Better Together: A High Minimum Wage + Strong Earned Income Tax Credit
This Women’s History Month, I’d like to take a moment to honor some kickass sisters who share both a gene pool and a drive to change the world: Sarah and Angelina Grimké. The Mirabal sisters. Serena and Venus Williams. Alice and Willa Vogtman. (Ok, those last two are only in preschool but I’m their mom, so I’m convinced they will do great things.)
And because I’m a policy wonk, I’d like to take another moment to honor two sister policies that also have life-changing potential: the minimum wage and the earned income tax credit (EITC).
I realize this is a thematic stretch, but in all seriousness, Women’s History Month is also a good time to note the slew of factors – past and present – that have made women and their families face a higher risk of poverty and economic insecurity. Things like barriers to education and health care, women’s disproportionate share of caregiving responsibilities and overrepresentation in low-wage jobs, and all the racism and sexism reflected in the persistent wage gaps that women, and especially women of color, still face.
So when we talk about policies that support working people who are struggling to make ends meet, we’re talking about policies that especially support women and their families. And two of the very most important ones are the minimum wage and the EITC.
These sister policies share a key purpose in common: boosting incomes for people working in low-wage jobs. But they also have important differences that make them complementary to one another.
- The minimum wage is a basic labor standard that sets a floor for the wages that employers can pay employees. Especially at the federal level, however, this standard has eroded tremendously over time: the federal minimum wage has been just $7.25/hour for a decade, and the minimum cash wage that employers can pay their tipped workers has been frozen at $2.13/hour for nearly three Most of the people who are paid the minimum wage, or just a few dollars above it, are women—and a mom with two children working for the federal minimum wage is forced to raise her family in poverty, even if she works full time.
- The EITC is a tax credit designed to offset payroll taxes and supplement wages for people working in low-wage jobs, providing the most benefits to low- to moderate-income families with children. And it is refundable, which means that if a tax filer owes less in federal income taxes than the amount the EITC is worth, she’ll receive some or all of the credit as a cash refund. The federal EITC lifted more than 1.2 million women 18 and older and nearly 3.5 million children out of poverty in 2017, and 28 states and the District of Columbia currently offer their own EITCs to provide an additional boost. For workers without children, however, the EITC provides little support; the maximum federal credit for Tax Year 2018 (taxes being filed now) is $519, and childless workers with earnings above $15,270 (or $20,950 for a married couple filing jointly) receive no credit at all. And because tax refunds only come once a year, the EITC can help workers meet large expenses, such as long-term repairs or a security deposit, but it is not sufficient to cover recurring expenses like utility bills, food, housing, and health care.
The EITC helps take up the slack from the wholly inadequate federal minimum wage, but it is NOT – repeat, NOT – a substitute for decent pay. In fact, offsetting all of the eroding value of the minimum wage through the EITC makes taxpayers, rather than employers, responsible for maintaining an adequate income standard for people working in low-wage jobs. To advance equity in our workplaces and in our tax code, and to truly support women and their families, we need to improve both the minimum wage and the EITC at the federal level. And fortunately, Congress is taking steps to do just that:
- The Raise the Wage Act would raise the minimum wage to $15/hour nationwide by 2024 and ensure that tipped workers are entitled to the same minimum wage as anyone else, before tips. Nearly one in three working women—and 36 percent of working women of color—would get a raise under the Raise the Wage Act. If the Raise the Wage Act became law, an affected worker who works year-round would see her annual income increase by about $3,500, on average—and because the value of the EITC rises as income rises up to a modest level for claimants with children, this minimum wage increase would also likely increase the EITC for many
- Senators Brown and Bennet are expected to introduce legislation to improve the EITC in the near future. If the bill follows the outlines of the Working Families Tax Relief Act they introduced last Congress, it will both substantially boost the EITC for families with children and make necessary and long-overdue expansions of the EITC for workers not claiming children. Both of these improvements would support women in low-wage jobs, and build on the proven success of the EITC in improving family well-being, health, and employment.
Women and their families need and deserve policies that support them in every dimension and every phase of their lives. And when it comes to basic income supports, don’t let anyone tell you we just need a higher minimum wage or a stronger EITC – we need both! These sisters stick together.