By Galen Savidge-Wilkins
Abstract
The Earned Income Tax Credit was established to provide low-income families with relief from the payroll tax, but it has grown over time to become the largest means-tested cash transfer program in the United States and one of the most substantial federal supports for the working poor. Although the EITC has been studied extensively, the literature has largely focused on its ability to encourage work, particularly among mothers (Eissa and Liebman 1996; Eissa and Hoynes 1998; Meyer and Rosenbaum 2001). There is a growing research literature on other effects of the EITC, including its impact on child cognitive ability and maternal health (Dahl and Lochner 2011; Evans and Garthwaite 2011). However, there is little research into how this component of the safety net impacts a key outcome for children: high school graduation. Using data from the National Longitudinal Survey of Youth on mothers and their children to construct a rich personal history for each child, this study examines the relationship between parental receipt of the Earned Income Tax Credit and children’s likelihood of graduating from high school on time. Within this study’s sample, EITC receipt is found to be most strongly associated with on-time graduation when these benefits are received during two life stages: before the children enter school and when children are in middle school. The results indicate that a $1,000 increase in average yearly real EITC receipt before the children enter school is associated with a 6.80 percentage point increase in the likelihood of finishing high school on time, and with a 1.56 percentage point improvement when that same increase in average real EITC receipt occurs during middle school. Analyses of specific disadvantaged subgroups yield statistically significant results during the same life stages and a stronger positive relationship between EITC receipt and high school graduation.
Galen Savidge-Wilkins completed the Master of Public Policy at the Georgetown Public Policy Institute in 2012. Adam Thomas, PhD, served as his advisor. Currently, Savidge-Wilkins is an Analyst with Abt Associates where he works on research and evaluation of federal homeless assistance, income security, and workforce development programs.