Paycheck Plus Pays Off for Low-Wage Workers
Paycheck Plus, a demonstration project supported by NYC Opportunity, increased post-tax earnings and reduced severe poverty among single working people who do not have dependent children, according to final results from the project. Paycheck Plus simulated an expanded Earned Income Tax Credit (EITC), which currently mainly benefits workers with dependent children.
The final findings were released by the research firm MDRC today at a Capitol Hill briefing in Washington D.C. The EITC is widely considered one of the nation’s most successful anti-poverty programs — and one that has long received bipartisan support. Every year, the EITC proves its power as an antipoverty tool. Analysis by NYC Opportunity’s poverty research unit shows that the EITC alone reduced the poverty rate in NYC by about 16 percent in 2016.
A weakness of the EITC is that it offers little help to working poor people without dependent children, a group that makes up a large part of the low-wage working population. In 2018, the EITC provided a maximum credit of $510 for these workers while a parent with one dependent child could receive up to $3,400. The EITC is also structured so that a non-custodial parent who works full-time at New York City’s current minimum wage of $13 per hour earns too much to be eligible for any benefits in 2018. A custodial parent with the same earnings could have received over $2,000.
Paycheck Plus aimed to test a policy solution to help fill this gap. It offered up to $2,000 a year over three years to single workers without dependent children who made up to $30,000 a year. Paycheck Plus did not use the tax system directly, as EITC does, but instead worked to mimic the effect of a tax credit. The final results show that the benefit helped. In addition to earning more, participants in Paycheck Plus were found to be more likely to work and, in the case of non-custodial parents, to pay child support. Paycheck Plus also increased the rate at which participants filed taxes, took advantage of free tax-preparation services, and received the federal EITC.
With support from other funders, MDRC is currently furthering this research by replicating the test of an expanded EITC in Atlanta — a city with a different demographic makeup and labor market than New York City. Initial findings from this replication are expected in fall 2019.
To learn more, read about the key findings from New York City in Findings at a Glance. For full results, read Boosting the Earned Income Tax Credit for Singles: Final Impact Findings from the Paycheck Plus Demonstration in New York City.
