Earned Income Tax Credits

This is an excerpt from the full brief.

A large and expanding body of research documents the associations between “income poverty” and a wide-ranging set of negative child development outcomes. Poverty can impede children’s cognitive development and their ability to learn. It can contribute to behavioral, social, and emotional problems. And poverty can contribute to poor health among children as well. Research also indicates that the strength of the effects of poverty on children’s health and development depends in part on the timing, duration, and intensity of poverty in childhood. The risks posed by poverty appear to be greatest among children who experience poverty when they are young and among children who experience persistent and deep poverty.

Recent experimental findings offer the strongest evidence to date that raising the incomes of low-income families can positively affect child development, especially for younger children. Studies of experimental welfare programs that increase family income through employment and earnings supplements have shown positive effects on children. The most consistent finding is improvement in school achievement among elementary school-age children. Although the effects on children’s behavior and children’s health are not uniform across experimental programs that increase family income, observed effects have been either positive or neutral. In contrast, experimental welfare programs that increase employment but not income have shown few effects on children, and observed effects tend to be mixed (i.e., not uniformly positive or negative). Moreover, findings from welfare-to-work experiments show that when programs reduce income, outcomes for children are sometimes, although not always, negative.

Although further research is needed to fully ascertain the conditions under which increased employment and income provide the maximum benefit to children, findings from welfare-to work experiments strongly indicate that in programs that do not increase income, positive gains for children are uncommon, and in some cases, the results for children are unfavorable. In light of research findings about the importance of family income for child development, this policy brief series seeks to provide concise and accessible syntheses of research about policies that have the potential to increase low family incomes. The focus of Policy Brief 2 is earned income tax credits (EICs).