The EITC and occupational mobility

I estimate that the implementation of state-level Earned Income Tax Credit (EITC) supplements results in a 3% reduction in the likelihood of downward occupational mobility among single mothers aged 19 to 35. This outcome, characterized by an elasticity of $$-$$ - 1.4, is not attributable to shifts in occupational distribution, wage changes, variations in workforce participation, or alterations in working hours. Rather, it aligns with the EITC’s enhanced compensation for mid-wage occupations, which diminishes the incentive for workers to transition into lower-wage roles. This evidence suggests that the EITC may exert a lasting effect on the skill development of employed workers, beyond its immediate financial benefits.