Last week, the Senate rejected a child tax credit revision that had bipartisan House support. It would have enabled more of the credit to be refundable to families with no employment income. Republican senators voted against it because they believed that providing unconstrained income to poor households would reduce their work effort. 

This was one of the outcomes of a recently concluded comprehensive study on the effects of a universal basic income in which $1,000 per month was given to poor households for three years. The study estimated, “Recipients of the cash transfers worked 1.3 to 1.4 hours less each week compared with the control group. Instead of working during those hours, recipients used them for leisure time.” 

In 2021, as part of the stimulus package, Congress passed an even more generous expansion of the child tax credit. Not only was there a $1,500 increase for younger children, but families could gain the full benefit without any earnings. Just as with recent legislative proposal, liberals focused on its ability to reduce child poverty, conservatives worried that, by eliminating an earnings requirement, it would discourage work. Some Republicans, most notably Mitt Romney, supported an expanded child credit. As long as it included a work requirement to gain full benefits, Democrats would not support it. Research I conducted points to a realistic compromise.

Some data from 2021 seem to support the liberal contention that Biden’s policy did not lower employment. While the expansion provided funds beginning in the second half of 2021, many took their benefits in early 2022 when filing their federal income taxes. As a result, it might have impacted employment behavior in 2022. Between 2021 and 2022, the employment rate of black teen women declined from 27 percent to 22.8 percent, while it increased for both white and Latino teen women, as well as all subgroups of men. Though black teen birth rates have declined in the last two decades, they are still 2.5 times higher than those of white teen women, and 29 percent of black, but only 12 percent of white, births are born to mothers 24 years old or younger. Therefore, young black women, as a group, would be more sensitive to the impact of the child tax credit changes. 

Looking further, even if I am correct in suggesting the 2022 employment drop was influenced by the child credit expansion, it is not clear that this should be seen as unwelcomed. In particular, it doesn’t appear that these women fell into the disconnected population—neither at paid employment nor in school, since the share of young black women in the disconnected population fell between 2021 and 2022. This suggests that we must look at the educational sector.

I found that the employment decline of black teen women was likely to have been among those who were in school. In particular, for those aged 16–24 years old, the black female employment rate of those in school declined modestly between 2021 and 2022, but increased significantly for those who were not enrolled. This strongly suggests that the modest employment withdrawal in 2022 was substantially among those who were school enrolled.

If the employment decline is primarily among young mothers who are in school, this is a good thing. These women who are trying to improve their situations and juggling one less ball—working while in school—should be supported. Indeed, child credit policies can easily accommodate for these dynamics, similarly to their adjustments in other policies.

When welfare-to-work policies were legislated during the Clinton Administration, educational activities were allowed as substitutes for work requirements. Similarly, when Maine instituted work requirements for food stamps for adults with no dependent children, it allowed educational substitutes. Thus, a child credit proposal could be enacted with the stipulation that suitable enrollment in an educational program counted as meeting a work requirement. This should be acceptable to conservatives who worry about work disincentives and to liberals who are reluctant to tie the refundable portion to work requirements.  

There still will be issues to resolve. The school requirement could be more or less stringent, deciding how to treat non-college training programs, and whether or not it would partially or fully offset a work requirement to gain full benefits. Finally, a modest portion of the credit could be available absent work.

The main point is that we should enact policies that encourage young women to focus as much as possible on expanding their educational attainment, as well as supporting their young children.  This compromise accomplishes both of these objectives and should be legislated.