Effects of the Expanded Child Tax Credit on Employment Outcomes: Evidence from Real-World Data

Early studies have established that the expanded Child Tax Credit (CTC), which provides monthly cash payments to most families with children in the United States, has substantially reduced poverty and food hardship since its introduction in July 2021. Some researchers posit, however, that the CTC payments may generate negative employment effects that could offset its potential poverty-reduction effects. Scholars have simulated various employment scenarios using different assumed labor supply elasticities, but no study to date has empirically assessed how the CTC payments to date have affected employment outcomes using real-world data. To evaluate actual employment effects, we follow previously-established methodology used to estimate other actual CTC impacts, applying a series of difference-in-differences analyses using data from the monthly Current Population Survey files from April 2021 through August 2021 and the Census Household Pulse Survey microdata collected from April 14 through September 13, 2021. Across both samples and several model specifications, we find very small, inconsistently signed, and statistically insignificant impacts of the CTC both on employment in the prior week and on active participation in the labor force among adults living in households with children. Further, labor supply responses to the change in CTC do not differ for households previously earning within the phase-in range of the prior CTC, in striking contrast to the predictions of the simulation work. Thus, our analyses of real-world data do not support claims that the CTC has negative employment effects that offset its documented reductions in poverty and hardship.