The Effects of Income on the Economic Wellbeing of Families with Low Incomes: Evidence from the 2021 Expanded Child Tax Credit

Pilkauskas, Natasha V.; Michelmore, Katherine; Kovski, Nicole; Shaefer, H. Luke

doi:10.3386/w30533

Cited by 27 publications

(27 citation statements)

References 37 publications

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“…Comparing the results of the analyses using 2022 and 2019 ASEC data reveals that income support policies enacted in relation to the COVID-19 pandemic may have affected poverty risk in the U.S. For example, we estimated that using 2019 data 13% of individuals experienced poverty under the absolute threshold and 18% experienced poverty under the relative threshold, while using 2022 data the corresponding estimates were 8% and 15%. These findings are consistent with other research that examined the effect of pandemic-era policies, including stimulus checks, enhanced unemployment insurance, the expanded child tax credit, and SNAP emergency allotments, and concluded that they reduced poverty [ 37 , 50 – 53 ].…”

Section: Discussionsupporting

confidence: 90%

Gaps in the welfare state: A role-based model of poverty risk in the U.S.

Berkowitz

Palakshappa

2023

PLoS ONE

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Background Research clearly demonstrates that income matters greatly to health. However, income distribution and its relationship to poverty risk is often misunderstood. Methods We provide a structural account of income distribution and poverty risk in the U.S., rooted in the ‘roles’ that individuals inhabit with relation to the ‘factor payment system’ (market distribution of income to individuals through wages and asset ownership). Principal roles are child, older adult, and, among working-age adults, disabled individual, student, unemployed individual, caregiver, or paid laborer. Moreover, the roles of other members of an individual’s household also influence an individual’s income level. This account implies that 1) roles other than paid laborer will be associated with greater poverty risk, 2) household composition will be associated with poverty risk, and 3) income support policies for those not able to engage in paid labor are critical for avoiding poverty. We test hypotheses implied by this account using 2019 and 2022 U.S. Census Current Population Survey data. The exposure variables in our analyses relate to roles and household composition. The outcomes relate to income and poverty risk. Results In 2019, 40.1 million individuals (12.7% of the population) experienced poverty under the U.S. Census’ Supplemental Poverty Measure. All roles other than paid laborer were associated with greater poverty risk (p < .001 for all comparisons). Household composition, particularly more children and disabled working-age adults, and fewer paid laborers, was also associated with greater poverty risk (p < .001 for all comparisons). Five key policy areas—child benefits, older-age pensions, disability and sickness insurance, unemployment insurance, and out-of-pocket healthcare spending—represented gaps in the welfare state strongly associated with poverty risk. Conclusions The role one inhabits and household composition are associated with poverty risk. This understanding of income distribution and poverty risk may be useful for social policy.

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Section: Discussionsupporting

confidence: 90%

Gaps in the welfare state: A role-based model of poverty risk in the U.S.

Berkowitz

Palakshappa

2023

PLoS ONE

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“…Second, we find that the expanded CTC contributed to higher average spending levels at personal care establishments, restaurants, and grocery and general stores. The latter finding is consistent with evidence that the CTC expansion reduced food hardship among families with children Pilkauskas et al, 2022). Notably, we do not find consistent evidence of greater consumption at alcohol, tobacco, or gambling establishmentseither on the extensive or intensive marginas a result of the CTC expansion.…”

Section: Discussionsupporting

confidence: 88%

“…Specifically, we find that a $1,000 increase in annual income due to the CTC led to a 6.7 percent increase in visits to child care centers. Though an analysis of labor supply decisions is beyond the scope of this study, it is possible that these findings could contribute to explaining the expanded CTC's lack of negative employment effects in 2021 (Ananat et al, 2022;Pilkauskas et al, 2022). More broadly, the patterns suggest that an unconditional cash allowance could enable some parents to increase their labor supply, even as others may decrease it due to reduced employment incentives (National Academy of Sciences, 2019).…”

Section: Discussionmentioning

confidence: 96%

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Consumption Responses to an Unconditional Child Allowance in the United States

Parolin¹,

Giupponi²,

Lee³

et al. 2022

Preprint

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The economic crisis triggered by COVID-19 put families with children in the United States under significant financial stress. The federal government’s largest response in 2021 was the American Rescue Plan Act, which temporarily expanded the Child Tax Credit (CTC) into a large, unconditional child allowance providing monthly income support to families with children. This study investigates consumption responses to the CTC expansion using anonymized mobile-location data and debit/credit card data that track visits and spending at 1.3 million establishments across counties that cover 99.6% of the U.S. population. For identification, we exploit variation in the size of households’ income gains due to the CTC across counties in a difference-in-differences framework spanning January 2021 through May 2022. We find that counties benefiting most from the CTC expansion experienced larger increases in visits to child care centers; increased spending amounts at personal care establishments, restaurants, and grocery and general stores; and no significant increase in consumption at alcohol, tobacco, or gambling establishments. We find some evidence that CTC payment frequency matters for spending decisions: when distributed at monthly frequency, the CTC payments contributed to greater consumption at grocery and general stores. When distributed as a lumpsum, the benefit contributed to greater consumption at children’s and family clothing stores. Both payment types contributed to greater visits to child care centers. These findings suggest that the CTC expansion increased household consumption and particularly spending on children.

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“…Examples of studies examining the effects of income on hardships other than food hardship include Pilkauskas & Michelmore (2019), who found that a $1,000 increase in the EITC reduced housing hardship (e.g., moderate or severe housing cost burdens and doubling up), and McKernan et al (2018), who examined the effects of SNAP, TANF, and public health insurance on aggregate hardship measures and found that participation in these programs reduces the total number of hardships that low-income families face by 48 percent. A more recent study by Pilkauskas et al (2022) examines the effects of the monthly CTC payments on a sample of families with very low incomes and found that the payments reduced the number of hardships faced and their levels of food insecurity. However, to date there are no studies examining the impact of the monthly CTC on a comprehensive set of hardships nor on any aggregate hardship indicators (e.g., experiencing multiple forms of hardship) in a representative sample.…”

Section: Materials Hardshipmentioning

confidence: 99%

The Effects of the 2021 Monthly Child Tax Credit on Child and Family Well-being: Evidence from New York City

Collyer¹,

Gandhi²,

Garfinkel³

et al. 2022

Preprint

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The temporary monthly Child Tax Credit implemented in 2021 had the potential to affect many aspects of child and family well-being, including poverty, hardship, use of food pantries, spending on child-related items, and parents’ mental health and employment. We assess these effects using data from two longitudinal studies of well-being in New York City. We find that the monthly CTC led to significant declines in the risk of facing material hardship, multiple hardships, running out of money, and using food pantries. We do not find evidence of significant changes in parents’ mental health, employment, or spending on childcare or enrichment activities.

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The Effects of Income on the Economic Wellbeing of Families with Low Incomes: Evidence from the 2021 Expanded Child Tax Credit

Cited by 27 publications

References 37 publications

Gaps in the welfare state: A role-based model of poverty risk in the U.S.

Gaps in the welfare state: A role-based model of poverty risk in the U.S.

Consumption Responses to an Unconditional Child Allowance in the United States

The Effects of the 2021 Monthly Child Tax Credit on Child and Family Well-being: Evidence from New York City

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