility age for Social Security, only a small minority of workers are aware of the age at which they can receive full retirement benefits from Social Security without a reduction for early retirement.     

Parental Divorce and College Students’ Persistence and Degree Attainment

The purpose of this study is to analyze whether college students from divorced families are more or less likely than their peers to persist and graduate in 4, 5, or 6 years. Utilizing data from the 2007 Cooperative Institutional Research Program survey of first-year students, the results of multinomial logistic regression analyses suggest that students whose parents were divorced were significantly less likely to graduate in 4, 5, or 6 years. These findings held controlling for demographic variables, precollege academic indicators, college experiences, and academic motivation.     

Household Income and Trajectories of Marital Satisfaction in Early Marriage

Are the marriages of lower income couples less satisfying than the marriages of more affluent couples? To address this question, we compared trajectories of marital satisfaction among couples with a wide range of household incomes. The marital satisfaction of 862 Black, White, and Latino newlywed spouses (N = 431 couples) was assessed five times, each 9 months apart, during the first 4 years of marriage. Lower income couples did not have less satisfying marriages on average, nor did their satisfaction decline more steeply on average. They did, however, experience (a) significantly greater fluctuations in marital satisfaction across assessments and (b) significantly more variability between husbands and wives. If efforts to support the marriages of low‐income couples are to address the unique characteristics of their marital development, these findings suggest that efforts to stabilize their marriages may be more effective than efforts to improve their satisfaction alone.     

Family Adaptations to Income and Job Loss in the U.S.

Using data from the Panel Study of Income Dynamics, this study examines the extent to which families experience major economic setbacks and how they respond. Families that experience a substantial loss of income or work hours are more likely to cut back on expenditures, receive public assistance, experience divorce or separation, and move. No evidence that partners are able to compensate for a major income loss by increasing their work hours was found. Initial conditions, such as income and assets, the unemployment rate of the area, and race, affect how a family adapts. Families with fewer resources and those who live in areas of high unemployment are more likely to rely on public assistance, and they are less likely to move, increase the work hours of the female head of household, or cut food expenditures.     

Financial well-being in family-based foster care: Exploring variation in income supports for kin and non-kin caregivers in California

Kinship foster parents have the same responsibilities as nonrelative foster parents and are held to the same standards of rehabilitative care. Nonetheless, their rights to financial supports and their access to other services vary across states depending on the federal eligibility of the child, and/or the licensing criteria caregivers may or may not meet. We know little about the financial supports, well-being, or services of kinship caregivers receiving differential payment schemes and whether or not these financial supports and services make any difference. More fundamentally, in states that operate two- or more -tiered funding schemes for kinship foster parents, we currently cannot even estimate what proportion of kin caregivers receive more, less, or nothing from the government, even though all are entitled to something. Kin and non-kin caregivers in two California counties responded to a written survey focused on the financial wellbeing and income supports available to families. Sources of support were associated with the availability and utilization of other child welfare services for caregivers and for children.     

Supporting family life: A survey of homeless shelters

Survey data from a national sample of homeless family shelters (N=59)were analyzed to describe the family support programming available to residents. Data were reported on facility and resident characteristics and family support programming, as well as on facility admission criteria and program participation requirements. Four independent variables (length of stay, shelter capacity, sponsorship, and program philosophy) were examined for their relationship to the family-oriented services offered. Facilities sheltered an average of 17 families, with a range of 2–200; the average length of stay for families was slightly over 5 months. Regarding family programming, services of an educational nature were more popular than those focused on providing support or therapy/intervention; services to parents to further adult development were more often offered than those either directed to parents in their parenting roles or to the family as a unit. Virtually all shelters (98%) applied eligibility criteria to families seeking admission. The most common reasons for exclusion were active drug (86%) and alcohol (83%) abuse by a family member; 40% also refused acceptance to families with adolescent males. Seventy-eight percent of facilities mandated participation in some support services. Smaller shelters operated with greater numbers of exclusions (¯x=5.98773; p<.05);larger shelters had higher percentages of mandatory family programming (¯x= 9.21823; p<.06).These findings shed light on shelter directors' beliefs about the etiology of family homelessness and proper steps to solve the problem.     

Quality of marriage: a comparison between golden wedding couples and couples married less than fifty years

The quality of marriage is investigated for a sample of 79 couples living in a midwestern comprehensive retirement community. These 158 older, middle-class men and women are healthy and average 74.8 years of age. Marital length averages 41 years, and 34.8 percent have celebrated their fiftieth wedding anniversary. Marital quality, morale, and sexual behavior are not significantly different for golden wedding couples than for couples married less than 50 years. Couples married less than 50 years spend more time socializing with other couples each week than do those who have passed the 50 year mark; they also have higher levels of sexual interest, and are more likely to have been previously married. All of these couples are happily married, have high morale, and most are still sexually active (62.8 percent).