State EITC Would Benefit Low-Paid Workers Who Can’t Work Full-Time

Today the budget Conference Committee approved the Governor’s proposed state Earned Income Tax Credit (EITC). This credit would boost the incomes of workers with very low earnings, as we discuss here, and as a result, it would inject additional dollars into local economies, particularly where poverty rates are high, as we point out here. One question that has come up in recent deliberations is what type of workers earn so little as to qualify for the proposed state EITC, which would be available only to those with annual earnings below about $7,000 to $14,000, depending on family size. The answer is that the credit would only benefit low-paid workers who are unable to work full-time, year-round. For example, the proposed credit would help:

  • Individuals whose limited work histories make it difficult for them to find regular, full-time jobs. These individuals might include young adults, CalWORKs recipients, or recently divorced parents with little or no work experience who can only find temporary or seasonal jobs. The proposed state EITC would be critical to such workers because it would supplement their low annual earnings while they acquire enough experience to be hired for full-time positions.
  • Individuals facing significant barriers to maintaining steady employment. The proposed state EITC would largely target people living in “deep poverty” (those with incomes below half the federal poverty line), who research shows typically face significant barriers to work, including low levels of education, a lack of stable housing, mental or physical health problems, and prior involvement in the criminal justice system. The proposed state EITC would provide a vital income boost to these individuals, whose personal challenges prohibit them from working consistently throughout the year.
  • Workers who lose their jobs or have their hours of work reduced. Studies show that most people who claimed the federal EITC during a recent 17-year period did so only once or twice, suggesting that the credit largely helps families get through a year or two of tough economic times. The proposed state EITC would be particularly beneficial during economic downturns when workers lose their jobs or have their work hours scaled back. For instance, the credit could help a single mother make ends meet after she’s forced to drop down to part-time at her minimum wage job. The credit could also boost the income of a two-parent family whose primary breadwinner gets laid off and has been unable to find work elsewhere.
  • Workers who are unable to work full-time for other reasons. Some workers face certain life circumstances that prevent them from being able to work full-time, including having to care for a chronically ill child or aging parent or being unable to patch together child care to cover full-time hours. Nearly one in five part-time workers report working part time because of family obligations, child care problems, or medical issues, according to national data, and another one-third report working part-time because of “slack work or business conditions” or being unable to find full-time positions. The state EITC would provide greater financial security to these types of workers until they are able to take on additional work hours.

These examples show that the Governor’s proposed state EITC would benefit a broad range of Californians who are prevented from working full-time, year-round due to a weak economy or other challenges in their lives. In this sense, the state credit would serve as a bridge, helping workers and their families get through difficult economic times until their life circumstances improve.

— Alissa Anderson