EITC: A Better Poverty Fighter Than Raising the Minimum Wage

Expanding the Earned Income Tax Credit for childless adults would put money in pockets without hurting jobs.

WSJ article by Michael Saltsman. Mr. Saltsman is research director at the Employment Policies Institute, which receives support from restaurants, foundations and individuals. Excerpts:

"President Obama wants to raise the minimum wage to $10.10 from $7.25. But the Congressional Budget Office released a report in February estimating that this higher wage would eliminate 500,000 jobs."

"even a modest wage increase would have immodest consequences. Increasing the minimum wage to $9 an hour would cost roughly 100,000 jobs, according to CBO estimates."

"But the EITC has one major weakness: Under current law, the size of the credit is dramatically smaller for individuals and families without children.

For instance, a single mother with two children who works part time for the federal minimum wage receives nearly $4,500 in additional income from the EITC. That's a 40% increase in take-home pay, bumping her hourly wage to $10.15 an hour from $7.25. But a single woman without children who works the same hours for the same wage takes home $265 in EITC benefits annually—a 2% increase in take-home pay.

Mr. Ryan's plan would close that gap."

"Mr. Ryan's proposal would reach childless adults in poverty whose hourly wage nevertheless exceeds $10.10. (A 2010 study in the Southern Economic Journal, sponsored by the Employment Policies Institute and conducted by economists Joseph Sabia and Richard Burkhauser, found that 25% of hourly employees in poverty earn $12 an hour or more.)"

"Only 18% of the benefits from Mr. Obama's wage proposal would go to minimum-wage earners living in poor families, as David Neumark explained in these pages last month."