Will COVID-19 Relief End a Long-Standing Inequity Against 65+ Workers?

The Earned Income Tax Credit (EITC), a wage subsidy provided through the tax system, is one of the largest federal income support programs. It lifts low-wage workers out of poverty and encourages labor force participation. The amount of the EITC depends on income and family composition. The credit may exceed $6,600 for families with many children. In contrast, childless workers under age 65 can only qualify for a maximum credit of $538 and those 65 and over are not eligible at all.  

The American Rescue Plan Act, the COVID-19 relief package currently advancing through Congress, would temporarily expand the EITC for childless workers, increasing the maximum benefit to $1,502. Among other changes, the legislation would also extend the credit to childless workers 65 and over, delivering an estimated average benefit of just over $360 for 2.8 million such workers.

While these amounts are modest, they are not insignificant. In many cases, they could exceed beneficiaries’ weekly or even monthly take-home pay. Researchers from the Brookings Institution estimate that half of low-wage workers ages 62 and older earn an hourly wage of less than $10.46, or about $420 for a 40-hour work week.

Removal of the age restriction would be a long-overdue change, bringing the credit up to speed with today's labor market realities, but it is only temporary. With no clear policy rationale for preventing low-wage workers 65 and older from accessing the credit, policymakers should go a step further than making this change solely to address the short-term economic challenges of the pandemic. They should make the change permanent.

A Critical Federal Income Support Program That Excludes Older Workers

Since the introduction of the EITC in 1975, the socioeconomic and policy environment for older low-wage workers has changed significantly. In many aspects, their experience has grown much closer to that of younger workers. Today the 65+ are an important and growing segment of the labor force. Their labor force participation rate averaged only 13.7 percent in 1975 but rose to over 20 percent by 2019. Yet most of them do not qualify for the credit because of the half-century-old statutory age limit for childless workers. In excluding workers 65 and over, one of the nation’s most critical domestic programs fails to reach this vulnerable part of the workforce and even puts them at a labor market disadvantage.

Many Older Essential Workers Did Not Receive the EITC During the Pandemic

The proposed measure is particularly timely given the economic and public health impact of the COVID-19 pandemic, which has highlighted the important role and the many challenges of older low-wage workers. Approximately 29 percent of low-wage workers across all age groups are essential workers (i.e., workers who perform jobs that are necessary to critical infrastructure operations). This rate is even higher among some demographic groups; among Black/African American low-wage workers ages 65 and older, for example, 36.3 percent are essential workers.

The pandemic has also highlighted the disparities between low-wage front-line and essential workers and other workers. Despite their central importance to the nation's health and well-being, most low-wage jobs lack the benefits and protections offered in higher-paying occupations. The age ceiling of the EITC—a law that theoretically should narrow disparities—only exacerbates these disparities among older low-wage workers. 

An Emergency Policy Response That Should Be Permanent

Expanding the EITC for workers ages 65 and over not only addresses the immediate COVID-19 crisis but also makes sense in the long run. Even before the pandemic, many workers making up the 65-and-over segment of the workforce remained employed out of financial necessity, not by choice. In recent decades, the notion of 65 as the normal retirement age has become obsolete. Policymakers, meanwhile, continue to look for ways to improve retirement security and reduce pressure on the national retirement system. More people working longer is one of the solutions. Such a trend would also help fill an expanding gap in the US labor market, given labor force participation rate declines projected for younger cohorts.

In this environment, continuing to limit access to the EITC only to low-income workers under age 65 makes little sense. It is counterproductive both in the short term and long run. Policymakers should remove the age restriction for older workers permanently, not only in response to the current crisis but also to advance long-term policy goals.