As debates continue on the portfolio of social policies included in the Biden administration’s Build Back Better plan, Senator Joe Manchin (D-WV) has said he won’t support the proposed permanent expansion of the child tax credit (CTC) unless work requirements are imposed on recipients—a compromise President Joe Biden has said he won’t make.
Ideally, negotiations around policy choices draw on the best evidence about what works and doesn’t work in public programs. In the case of work requirements, the evidence is clear: they may sound appealing, but they don’t actually promote increased work and earnings. In fact, they impose other harms.
The American Rescue Plan Act, passed in March 2021, provides families a monthly CTC payment between July and December 2021 of up to $300 for each child younger than 6 and up to $250 for children ages 6–17, with the remainder refunded following the 2021 year-end tax filing. The American Rescue Plan Act made additional significant—albeit temporary—changes to the CTC that aim to support the lowest-income families who were previously not eligible for the credit.
Analyses of the impact of the new CTC indicate significant reductions in poverty and low income for children across the US. If the credit is made permanent, Urban researchers estimate that child poverty across the US would be cut by more than 40 percent in a typical year, assuming that 80 percent of eligible households are reached. In Manchin’s home state of West Virginia, child poverty could be reduced by nearly 50 percent.
Why are we talking about work requirements?
Including work requirements in social safety net programs is predicated on the belief that if people are receiving assistance, they won’t want to work. But research on similar programs in other countries, including Canada, does not support this concern.
In fact, in the Canadian model, some families, such as those with parents who never married, actually increased their work effort. Additional income can have that effect if it helps families afford basic work expenses like food, clothing, housing, and child care and helps them weather unexpected expenses, like a car repair or medical bill that can make finding and keeping a job difficult.
Preliminary results from a Stockton, California, cash transfer experiment that provided basic-level income to low-income families also show increased market work. And prior simulations of policies similar to the CTC expansion have incorporated assumptions about reductions in work effort and find that any drop in earned income has exceedingly small effects on poverty.
Predictions that the expanded CTC would cause people to reduce their work efforts in large numbers haven’t borne out in the early months, with a recent analysis finding very small, inconsistent, and statistically insignificant effects on work from the first few rounds of payments.
Shortly after the first advance payments were issued, Urban researchers asked 20 parents how the payments might affect their decisions about work hours. Parents often seemed perplexed by the question, and none felt the credit payments would alter their work decisions. Noted one parent: “I think it will be the same number of hours. It’s a huge help, but we’re only surviving here, right?”
Work requirements don’t increase work and earnings
The problem with work requirements as a proposed solution to an already low risk of work disincentives is that they don’t actually achieve their objectives. Over the past several years, researchers have delved into the impact of work requirements on employment in US public benefit programs and found that requirements don’t facilitate their stated primary goal of increasing work and earnings.
A 2021 study on the effects of reinstating work requirements and work-related time limits for certain Supplemental Nutrition Assistance Program (SNAP) participants in nine states found no evidence the rules increased employment or annual earnings. What they did do was impose complex administrative procedures on both participants and state administrators and dramatically decrease SNAP participation.
Other studies find similar ineffectiveness for work requirements. Research on the Temporary Assistance for Needy Families cash assistance program found that work requirements contributed to modest but temporary gains in employment, but the jobs people found were unstable and did not pay enough to lift them out of poverty. Research on SNAP and housing assistance also shows most participants are already working or exempt from work requirements.
What work requirements can do: Produce negative outcomes
Work requirements can lead to negative outcomes that further undermine program efficiency and erode programs’ benefits for household well-being. It’s unclear what level of documentation would be required to comply with CTC work requirements, but the evidence shows the red tape associated with work requirements can cause people to lose access to vital supports, even when they are working or should be exempt.
Unfortunately, work requirements are not merely a mechanism for program integrity to prevent ineligible applicants from receiving services—they can also be an intentional mechanism to reduce program access for people who are eligible.
Work requirements sound good because they conform to the “American Dream” narrative, which attributes financial stability and success largely to individual hard work and personal responsibility. But that narrative ignores the many interrelated systems and structures—and the embedded racial disparities and discrimination—that reduce educational, employment, and wealth-building opportunities for many Americans, especially for people of color.
The expanded CTC is grounded in a solid body of research that demonstrates that boosting the incomes of families with children can contribute to positive short- and longer-term educational, health, and economic outcomes. Evidence shows work requirements won’t help achieve these positive outcomes and can create additional harm. Debates on how to structure the CTC could benefit from a better understanding of what the evidence really shows about work requirements.
The Urban Institute has the evidence to show what it will take to create a society where everyone has a fair shot at achieving their vision of success.