One contentious component of the $1.9 trillion COVID relief bill was its expansion of the child tax credit. Not only did it increase the credit from $2,000 per child to as much as $3,600 but it also made the credit fully refundable at zero income. A second contentious issue has been the continued delays in school openings. This essay will look at how these two issues may or may not impact on black and white female labor market behavior.
As to the child tax credit legislation, some conservatives fear its potential effects on work. Oren Cass estimated that together with other government safety-net program, a single parent with two children can obtain benefits and income totally over $30,000. As a result, he suggested that the legislation may induce labor market withdrawals. Matthew Ignatius dismissed these concerns: “If a generous child allowance leads to some reduction in hours worked as people spend more time with their kids, that’ll be fine.”
The labor force participation rate (LFPR) for all white women 20 years or older continuously declined during the last decade. It would be a mistake, however, to consider this a problem that the child tax legislation could exacerbate. This decline occurred because the LFPR declined for women 45 to 64 years old and because of the rising share of women over 65 years old. By contrast, the LFPR of white women in their peak childbearing and child-raising years, 20 to 34 years old, was substantially higher in 2019 than in 2011. Indeed, despite declines due to the pandemic, their 2020 LFPRs remained above their 2011 levels. Thus, the guaranteed tax credits at zero income might do no more than modestly stem the labor force increases among younger white women.
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