How Working Women Respond to School Closings and Tax Changes
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.
Even more so than among white women, the LFPR of younger black women increased through 2019. Unlike older white women, however, the LFPR of black women 45-64 years old also increased substantially. The pandemic, however, had a devastating effect on younger black women. For 20-24 year olds, their LFPR rate declined in one year by 9 percent. Whereas in 2019 it was 6.2 percent above its 2011 level, in 2020 it was 3.0 percent below it. By contrast, among comparably-aged white women, it fell by less than half as much. Similarly, among 25-34 year olds, the decline was more substantial for black than white women. By contrast, for older women, LFPR changes from 2019 to 2020 were very small and there were no significant racial differences.
There can be many explanations for the disproportionate LFPR decrease among younger black women but the closing of schools and childcare facilities is certainly one. In 2018, 29 percent of all black children, compared to 12 percent of white children, were born to unmarried mothers 24 years old or younger. As a result, among 20-24 year olds, there are many more black than white lone mothers — women who may have had to drop out of the labor force because of childcare responsibilities. This gives further justification for the ability of nonworking parents to obtain full child tax credit benefits.
Hopefully, as schools and daycare centers reopen and the economy continues to expand, these mothers will be able to regain their employment. When up for renewal in 2022, however, there are reasons to rethink the child tax credit legislation. The increase to $3,600 for pre-school children should continue but there are a number of reasons to question its increase to $3,000 for older children, especially to upper-middle class households.
Once household income rises beyond $60,000, the vast majority of families with children are married couples. Rather than enabling them to obtain the more generous child credit, it would be much more efficient to shift the benefits to a newly legislated earned income tax credit (EITC). Currently, since the EITC is based on family income, if a working single parent marries a working partner, thousands of dollars of benefits are lost. In a proposal I advanced with Angela Rachidi, we increase the amount that married couples can receive and extend benefits to a higher income range. Not only would the desired benefits embedded in the recently enacted child tax credit be provided, but the EITC revision would dramatically reduce the substantial marriage penalty low-waged single parents now face.
Robert Cherry is recently a recently retired Brooklyn College economist and author of Why the Jews? How Jewish Values Transformed Twentieth Century American Pop Culture (Rowman & Littlefield).
