Gordon Berlin discusses the nation’s long struggle to reduce poverty in families with children, and proposes a counterintuitive solution—rewarding the work of individuals. He notes that policymakers’ difficulty in reducing family poverty since 1973 is attributable to two intertwined problems—falling wages among low-skilled workers and the striking increase in children living with a lone parent, usually the mother. As the wages of men with a high school education or less began to decline, their employment rates did likewise. The share of men who could support a family above the poverty line thus began to decline—and with it the willingness of low-income women to marry the fathers of their children. Because the U.S. social welfare system is built around the needs of poor families with children—and largely excludes single adults who are poor (and disproportionately male)—it creates disincentives to work and marry for some families, aggravating these larger trends.
Berlin proposes a new policy that would partially overcome the low wages and income of poorly educated males and second earners in two-parent households by using the earned income tax credit (EITC) to supplement the earnings of all low-wage workers aged twenty-one to fifty-four who work full time—regardless of whether they have children or whether they are married. By conditioning the benefit on full-time work and by retaining the existing family-based EITC program while treating EITC payments as individual income rather than as joint income for income tax purposes, the policy would restore equity to the American social compact without distorting incentives to work, marry, and bear children. The largest benefits by far would accrue to two-parent households in which both adults can work full time.
Because the policy would carry a large price tag—nearly $30 billion a year when fully implemented— Berlin says that a prudent next step would be to test this strategy rigorously in several states over several years, preferably using a random assignment design. (author abstract)