•Press Release Government Health and Social Programs Inequality
Washington DC — Most children live in households that experience at least one negative earnings shock, a decline of 20 percent or more in household earnings from one month to the next, in a typical year. That finding is the basis for a new report released today by the Center for Economic and Policy Research (CEPR).
As legislation is moving through Congress to expand the Child Tax Credit, CEPR Economist Yixia Cai and Senior Policy Fellow Shawn Fremstad explain how the Child Tax Credit could be restructured to provide a reliable buffer against these common earnings shocks.
Most Children Live in Households that Experience One or More Substantial Declines in Earnings During the Year: The Child Tax Credit Should Be Restructured to Help Them finds that on average, nearly half of all children lived in households that experienced one or more negative earnings shocks in each of the years from 2009 to 2016. Among children living in households with extremely low incomes, 80 percent experienced one or more negative earnings shocks on average.
About 45 percent of white, non-Hispanic children experienced one or more negative earnings shocks, compared to about 48 percent of Black children and 50 percent of Hispanic children.
“Congress should expand and restructure the Child Tax Credit as a monthly payment that provides a reliable buffer against these shocks,” said co-author Fremstad. “Furthermore, by paying the same per-child benefit to all families with children, as is done in Ireland, Sweden and various other countries, Congress could help parents meet some of the regular monthly costs of parenting while reducing the risks of overpayments that would have the perverse effect of increasing income instability.”