1 in 6 AZ workers earn too little to make ends meet
Arizona’s economy added more than 100,000 jobs in 2021, bringing total employment back to pre-pandemic levels. Despite the good news, 1 out of 6 workers in our state still earn too little to make ends meet.
Thankfully, President Biden’s Build Back Better bill would provide muchneeded relief for working-class households – especially those with children. Now it’s up to the Congress to act.
The American Rescue Plan passed in March expanded the child tax credit for 2021, through which families are eligible for $3,000 per child between the ages 6 to 17, and $3,600 for children under 6.
The Build Back Better proposal will extend the credit at least through 2022. It will also reduce the costs of child care to 7% of income for most working- and middle-class families.
Tax credits and investment in child care will help alleviate the financial stress facing many families. Yet not everyone understands this.
Misinformation has generated unwarranted concerns that the child tax credit disincentivizes work because it is fully “refundable,” meaning that families can claim the credit regardless whether they earn enough to file income tax returns.
Some members of Congress, including a few Senate Democrats, want to weaken this provision by calling for minimum income thresholds to allay fears that we are supposedly paying people not to work.
We heard similar arguments throughout the pandemic, when payments to millions of displaced workers were labeled a “terrible blunder” that fueled America’s labor shortage. But it turns out there is no evidence that extended benefits dampen employment.
For example, studies show that the CARES Act had no effect on job vacancies. Moreover, workers’ efforts to find new jobs are relatively insensitive to the expansion of employment benefits.
Tax credits help reduce child poverty – to the tune of 40%. Child poverty rose nationwide over the last several years. In Arizona, roughly one-fifth of children lived in poverty during 2020.
Many of these children are members of working families. Low incomes – along with soaring costs of living – continue to leave many households without sufficient means.
Back in 2020, the estimated living wage in Arizona was at $29.01 an hour for a household with one child and one working adult. That equates to about $60,000 a year.
That number may sound high, but consider that living wage estimates take into account the costs of basic needs like housing, transportation and food, which total close to $30,000 on their own. It also includes child care, which is estimated at $5,610 per child.
Of course, child care costs drop significantly if there is an adult who can stay home. The trouble is, many homes don’t have that luxury. Roughly 440,000 Arizona households are single-income families and at least one-third of all households with children are single-income.
Many parents simply don’t have the option to stay home. And when they work, they make too little to cover expenses.
About 650,000 workers in Arizona earn average wages of $17.50 an hour – more than $10 an hour short of the income needed to get by.
Arizona’s two largest employers are retail trade, including store clerks, and leisure and hospitality, including cooks and concierges. Those industries are among the lowest-paid in the nation.
Those are just two examples. Average incomes fall short of a living wage in two-thirds of the most common jobs in our state. Together, it means hundreds of thousands of workers face difficult choices at the end of each month.
That’s where Build Back Better promises relief. The child tax credit effectively offsets more than half of the $5,610 annual per child expenses estimated for the average Arizonan family.
One study shows that 91% of low-income families have relied on this tax relief to cover housing, food and education. Capping child care costs further enables families to cover basic needs.
The long-term benefits are significant. Evidence highlights the strong links between reducing child poverty and better public health outcomes, higher educational attainment and lower crime rates.
Clearly, the president’s proposal to address the financial burdens facing working families will save money down the road – something that fiscal conservatives and moderates in Congress should appreciate.
It’s time Congress delivered these critical investments for the country.