TABLE OF CONTENTS
ACKNOWEDGEMENTS ................................................................................................. ii.
ABSTRACT ...................................................................................................................... iii.
LIST OF TABLES ..............................................................................................................v.
Chapter
I.
Introduction ..................................................................................................1
Program Development .....................................................................1
Eligibility .........................................................................................2
EITC Research .................................................................................5
Economic Conditions .......................................................................7
Female Heads of Households ...........................................................8
Purpose and Objectives ..................................................................10
Justification ....................................................................................10
Theoretical Grounding ...................................................................11
II.
Literature Review .......................................................................................13
Financial Management Practices of
Low Income Families ..................................................................13
Resource Allocation .......................................................................21
III.
Methods......................................................................................................26
Conceptual Approaches to Social
Science Research.........................................................................26
Qualitative Research Design and Strategy:
Focus on Interviewing .................................................................28
Qualitative Interviewing ....................................................30
vi
Procedure .......................................................................................32
Sample Protocols ...............................................................32
Initial Contacts and Planning .............................................36
Interview Preparation .........................................................37
Contacting and Establishing Interview
Appointments ..................................................................38
Conducting the Interviews .................................................39
Domains of Inquiry ........................................................................41
Data Analysis .................................................................................43
IV.
Findings......................................................................................................46
General EITC Information .............................................................46
Knowledge of the EITC .....................................................46
Reactions to the First Receipt of the EITC ........................48
Reactions to the Program ...................................................49
Money Management.......................................................................50
Tax Preparation ..................................................................50
Priorities for Spending .......................................................51
Planning .............................................................................52
Use of EITC Money ...........................................................52
Economic Context..........................................................................56
Effects of the EITC ............................................................56
Welfare ...............................................................................57
Work Attitudes ...................................................................61
vii
Difficulties of Poverty........................................................62
Future .............................................................................................67
Reactions to Future Income ...............................................67
Future Expectations ...........................................................69
V.
Discussion ..................................................................................................71
VI.
Summary ....................................................................................................81
General Discussion ........................................................................81
Implications....................................................................................87
Future Research..............................................................................90
Conclusion .....................................................................................91
APPENDIX I......................................................................................................................93
REFERENCES ..................................................................................................................94
viii
CHAPTER I
Introduction
Program Development
The Earned Income Tax Credit (EITC) was first adopted in 1975 under the Ford
administration. Its original purpose was to help low-income working families with
children offset the burden of the social security payroll tax. The original EITC equaled
10 percent of earnings, up to a maximum of $400 for those families with children. In its
beginning years, relatively few people knew of the tax credit, and it was not until the
1980s that the credit gained more attention (Hoffman and Seidman, 1990). The tax credit
has been increased several times since its original adoption. The largest increases
occurred in 1986, 1990, and 1993. When the Omnibus Reconciliation Act 93 (OBRA93)
was fully implemented in 1996, the credit rate was increased to 40% of earnings for
families with two or more children and 34% for families with one child. Also, for the
first time, taxpayers without children were able to qualify for a 7.65% credit.
Over the years, the main purpose of the EITC has also shifted. The tax credit has
now become one of the cornerstones of President Clinton’s welfare reform plans. Its
purpose has moved from helping poor people with payroll taxes to lifting low-income
workers out of poverty (Cloud, 1993). In an exchange with reporters about the EITC,
President Clinton noted:
But the most important thing of all to reward work is that this will be the
first time in the history of our country when we’ll be able to say that if you
work forty hours a week and you have children in your home, you will be
1
lifted out of poverty (Weekly Compilation of Presidential Documents,
Aug. 2, 1993).
Through the years, the EITC has been applauded by Republicans and Democrats
alike. The credit’s popularity has been attributed to the fact that it is given only to those
who work, and two-parent families are allowed to receive the credit while not being
penalized for being married (Greenstein and Shapiro, 1998). Many have seen the EITC
as an ideal way to help move people off the welfare rolls because recipients must work in
order to receive the credit.
Though the EITC is applauded by many, and it is a major component of President
Clinton’s welfare reform plan, many economists and politicians raise several complaints
about the EITC. Some claim that the EITC is full of fraud and error and that it actually
encourages workers to participate less in the work force (Lerner, 1994 & The Economist,
1995). Rather than do away completely with the EITC, many politicians are currently
trying to “fine tune” the EITC laws to reduce the amount of fraud in benefits received and
give a greater benefit to those families where the two wage-earners are married.
Eligibility1
In order to receive the EITC, one must work and receive a positive income. Two
groups are eligible to receive the tax credit. The first group of eligible taxpayers includes
families who:

1
have a qualifying child2 in the home,
All eligibility requirements and EITC rules are for the 1997 tax year.
2

have either spouse working part or full time (if married),

have an adjusted gross income less than: $25,760 for one-child households; or
$29,290 for households with more than one child, and

do not have certain types of disqualifying investment income greater than $2,200.
The second eligible group of taxpayers includes households that do not have a
child and have workers who:

are more than 24 years old and less than 65 years old,

have lived in the United States for more than half the year,

are not the dependent of another taxpayer,

have an adjusted gross income less than $9,770,

have either spouse working full or part time (if married), and

do not have certain types of disqualifying investment income greater than $2,200.
The amount of EITC benefits has three distinct categories: the “phase-in” range,
the “plateau” range, and the “phase-out” range. In the phase-in range, the benefit
increases for every dollar made, up to an income of $6,500 for a family with one child
and $9,140 for a family with two or more children, after which the next phase begins.
During the plateau range, where the maximum benefit is reached, the benefit remains the
same even if the recipient earns more money. The plateau range is from $6,500 to
$11,930 for a family with one child and $9,140 to $11,930 for a family with two or more
children. The maximum benefit is $2,210 for a one child family and $3,656 for a family
A qualifying child includes a family’s own child, an adopted child, or a grandchild as
long as he or she lived with the family for at least 6 months (in 1997). An unrelated child
or foster child must have lived with the family for all 12 months of the year. The child
2
3
with more children. Finally, the phase-out range covers income up to $25,760 (for one
child) and $29,290 (two or more children). In this phase, the benefit decreases for each
additional dollar earned.
Eligible recipients can receive their benefit in one of three ways. The first option
is to receive a lump sum amount at the end of the year from the IRS in the form of a
higher income tax refund. The second option is referred to as the “Advanced Payment
Option.” Employees with children can receive a portion of their benefits (60%) each
month as an addition to their paychecks and the rest in a lump sum when they file their
taxes. The employer pays the advanced payment out of employer and employee social
security taxes and does not actually experience any out-of-pocket expenses (Scholz,
Winter 1993-1994). In 1989 fewer than one-half of one percent of those eligible for the
EITC chose the advanced payment option (Scholz, Winter 93-94). This number, though,
seems to be slowly increasing. Beginning in 1994, the IRS was required to let those who
received the EITC know about the advanced payment option. Though most research
cannot cite a particular reason for the small number of people using the advanced
payment option, most researchers feel that employers and employees alike simply do not
know about or completely understand the option (Scholz, Winter 93-94). The third way
the benefit can be “received” is by owing a smaller amount of income tax at the end of the
year. Some believe that 75% to 90% of those who are eligible for the tax credit are
receiving benefits (Scholz, 1996). These high rates can be greatly attributed to an
increase in the outreach efforts to let workers know about the credit.
does not have to be claimed as a dependent but must be less than 19 years old, or a full
time student under 24, or totally disabled (no matter the age).
4
The majority of people receiving the EITC fall into the phase-out range. The
effect of the EITC may be the least in this group because some people in the phase-out
range may not be as close to the poverty line as other recipients. One study (Scholz,
1996) found that approximately 61% of the households receiving the EITC fall within the
phase-out range (p.78). Eighty-four percent of total earnings, however, fall into this range
(Browning, 1997, p. 23). In 1997, about 16 million families benefited from the Earned
Income Tax Credit. Single women make up the largest group of taxpayers who are
eligible for the EITC (Eissa and Liebman, 1996, p. 610).
EITC Research
Until recently, not many studies had been done about the effects of the EITC on
its recipients. More studies are currently being conducted as the EITC gains more
attention in the midst of welfare reform. Most studies that have been conducted have
focused on work force participation by using labor force statistics or information from
other databases. Others have used economic models to hypothesize how recipients would
participate in the work force after receiving the EITC. One of the main concerns for
many of these studies has been the “phase-out threshold” of the EITC benefit amounts.
Not much research has looked at the “phase-in” area where the greatest effects might be
occurring. This may be due to the fact that there are greater numbers of people in the
phase-out category and a greater percentage of total earnings fall into the phase-out range
(Browning, 1997).
Using economic models and simulations, some researchers have estimated that
work force participation by those in the phase-out range will actually decline (Browning,
5
1997; Hotzblatt, McCubbin, and Gillette, 1994; Scholz 1996). These studies estimated
this decline to be especially true of those people already in the market labor force.
These studies, along with several others (Dickert, Houser, and Scholz, 1994;
Ozawa, 1995; Eissa and Liebman, 1996), however, all agreed that those in the phase-in
range, as well as any people currently not in the market place, would have great incentive
to either enter the work force or increase labor hours. Of these studies, one found that the
EITC was effective in offsetting any work disincentives set up through the AFDC or food
stamp programs (Ozawa, 1995). Another one found that through the 1993 EITC
expansion, labor force participation by women with children increased by 2.8% (Eissa
and Liebman, 1996, p. 635). The impact for women with less than a high school
education was more than twice as much. In fact, recent studies have indicated that even
those who are currently working and are in the phase-out range of benefits are not
reducing labor force hours as predicted by some of the earlier studies that used economic
models and simulations (Greenstein and Shapiro, 1998). Therefore, studies using more
than just models and estimates need to be conducted because actual data do not
necessarily seem to support original predictions.
In looking at the EITC, it is also important to understand economic trends as well
as the situation faced by many female heads of households, because many workers
receiving the EITC are single mothers. These trends contribute to the number of people
needing assistance and the growing importance of the EITC.
Economic Conditions
6
It is necessary to understand the economic conditions of low-income American
workers in order to place the impact of the Earned Income Tax Credit into a larger
context. Over the past couple of decades, family incomes have seen little growth and a
greater increase in income inequality between the wealthy and the poor. Between 1989
and 1995 median family income fell by 3.4%. The bottom 80% of male workers and the
bottom 60% of female earners experienced declines in their after-inflation wages (Mishel,
Bernestein, and Schmitt, 1997, p. 6). The American economy has shifted from a
manufacturing to a service industry base. Many jobs offer part-time rather than full-time
hours, thereby forcing workers to have multiple jobs to support a family. There has also
been a decreased in the number of employees covered by employer-sponsored health and
pension benefits (p.7).
The gap between the wealthiest and poorest wage earners continues to widen.
The richest 1% of the American population has seen a decreased effective tax rate
through the 1980s and 1990s. Most middle and low income families have seen no
difference in their effective tax rate during the same time period. However, most
researchers believe that the widening gap between the rich and the poor has more to do
with income disparities than tax issues. For instance, in 1995, chief executive officers
earned 173 times what the average worker earned (p. 7).
Poverty rates continue to remain high as well. In 1995, 13.8% of the population
was considered to be poor (p. 11). The rate for minorities and children are above the
national average. With wages that seem to be continuing along their downward trends,
the outlook for many families in poverty remains bleak.
7
A recent study by the Center on Budget and Policy Priorities (Greenstein and
Shapiro,1998), however, has shown that the EITC is beginning to help many of these
families. In 1996, the EITC lifted 4.6 million people out of poverty. Nearly 2.4 million
of them were children. The study noted that no other government benefit program lifted
as many children out of poverty as the EITC.
Female Heads of Household
The number of single female-headed households continues to increase. These
families are especially vulnerable to living in poverty. In 1993, over 46 % of femaleheaded households lived in poverty (Rodgers, 1996). Eleven percent of these families
were poor despite the fact that the mother held a full time job (Rodgers, 1996). Many
women were not able to find jobs, either because of the shortage of opportunities
available in their area or the lack of an appropriate education. Single female-headed
families are often “bound” to poverty. Absence of a viable support system also plays a
part in these lives of poverty (Schein, 1995).
Even though women’s wages, in general, are becoming more “equal” to men’s,
women still do not earn as much as their male counterparts (Rose, 1995). This situation,
coupled with the problem of an inadequate supply of jobs that will sufficiently meet the
needs of impoverished women, only adds to the dilemma for female heads of households.
Though many families that fall into poverty eventually pull themselves out, many femaleheaded households do not. “About 20 percent of all those who become poor remain poor
for extended periods. Mother-only families are disproportionately represented in this
group...” (Rodgers, 1996, p. 21).
8
In searching for a job, many mothers are faced with the problem of the need for
flexibility (Schein, 1995). Because the mother is the only parent in the household, if an
emergency arises, she must be the one to take care of it. Too often, the kinds of jobs that
would offer the needed flexibility are not those available to women who are not highly
educated. The jobs that poor women often must take do not pay well enough and do not
offer the needed flexibility. Women who try to go back to school to either obtain their
General Education Degree or a college degree, are faced with even more difficult
situations. Often low-income women have problems working full time and going to
school, having someone to watch her children, and paying for her schooling (Schein,
1995).
The children in these situations are also greatly affected. Children who grow up
in poverty are twice as likely to drop out of school and one a half times as likely to be
unemployed. Girls in this situation are four times as likely to become an unwed mother
(Gottschalk, McLanahan, and Sandefur, 1994). The developmental process of a child
who suffers long-term poverty is also greatly at risk (Korenman, Miller, and Sjaastad,
1994). Children in poverty are often stigmatized by their economic conditions.
Of course, one of the biggest problems for women living in poverty is a lack of
financial resources. Single mothers often struggle from month to month, never knowing
if there will be enough money to make it through. For many “child care is an
unaffordable burden” (Polakow, 1993). One woman, in talking about the difficulty of
making ends meet, noted, “One automobile problem could set me back a couple of
months” (Schein, 1995, p.53). Another woman said, “Sometimes you rob Peter to pay
Paul and pray Paul is not broke. It’s very tight” (Schein, 1995, p.56). They simply do not
9
have enough to make it through the month. The financial strain these families face are far
reaching and include more than just “paying the bills.” One emergency can cause a great
financial burden that lasts for months. Many women are forced to look to governmental
support or help from food pantries and other charitable organizations.
Purpose and Objectives
The purpose of this study was to gain a deeper insight into how the EITC is used
and some of the effects of the EITC for female-headed households. The three main
objectives were to:

understand the how EITC recipients spend their EITC money (Schnittgrund and
Baker (1983) note that it is important to understand why families make the
choices they do in order to better help them make necessary financial adjustments
(p.261)),

understand what recipients feel the EITC has done for them, and

understand if, and on what, recipients are planning to use future EITC benefits.
Justification
Because most EITC research to date has only dealt with simulations, in-depth and
insightful information from recipients has not been examined. This is especially
important because more recent studies have found that some original predictions about
work force participation (that these simulations suggested) are in fact incorrect
(Greenstein and Shapiro, 1998). In the midst of current welfare reform, where great
emphasis is being placed on working, more EITC research is needed to see how the
10
program is affecting the lives of the working poor. Because many people see the EITC as
one of the most important aids to the poor today, it is necessary to understand if and how
the program is helping low-income people. To use the EITC as a tool to help people get
back into the work force and stay out of poverty, evaluations of the program need to be
conducted. Research in this study will help lay the groundwork for more large-scale
EITC research.
Studies on the EITC will also grow in importance as more states consider
adopting an earned income tax credit on the state level. Currently, nine states3 have
developed state level earned income tax credits which are a percentage of the federal
credit. Missouri is now also considering a tax credit that would be a percentage of the
federal benefit for low-income workers. Therefore, it is important to understand how the
federal EITC benefit is used and what its effects are as several states look to expand it to
aid the poor.
Theoretical Grounding
When conducting qualitative research, one does not start with a theory and then
attempt to prove it (Strauss and Corbin, 1990). Nevertheless, existing theory can be
useful in considering the research issues. For this study, Milton Friedman’s Permanent
Income Hypothesis was useful in this regard. Friedman deals with the way people
perceive their income. Current consumption depends on how one views both permanent
and transitory income. Permanent income is an average of what one expects to receive
3
Iowa, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island,
Vermont and Wisconsin
11
over the long run rather than in the short run. Transitory income includes sources of
income that are not expected to be received on a regular basis over the long run. The
theory suggests that one’s spending pattern depends on one’s permanent income and is
not affected by transitory income. Therefore, it is important to understand whether EITC
recipients see their benefits as transitory income or permanent income in as much as their
view may affect their consumption and savings patterns with this source of income, i.e.
the EITC.
12
CHAPTER II
Literature Review
Financial Management Practices of Low-Income Families
Just like research on the EITC, relatively few studies have been conducted
regarding the financial management practices of low-income households. Bowen, Lago,
and Furry (1997, p. 39) note that the lack of research on this topic may be caused by many
reasons, including reluctance of low-income consumers to share information about
personal finances, the difficulty in reaching the group with such methods as
questionnaires, and the lack of funding for studying low-income people. They also note,
however, that informal and qualitative approaches may be the most effective way to
research low-income people. Of ten studies that were reviewed, almost all of them
acknowledged the fact that not much research has been done on the financial management
practices of low-income families and that more needs to be done. Because the use of
EITC benefits will be affected by these practices, it is important to learn more about how
low-income people manage their EITC money.
An older study (Williams, Noll, and Dick, 1976) that is still cited today examined
the financial problems of families from two urban areas. The researchers looked at
families with at least one child under 18 and a homemaker between the ages of 18 and 64
living in the areas of East Chicago, Indiana and Toledo, Ohio. Questions were asked of
the participants relating to the financial problems they faced. A list of possible answers
was given to the respondents from which to choose. Questions regarding perception of
13
income adequacy were also asked. The researchers computed an income adequacy index
(based on the cost of food for a family while taking its size and sex/age composition into
consideration), determined the family’s life cycle stage, and assigned each family a
socioeconomic class based on status, occupation, and education.
The nine most chosen problems these families faced were:
(1) not enough food to last until there is money to buy more,
(2) behind on the rent or house payment,
(3) not able to buy special things my kids want,
(4) not enough money for dentist, doctor, or medicine,
(5) danger of having gas or electricity turned off,
(6) not able to meet large bills,
(7) cannot afford to keep household equipment and appliances in running order,
(8) not able to buy new shoes or clothes, and
(9) not able to save money.
It was also found that families that perceived their income to be adequate claimed
fewer financial problems. Those with a steady source of income also noted fewer
financial problems than those with an undependable income. The problem of not being
able to save decreased as educational level increased. The researchers also found that the
lower the socioeconomic class, the greater the amount of financial problems. Problems
were experienced at every stage of the family life cycle.
The research by Williams, Noll, and Dick (1976), however, did not allow
participants to list the problems they felt they had; they simply had to choose from a list
that was already made up by the researchers; therefore, some problems that were faced by
14
the families may have been omitted and no further explanation could be obtained from
the interviewees. These researchers only looked at urban families with a spouse in the
home. Results may vary for rural families and for those with both spouses working as
well as for single parent households.
A study by Mullis and Schnittgrund (1982) looked at budgeting practices over the
family life cycle. In the family lifecycle, households in the early stages try to build up
durable goods. During these stages, income is generally increasing, but expenditures still
exceed income. In the expanding stage, children are present, which generally adds great
economic strain to low income families. In the contracting stage, children are leaving or
have left the household, peak income has been achieved, and often money problems
decline somewhat. Households in a southern, urban area were chosen if they had “two or
more persons related by blood, marriage, or adoption, and the head of the household was
between 18 and 65 years of age” (p.114). Personal interviews were conducted to obtain
information. Families were categorized into five life cycle stages.
The researcher found that most families did not have a formal budget of any kind
no matter what their life cycle stage. Most used only informal, unwritten budgets. They
also found that satisfaction with income did not significantly differ between those who
had a budget and those who did not. Most families, even those who do not budget, feel
that budgets lead, or would lead, to greater satisfaction when planning and buying goods.
Therefore, further research is needed to help explain this contradictory evidence.
The interview questions by Mullis and Schnittgrund (1982) forced respondents to
choose their answers on a scale. Therefore, it was impossible to gain further
understanding into their responses. Also, the researchers talked with one of the adults in
15
the household. The research did not specify that the person interviewed was the one that
managed the family’s finances. Responses may have been different if the researchers had
only talked with those who were in charge of the finances, because the other adult may
not have a full understanding of how the finances are used.
Building on the findings of the Mullis and Schnittgrund research, further study on
urban families divided by race was done by Schnittgrund and Baker (1983). An area that
was considered to be a high-minority, high unemployment, and low-to-moderate income
region was studied. Two-thirds of the household heads were male. Most had a high
school diploma or less. The average income per three-person household was less than
$8,000. Interviewers asked participants to respond to questions about budgeting
behavior, credit use, saving, life insurance, employment, decision-making, housing, and
financial problems. Researchers also asked questions about satisfaction and expectations.
A five-point Lickert scale was used. The study consisted of 69 white, 70 black, and 60
Mexican-American families, with white families having the highest mean income of
$12,023. Black families were next with $10,750 followed by the Mexican-American
families with $8,893. Black families had, on average, the largest family size of the three
groups. Most families were traditional husband-wife households.
The researchers found that only 21% of black families, 17% of white families, and
10% of Mexican-American families kept a formal, written budget. The more common
method was a mental budget which was used by 56% of the Mexican-American, 45% of
the white, and 44% of the black families. More families kept track of their expenditures.
Eighty-eight percent of the white families, 81% of black families, and 79% of the
Mexican-American families followed this practice. Black respondents tended to be more
16
dissatisfied with their income, their expected future income, and items they could buy.
All groups showed dissatisfaction toward their ability to save. Credit use was common
among all the groups. They also found that there was a general level of satisfaction
among participants with “the material goods they possessed, the extent to which they
were achieving success and getting ahead, and the head of the family’s job” (p.267). All
respondents were fairly optimistic about the future. Participants also noted that they felt
in control of their finances.
It seems unusual that most of the families in this area were traditional husbandwife families because a large proportion of those living in poverty tend to be single,
female heads-of-households. Further research may also need to be conducted to see why
some of the results are seemingly contradictory. For example, having an overall
satisfaction with achieving success while at the same time being dissatisfied with income
and future income seems contradictory. Also, non-urban families need to also be studied
to see how they compare with the urban study.
Davis and Weber (1990) looked at patterns and obstacles to financial
management. They considered four practices to be a part of good financial management:
having a budget, having an income/expense statement, making a comparison between the
income/expense statement and the budget, and finally, preparing a personal balance sheet
(net worth statement). Mail questionnaires were sent to families living in nonmetropolitan Kansas. As a result of phone listings being used, very low-income
households were probably excluded because many of these families do not have phones.
The typical respondent was "a married person in his or her late 40's, who had two years of
post-secondary education, and whose total gross family income was between $20,000 and
17
$25,000" (Davis & Weber, 1990, p. 43). Older, married people were over-represented in
the population sample. Respondents were asked about the financial management
practices they did or did not use, the degree of implementation, or the reasons for not
using one of the four methods.
Researchers found that the most common practice was keeping written records of
spending followed by having a budget. Further questions revealed that many of the
respondents had a mental budget and most were very short term. A little over two-thirds
compared their actual spending to their budget, but not always on a monthly basis. They
found that 50% of the sample estimated net worth on a yearly basis. The biggest reason
for not using these financial management tools was having an irregularity in income or
spending. Because this research focused on those who were older, responses from
younger participants and those with less income may differ. Half of all participants in
this study calculated their net worth which may not be a practice utilized by younger
families, especially those with lower incomes.
In another study (Godwin and Koonce, 1992), cash flow management of lowincome newlyweds was compared by income level. Questionnaires were sent to couples
who were in their first year of marriage and had not been married before. Couples labeled
as “low-income” did not necessarily have an income below the poverty level. Most
spouses were in their twenties, though some were in their thirties. A wide variety of
occupations were represented. Some spouses worked two jobs.
A Lickert scale was used to determine the frequency of use of certain cash flow
management procedures. It was found that low-income couples used a budget more
frequently than those with higher incomes, thought planning for future success was
18
essential, and believed strongly that “people will get ahead in life if they have the skills
and do a good job” (p. 39).
The study did not separate respondents by race or ethnicity. Also, it was not asked
if participants had a mental or written budget. It could also be that some of the couples
responded to the questions to make themselves appear better off because some of these
findings do not support results from earlier studies where most people did not plan far
into the future and did not have a written budget.
Further research on the financial management practices of low-income people was
conducted by Marlowe, Godwin, and Maddux (1995) when they looked at the financial
knowledge and behavior of welfare recipients. Questionnaires were given to AFDC (Aid
to Families with Dependent Children) recipients who were participating in a money
management training course. Pre- and post-tests were developed and administered.
Questions were also read aloud because some of the participants did not have a high
reading level. Not all of the participants who took the pre-test were present to fill out the
post-test. Questions regarding financial knowledge, financial behavior, attitudes, and
perception of barriers to effective money management were asked. Most respondents
were between 25 and 34 and had ten or eleven years of school. Forty-one percent had one
or two children and 30% had three or four. All were receiving at least one kind of
welfare assistance.
The researchers found that respondents had a perception of high institutional
barriers, although this perception did not seem to influence the financial behaviors of the
participants. The welfare recipients had a low level of financial knowledge, even after
19
taking the course. They felt in control of their finances and indicated planning and saving
behaviors. They did feel frustrated, however, with their lack of funds.
The researchers cautioned that more research in this area needs to be done because
not all of the participants who took the pre-test participated in the post-test. Only 19
welfare recipients’ questionnaires, therefore, could be used. A larger sample or more indepth research needs to be conducted to gain further insight into the financial
management practices and attitudes of this group.
Hopelessness and an external locus of control have also been cited as important
factors when looking at the financial management practices of low-income households
(Ellwood, 1988; Danes, 1991; Rupured and Payne, 1993). Ellwood (1988) has suggested
that hopelessness is a characteristic of low-income people. This may in turn cause
barriers to sound financial management practices because of feelings of futility. Danes
(1991) found that among certain farm women, those who had an internal locus of control
had a greater satisfaction with the gap between their standard and level of living.
Rupured and Payne (1993) identified eight characteristics of limited resource households.
These were: crisis enmeshment, short-term time horizon, high stress levels, isolation,
limited access to positive role models, low self esteem, pervasive hopelessness, and an
external locus of control. These characteristics also relate to a family’s financial
management practices. Because some of the earlier studies indicated that even lowincome families feel in control of their finances, further research needs to be done to
determine the role of locus of control and to see which low-income families indeed do
have an external locus of control.
20
Resource Allocation
Lino (1996) used data from the 1990-1992 Consumer Expenditure Survey to look
at the spending patterns of poor households with children. Poor families were defined as
“those whose income and total expenditures fell below the poverty threshold” (p. 2).
Most were single parent households and the head of the family did not have a high school
diploma. Food stamps were a common source of welfare assistance. The chart (Lino,
1996, p.8) seen below summarizes some of his findings. It shows the percentage of poor
and nonpoor households with children reporting expenditures for each category.
Table 1.
Percentage of poor and nonpoor households with children by expenditures
incurred, 1990-92
Expenditures
Poor
Nonpoor
Housing
100
100
Food
100
100
At home*
99
100
Away from home*
50
91
Transportation*
80
99
Clothing*
85
96
Health Care*
32
84
Entertainment*
69
95
Personal care*
41
81
Education or reading*
39
82
Child care*
7
31
Home furnishings or
50
80
equipment*
Alcohol or tobacco*
51
69
Retirement or pensions*
56
97
1
Miscellaneous*
34
81
1
Includes life insurance, cash contributions, finance charges excluding mortgages and
vehicles, and occupational expenses.
* Differences in expenditures incurred between poor and nonpoor households were
statistically significant at p < .01 based on unweighted data.
21
According to the above chart, all households, independent of income, spend their
money on certain categories such as housing and food. Expenditures on other categories,
such as food away from home, health care, personal care, and retirement or pensions were
greatly differentiated based on income.
The researcher (1996) also calculated the percentage of total expenditures for each
category in the following table (p. 10).
Table 2.
Expenditures of poor and nonpoor households with children,* 1990-1992
Expenditures
Poor
Nonpoor
Total Expenditures
$9,986
$35,815
Per capita
$2,270
$9,183
Housing
Food
At home
Away from home
Transportation
Clothing
Health Care
Entertainment
Personal care
Education or reading
Child care
Home furnishings or
equipment
Alcohol or tobacco
Retirement or pensions
Miscellaneous1
Percentage of total expenditures
37.0
25.8
31.7
15.8
30.0
12.1
1.7
3.7
9.0
18.9
6.4
5.3
1.5
4.2
3.1
5.4
1.0
0.8
0.5
2.0
0.4
1.8
2.1
4.2
3.1
2.7
1.5
1.6
10.8
3.4
1
Includes life insurance, cash contributions, finance charges excluding mortgages and
vehicles, and occupational expenses.
* All differences in dollar amounts between poor and nonpoor households were
statistically significant at p < .01 based on unweighted data.
For some categories, the poor spend a larger percentage of their income than nonpoor households such as for housing and food at home. The poor also tend to spend more
22
on alcohol and tobacco. They are not able to spend as much on “non-need” items such as
entertainment, education and reading, and home furnishings and equipment. The nonpoor
spent four times more on retirement and pensions than poor households.
Similar results were found by another researcher who used 1993 Consumer
Expenditure Survey Information (Mergenhagen, 1996). Low-income spending patterns
tend to be the same across all households that fall in the poverty level. Also, the average
annual expenditures of these low-income households exceed annual income. Part of this
difference can be contributed to the public assistance (food stamps, subsidized housing,
etc.) that some low-income families receive.
The majority of spending in low-income households is for necessity goods. Lowincome households spend less on nearly everything as compared to non-poor households.
Rent for housing, used cars, second-hand clothing, and health care costs, however, are
some of the areas in which low-income consumers spend a great deal of their income.
Low-income families are more likely to rent their homes rather than buy them. In 1993,
the average US household spent 31% of its income on housing. For those families,
however, who made less than $5,000 a year, 34% was dedicated to housing. Families
who made between $5,000 and $14,999 spent 36% of their annual income on housing.
Low-income households also spend a larger-than-average proportion on housekeeping
supplies, utilities, fuels, and public services.
For the average US household, 14% of income goes to food either at or away from
home. For low-income households, this percentage jumps up to 17%. Low-income
households tend to not eat out as often. As a result, low-income households spend a
disproportionately large share on food at home. Over twelve percent of income for low23
income households is for food at home, whereas 8.7% of income for the average
household goes to food at home.
Low-income households generally buy used cars rather than new ones. Therefore,
they spend a greater-than-average share on used vehicles. Because families earning less
than $15,000 own fewer cars than the average population, they also spend less on
transportation costs such as gas, oil, and car maintenance. Low-income households spend
less than 16% on transportation, while the average US household devotes almost 18%.
The average US household spends 6% of total income on clothing, accessories,
and related services. Though they spend much less in actual dollar amounts, low-income
households spend a similar percentage of their income for their clothing needs. However,
many low-income people purchase their clothing from thrift, second-hand stores, and
discount stores.
Health care costs are another aspect that takes up a large proportion of lowincome people’s earnings. The average US household spends about 6% on health care
costs. Families that earn between $5,000 and $14,999 spend 8%. Health care costs are
often a problem for low-income households because they often do not have insurance or
are underinsured.
Low-income households spent less-than-average on entertainment expenses. This
includes admissions, pets, and toys. Low-income families spend about 4% of their
income for entertainment, while the average US household spends 6%. Also, while lowincome families give cash contributions (those to family and friends, donations to
religious, political, charitable, and other organizations) averaging about 2% of total
24
income, the average is 3% of income. Low-income households spend more than the
average percentage on tobacco and smoking supplies.
Another area where low-income households fall well below the average spending
patterns is financial security. The average US household devotes 10% of income to
savings, pension plans, and non-health insurance, while those in a low-income
households only spend less than 3% on these items. Many of the people in low-income
households do not look forward to old age and retirement because they have no idea what
the future holds for them financially.
25
CHAPTER III
Methods
Conceptual Approaches to Social Science Research
When dealing with the social sciences, there are two main perspectives that guide
research, the positivist and the interpretivist approaches. Though both positivists and
interpretivists attempt to gain some sort of understanding of their topic of interest, the
method employed by each type of researcher guides their research in different ways.
Because positivists deal more with measurable, statistical, and quantifiable data, most
people would refer to research done with this perspective as quantitative research. On the
other hand, interpretivists tend to be classified as qualitative researchers because of the
“emphasis on processes and meanings that are not rigorously examined, or measured (if
measured at all ) in terms of quantity, amount, intensity, or frequency” (Denzin &
Lincoln, 1994, p.4). These differing research methods vary in areas such as ontology,
epistemology, and methodology (Denzin and Lincoln, 1994).
For the positivist researcher, there is only one reality that is being measured. In
describing this perspective, Denzin and Lincoln (1994) stated that for positivists, there is
“a reality out there to be studied, captured, and understood…” (p.5). In order to
understand this behavior more completely, the researcher must isolate the research
participant from external stimuli, honing in on one particular activity without placing that
behavior in a larger context. Rather than adapting to new environments, research
participants are thought to be merely affected by them. The goal of this type of research
26
is to achieve prediction and verification of existing theories through systematic research
that follows step-by-step processes with well defined variables; there is little emphasis on
producing new theories. Generalizability, objectivity, and reliability are favored, while
findings specific to a certain group and involvement with research participants is
considered “unscientific.” The research design is set and expected findings are
hypothesized before any research begins (a priori), and this design and expected findings
change little throughout the research process. Control over variables, statistical samples,
and reproducible findings are all important components to this linear research process.
Lastly, positivist research tends to deal with “what” questions rather than focusing on why
particular behaviors occur.
Rather than viewing human behavior in one, simple reality, interpretivist research
attempts to see human behavior as a complex interaction in multiple social contexts.
Emphasis is on the participant’s view of those interactions and contexts. These
researchers do not try to separate their research participants from the environment in
which they are. Rather, for them it is impossible to isolate one behavior or action from
the many factors that may affect it. “Qualitative researchers stress the socially
constructed nature of reality, the intimate relationship between the researcher and what is
studied, and the situational constraints that shape inquiry” (Denzin & Lincoln, 1994, p.
4). The goal of this type of research is not to verify existing theory, but to gain
understanding of a particular research area, thereby increasing the possibility of producing
new theories.
Understanding the full context and gaining knowledge of as many factors that
affect a situation as possible are cornerstones of the interpretivist method. Because
27
findings may not be measurable, research may not be generalizable to other groups.
Interpretivists use existing theories as a guide for the research process; however, methods
and ideas can be changed and shaped as the research is carried out (a posteriori).
Redundancy of answers is used as a measurement for having “enough” data for a study.
The main focus of interpretivist research is understanding why a particular behavior
occurs by gaining knowledge of as many factors as possible that could affect it.
Qualitative Research Design and Strategy: Focus on Interviewing
Because qualitative research focuses on humans in a certain context or
unmeasurable matter, not all topics can be studied in the same way. Therefore, in order to
gather qualitative data, a researcher may use one or more approaches of data collection.
The goal of the research, availability of resources, and the type of research being done all
play a part in the data collection strategy. Participant observation, ethnographies, case
studies, interviews, and focus groups are all methods to obtain qualitative data. The
depth of information needed and the specific research goals will help determine what type
of method one uses. Each method may give the researcher different kinds or amounts of
information; therefore, it is important for the researcher to carefully select the method that
will give him or her the most appropriate information.
Naturalistic inquiry, valued by most qualitative researchers when practicable,
allows the researcher to study a particular event or behavior in a natural setting, as
opposed to an artificially constructed one. In discussing naturalistic inquiry, Patton
(1990) noted:
28
The research setting is a naturally occurring event, program, community,
relationship, or interaction that has no predetermined course established by
and for the researcher. Rather, the point of using qualitative methods is to
understand naturally occurring phenomena in their naturally occurring
states (p. 39).
Therefore, the researcher attempts to enter the participant’s social context in order to
collect data and understanding. The setting is not manipulated as in some quantitative
studies. The researcher's goal in using naturalist inquiry is to view the environment as the
participant does, undisturbed by the research being conducted to the extent possible.
The advantage of naturalistic inquiry is that the researcher is able to gain
understanding into how an event or phenomenon fits into a larger picture, or the social
context. It allows the researcher to see how many factors can contribute to, or play a part
in, some event. It also allows the researcher to better understand how the participants
understand their situation and how they live their lives. At the same time, however, the
biggest disadvantage to naturalistic inquiry is that the researcher has little control over the
research setting. Unlike in a “sterile” laboratory where many factors can be controlled,
the researcher is not able to “adjust” variables that may interfere with the research
process.
Another important concept often applied in qualitative research is grounded
theory. Strauss and Corbin (1990, p. 23) stated that “a grounded theory is one that is
inductively derived from the study of the phenomenon it represents.” Therefore, one does
not start with a theory and try to prove it through research, but rather, one studies a certain
area of interest and then develops theory from observations and analysis of data from the
29
situation. Because of this strategy, new theory is much more likely to come about
through qualitative research rather than simply proving or disproving existing theories.
Qualitative Interviewing
Interviews are useful when the researcher needs to gain a greater amount of depth
(rather than breadth) of information that he or she might not be able to otherwise obtain
from methods such as questionnaires (Mason, 1996). Interviews allow researchers to
probe for further explanation when asking research participants questions and are
therefore able to gain understanding and perspective that they might not otherwise be able
to get. Because several different interviewing styles exist, research goals need to be
assessed, and the appropriate interview method should be chosen accordingly. Patton
(1990) noted that there are four main types of approaches to interviewing: the informal
conversational interview, the general interview guide approach, the standardized openended interview, and the closed, fixed response interview. A brief description of each
approach follows (Patton, 1990).
The informal conversational interview is based on questions that come about from
the specific context within which the research is being conducted. Researchers do not
prepare a question set ahead of time, but merely allow questions to emerge from the
situation. With this approach, the interview can be tailored to fit each individual and each
situation. However, with this method, data analysis may be difficult because of the wide
range of data that may be collected if similar questions do not arise in different situations.
With the interview guide approach, a list of specific topics that the researcher
wishes to cover is predetermined, however, specific wording for the questions is not. The
30
benefit of this type of approach is that the interviews gain more structure without losing a
conversational style. A weakness, similar to that of the informal conversational
interview, is that the different wording of questions may bring about different responses
from participants, and again, data analysis may be difficult. Also, important topics that
would be brought about from the context may be overlooked because of the added
structure to the interviews.
The third approach, the standardized open-ended interview has a predetermined
wording and sequence of questions. Because respondents are answering the same
questions in the same order, comparability between respondents is increased. This
comparability aids in the organization and analysis of the data. On the other hand, the
more structured the interview, the greater the amount of flexibility that is lost. The
researcher no longer has as great an ability to adapt the interview questions to the
particular situation.
Finally, closed, fixed response interviewing questions contain answers from which
the participant must choose. These types of interviews are generally much shorter and
require fewer resources than the other three approaches to interviewing. Data analysis
becomes much easier as well. The greatest weakness of the method, however, is that
respondents cannot elaborate on answers or explain why they chose a certain response.
For this reason, the true meaning behind the participant’s answer is nearly impossible to
obtain with this method of interviewing.
Because they tend to be especially reluctant to return mailed questionnaires and
may feel uncomfortable revealing financial information, an informal, qualitative approach
was determined to be the most effective way to research low-income people (Bowen,
31
Lago, and Furry, 1997, p. 39). Because of this reason and the need for gaining in-depth
information from research participants, the researcher of this study chose to conduct
interviews to obtain information about the Earned Income Tax Credit. The informal
conversational interview was used for this study. However, because the interviewer was
dealing with a sensitive issue and was speaking to a group of people who were not
generally open about financial issues along with suggestions given by the practice
interviewee, standardized questions were developed to begin the conversation for each
domain of inquiry. After the initial question, the conversation flowed freely and naturally
and specific questions were allowed to arise from the conversation. The opening
questions simply allowed for careful wording to not offend the interview participants.
The questions during the interviews were open-ended and did not force the participants to
answer in a specific way and could clarify or expand on a certain topic if the interviewer
needed more information.
Procedure
Sample Protocols
A sample that was as homogeneous as possible was selected. Patton (1990) noted
that a homogeneous sample is helpful when trying to “describe some particular subgroup
in depth. A program that has many different kinds of participants may need in-depth
information about a particular subgroup” (p. 173). The EITC program is one in which
there is a wide variety of recipients, and therefore, a homogeneous sample makes it
possible to gather more information about a specific group (Caucasian female-headed
32
households with children). The protocols used for this sample were those where the
EITC recipients:

were age 20 to 40;

were living on their own (not with parents or a boyfriend);

had at least one biological or adopted child;

had their child (or children) living at home at least nine months of the year;

had income in one of the following ranges:


one child household: $6,500 to $11,930

two or more children household: $9,140 to $11,930;
lived in a rural town (all Missouri communities excluding St. Louis, Kansas City,
and Springfield);

had at least a ninth grade education;

were Caucasian; and

worked at least ten hours per week.
The age range was selected as women from the ages of 20 to 40 would likely be
able to live on their own and would be in the range of having children at home. Because
these are single female heads-of-households, those who do not live with parents or a
boyfriend would not be as likely to receive financial support from someone else and
would not have as great an influence from someone else on their spending patterns.
Those women with children living in the home are able to get a higher EITC payment
than those without children. Further, if children live in the home the majority of the year,
they are more likely to be an integral part of the mother’s life as opposed to a child that
only lives with the mother a month or two out of the year. The income ranges given
33
would allow a mother to receive the highest possible EITC payment, and therefore, one
might see the greatest effects of the program. The protocols of living in a rural town,
having at least a ninth grade education, and being Caucasian were further factors that
allowed the group to be more homogeneous with perhaps a more similar culture. In order
to receive the EITC, one must work; therefore, it was required that the women in the
sample worked at least ten hours per week.
The final sample contained seven women, who ranged in age from 25 to 42 (the
age protocol was expanded). All lived in Missouri towns with a population of 13,000 or
less. One woman had been recently married, but was a single mother for several years
while receiving the EITC. Another was currently out of work because of a situation with
a pending divorce; however, she had worked and received the EITC for several years as
well, and would soon be returning to work. Therefore, even though these two women did
not exactly fit the original protocols, they were still included in the sample because they
recently did fit the sample requirements. The sociodemographic information (Appendix
I) that was asked of each woman is summarized on the following page in
Table 1. Pseudonyms were assigned to each woman.
34
Table 3: Sample
Pseudoname:
Age
Number
of
Children
Patty
Kelly
Sharon
Lisa
Amy
Nancy
Barb
27
2
25
2
31
1
42
2
25
1
30
4
Age of
Children
Education
Level
Mother’s
Education
Level
Father’s
Education
Level
Hours
employed
each week
Type of
employment
3&5
9 months
&4
12
11
6 & 12
12
12
9
months
11
30
2
(expecting one
more)
2 & 12
12
not
known
8
8
12
did not
graduate
12
12
not
known
8
12
8
did not
graduate
not
known
40
36
40 or
more
42.5
30 to
40
30
30 (at last
job)
Manager
CNA
(certified
nurse’s
assistant)
not
known
assistant
manager
Beautician
& house
cleaner
hotel
house
keeper
day care
worker
hotel
house
keeper
$10,000
to
$11,000
13
$11,000 to
$12,000
$5,000
to
$6,000
1
$8,000
to
$9,000
12
$8,000
to
$9,000
4
Income
Range
Number
of Years
Receiving
the EITC
12
$9,000
to
$10,000
3
3
35
3
12
5, 9, 10,
& 11
12
Initial Contacts and Planning
In order to identify women for the sample, social service workers from across the
state of Missouri, welfare reform activists (from the St. Louis-based organization,
ROWEL), government agency workers, and University Outreach and Extension
employees who work with low income people on a regular basis were asked for
assistance. These contacts were chosen because they were known to a committee
member through past experience as well as the contacts’ ability to reach low-income
people. The researcher began calling contacts in the spring of 1998 in order to obtain
participants for this study. The contact would then receive a brief description of the study
along with a list of the protocols from the researcher, generally via fax or e-mail. In the
letter they received, they would also be asked if they either knew of anyone that would fit
into the sample or if they knew of another contact person who might be helpful. Nearly
all of the contacts agreed to try to think of some people they may know that would fit into
the study or to pass the information about the study on to someone else that might know
of a potential participant. One of the government agencies informed the researcher that
they were not allowed to release confidential information and would not be able to assist
with the study. Many of the contacts seemed very willing to help at first, however, they
often did not follow through on passing the research information on to others or returning
the researcher’s call when they said they would. The researcher believed this could be
due in part to the hectic schedules of many of the contacts. However, several people were
very cooperative and spoke to other contacts they knew on the researcher’s behalf.
After more than two months not a single person had been identifies as an
interviewee. The researcher then contacted some people from her church who were able
36
to post flyers in places such as WIC offices. The researcher also contacted community
members from the researcher’s home town who would have contact with low income
people, such as a Parents As Teachers member. One organization that sends newsletters
to its low income members (nearly 1,000 people) included an advertisement of the study
along with a note that telephone expenses would be reimbursed if a potential participant
needed to call long distance. Finally, one of the contacts came through and provided a list
of eight names of women who fit the researcher’s protocols who would be willing to
participate in the interview. Later another second contact sent the researcher one more
name.
Because of potentially poor reading skills, no correspondence was ever sent out to
the participants. Rather, the study was explained to the participant during the initial
phone call. Calls were also made to remind participants of the interviews. Permission to
do the interviews had been granted by the University of Missouri Human Subjects
Review Committee. Domains of inquiry as well as the opening questions were
submitted, reviewed, and approved. Permission was also granted by the committee to
offer a ten dollar incentive for participating in the interview. The researcher paid each
individual who agreed to be interviewed and was later reimbursed from a fund in the
Consumer and Family Economics Department used for small research studies.
Interview Preparation
While in the process of finding women to interview, a practice interview was
conducted with a woman who works daily with low-income women. A committee
member had worked with this practice interviewee many times before, and she was
37
known to have an extensive knowledge of the welfare system and the Earned Income Tax
Credit. She was therefore contacted and asked to help with this research project. This
interview allowed the researcher to correct any awkward or confusing wording of
questions, streamline the interview to an acceptable time limit, replace potentially overly
intrusive questions with more appropriate ones, and begin developing the domains of
inquiry for this study. She reviewed the types of questions the researcher would be
asking and gave suggestions for improvement. For instance, she helped the researcher
reword a question she felt implied a lack of ability to handle personal finances. She also
helped with the rewording of some questions that she felt were not clear and suggested
explaining any “big” words that someone might not understand. For example, she
suggested that the researcher not simply say “EITC” assuming the participant would
understand what those letters stood for. After the interview was conducted, it was
transcribed and coded. Enough information was obtained from this interview that the
codes that emerged were then used as the basis for the codes used in the actual interviews
included in this study.
Contacting and Establishing Interview Appointments
The researcher immediately began calling the women from the list that was sent
from one of the contacts to set up interview times, and again, ran into more difficulty.
For two weeks, it was impossible to contact any of the women on the list. One woman’s
phone was disconnected. Messages were left for three of them, and they never returned
the phone call. The other women did not have an answering machine, and could not be
contacted. Three out of the eight were finally reached. The woman from the other
38
contact also agreed to be interviewed. Two women who had seen a flyer posted called to
participate in the study, and the seventh woman came from a personal contact of the
researcher.
Neither the researcher nor the committee members anticipated how difficult
finding participants would be. As previously mentioned, it was even hard to contact the
people for whom the researcher already had a name and phone number. Potential
participants would not return phone calls (they were told they could either call collect or
that they would be reimbursed), and two potential interviewees had had their phones
disconnected, so they were also unable to be reached. In order to find more prospective
participants, each person who was interviewed was also asked if they knew of anyone else
who could be interviewed. They all tried to be helpful, but most did not know of anyone
else who fit the protocols. One woman said her best friend fit the protocols and would
probably be willing, but when the researcher tried to call her back, her phone had been
shut off. Another woman said she would post the flyer at her work, but no calls were
received. Therefore, after several frustrating months, seven interviews were completed.
Conducting the Interviews
The interviews were conducted over a two-month period during the summer of
1998. Each interviewee was told that the interview could be held at a location of her
choice. Interviewees were also informed that transportation could be provided to the
place they wanted to meet. The interviewees, however, were very willing to open their
homes to the researcher. All but one interview was conducted in the interviewees’
homes. The one interview that was not at the interviewee’s home took place at a fast
39
food restaurant frequented by the woman. She felt her home would be difficult to find
and too far of the way for the researcher. The interview was conducted outside in order to
gain as much privacy as possible. The researcher encountered some difficulty meeting
that particular interviewee because the woman mistakenly told the researcher the wrong
place to meet the first time, and therefore, the interview had to be rescheduled. Two of
the women were late getting to their homes at their appointed interview times; therefore,
the researcher had to wait outside, hoping the interviewees would eventually show up.
They did. Of the six women interviewed in their homes, one lived in a mobile home, one
lived in a community low-income housing project, and four lived in a house they either
rented or owned.
The women did not seem threatened in any way while being interviewed or while
having the researcher of the study in their homes. The researcher explained that the study
is part of a Master’s thesis project and that their names would never be mentioned in the
thesis and that it would be impossible for others to identify them in any way by their
comments. The researcher asked permission before using a tape recorder and explained
no one else would have access to the tapes or any notes. All seven women readily agreed
to be taped. Several women expressed sympathy with the researcher for having to travel
to several different places to conduct the interviews. The furthest the researcher traveled
to speak to an interviewee was about an hour and a half. Some of the homes were
difficult to find because some interviewees lived in areas where there were no well
marked roads.
Each interviewee seemed open and very willing to talk with the researcher. One
of the participants was shy about her answers and had to be “encouraged” more than the
40
others, but the rest openly shared stories and gave their opinions. One interviewee was
especially open and told the researcher elaborate stories about her life and the difficulties
she has faced in dealing with poverty. The interviews lasted between thirty and forty-five
minutes. This seemed to be an appropriate amount of time for the participants because
many of them were busy with activities for their children, work, etc. For some, the $10
incentive seemed extremely important. One woman’s four-year old son ran up to the
researcher upon entering the home and asked “Where’s the money?” On the other hand,
one participant tried to give the money back, saying that she did not have to be paid
because she was glad to help with the study, but she finally took the money. Because the
researcher was able to be in almost all of the participants’ homes, it was possible to
observe their living conditions and a small part of their home life. Several of the homes
were run down and needed some maintenance work. Some were clean; others were
messy. During four of the interviews, children were present and in the same room for at
least part of the interview, though it did not seem to keep the mothers from being open
with the researcher. The children generally watched television or played with toys while
the mother was interviewed.
Domains of Inquiry
Based on information found in the literature review, in the theoretical grounding,
and from the thesis committee, several domains of inquiry were formulated which
included:

reactions to the EITC,

financial planning, use and effects of EITC,
41

future expectations,

past welfare benefits received,

tax preparation,

advanced payment option,

overall thoughts of the EITC program,

and sociodemographic information (see Appendix I).
In the beginning, the committee suggested domains of inquiry that would have elicited
detailed information on general financial planning, and views toward debt and savings.
However, with further discussion, the researcher and committee felt that these additional
domains may not fit in the limited time for each interview, and some of these “larger”
issues would likely emerge from the more narrow questions based on the Earned Income
Tax Credit. The final list of domains allowed each participant to give her thoughts on a
wide range of topics concerning the Earned Income Tax Credit and also how it fit into the
larger financial picture of her life. The researcher realized that as the interview process
continued, the domains of inquiry could change to add relevant information that came
about and questions that did not pertain as well to the research goals could be removed.
Strauss and Corbin (1990) noted:
The initial questions or areas for observation are based on concepts derived from
literature or experience. Since these concepts, as you know, do not yet have
proven theoretical relevance to the evolving theory, they must be considered
provisional. Nevertheless, they provide a beginning focus, a place for the
researcher to start (p. 180).
42
In fact, as the interviews progressed, the domains of inquiry were changed.
During the interviews, a new issue regarding the improvement of the interviewee’s
financial future came about. The domains of inquiry dealing with questions about the
welfare system were expanded to gain a greater understanding of how the interviewee
viewed the welfare system and others in the system. Each research participant also had
time at the end to add any additional comments or ask any questions. During this time,
some participants further explained their thoughts on the EITC and one asked further
questions about the advanced payment option.
Data Analysis
After each interview, the tapes were transcribed verbatim. Each interview was
also coded as soon as each one was completed. The tentative set of codes formulated on
the basis of the practice interview were used, however, the list was revised and amended
as dictated by the data. To begin the coding process of the interviews, the researcher
went through phrase by phrase, placing main codes into the text where it was appropriate
(open coding). This first step in the coding process is where “[s]imilar events and
incidents are labeled and grouped to form categories” (Strauss & Corbin, 1990, p.74).
When each interview had the main codes in it, then all statements (from all seven
interviews) that had the same code were placed together. Sub-codes were then placed
within the major codes in order to further divide each statement into similar categories.
This next step where sub-categories are related to main categories is called axial coding
(Strauss & Corbin, 1990). Each sub-category then contained all the statements from all
seven interviewees that pertained to that particular topic.
43
After the coding process was finished and organized, the researcher then had to
integrate these codes into the findings of this study. Strauss and Corbin (1990) suggested
several steps when combining and organizing codes to form the basis of the research.
The first step is to discover the story line of the research, which is a narrative about the
main topic of the research. The next step is to then relate the subcategories to this main
topic. They also noted that dimensional levels may be used in bringing about
relationships between topics. Finally, one must use the data gathered to validate those
relationships the researcher has discovered and then continue the data gathering process
until redundancy is achieved.
These same steps were used when the researcher was integrating the data into a
storyline or findings theme. The main story of the research was usage of the Earned
Income Tax Credit by Caucasian, female-headed households. The sub-categories that
were then related to this topic were: knowledge of the EITC, tax preparation, reactions to
the program, reactions to receipt of the EITC, priorities for spending, planning, use of
money, and effects of the EITC. Welfare and work attitudes were also related subcategories because attitudes toward welfare and work may affect the usage of the EITC
money. Finally, reactions to more money, future expectations, and difficulties of poverty
were other sub-categories to the main topic. The order of the sub-categories listed in the
findings is the same as listed above. This order was chosen because it is a somewhat
“linear” pattern. The sub-categories ranged from how the recipient first heard about the
EITC to what their future expectations were. The data in these sub-categories proved to
support the main topic of “usage” because this main theme could be seen in some way
44
throughout each of the categories. All the categories deal in one way or another (either
directly or indirectly) with the woman’s usage of the Earned Income Tax Credit.
45
CHAPTER IV
Findings
General EITC Information
Knowledge of the EITC
Sources of where each of the seven interviewees learned about the EITC varied.
Two first heard about the program from family members, two learned about it through
friends who had received it, and three first learned about it from a tax preparer. None of
the women knew how or why the program had been started. Two women guessed that it
was possibly to give low income people a tax break; another thought it may have been
started to keep people off of welfare; and a fourth woman guessed that it might have been
started to help keep low income people “on their feet.” The other three did not venture a
guess.
All seven women were currently receiving the EITC as a lump sum rather than
taking advantage of the advanced payment option where they would receive a part of their
EITC benefit each month in their paycheck. When asked if they knew about the
advanced payment option, four women had heard of it and three had not. Even though
one woman had heard of it, she did not really understand how it worked. Another woman
had actually received her EITC payment in advanced payments in the past. She had
received the EITC for three years, however, she only received the EITC in advanced
payments for a few months of that time. She felt the advanced payment was helping her
situation because she could more easily pay her bills each month. However, she lost the
46
job where she used the advanced payment option. She has not yet asked her current
employer for the option. She feels that her current situation is very unstable, and she is
unsure if she will be at her current position much longer. Therefore, she is not currently
receiving the advanced payment option.
The other three women who had heard of the option all felt that receiving the EITC as a
lump sum was better for them. The researcher briefly explained how the option worked
to Barb because she did not completely understand it, but she still felt the lump sum was
better for her anyway. Patty was afraid she would squander the money if she got just a
little bit more in each check. She said, “I figured if I got the advanced money now, I
would spend it foolishly and if I waited and got it in one lump sum that I wouldn’t.” She
needed to buy a new car, and she said with the lump sum she could just buy the car and
not have to worry about making payments.
Sharon and Nancy shared a similar opinion. Nancy had not even heard of the
advanced payment option, but after it was briefly explained, she still felt that the lump
sum would be better for her. They both said that at the end of the year, they tended to
need more money to help them get caught up on things that they had gotten behind on
throughout the year. With a lump sum, they were able to get caught up. Sharon noted:
Because if you get a few dollars here and a few dollars there on your check, it’s
not gonna make a difference. When you get it all in one lump sum at the end of
the year, then I can use it. Do you know how hard it is to put back $5 every week
to make up $500 or $600 at the end of the year?
They felt that something would come up every month that would eat away the advanced
payment option money they would be getting, and then they would not have any money to
47
pay the bills at the end of the year. Nancy mentioned that because of her utility bills,
which are greater in the winter, and bills from Christmas, she prefers to have more money
at the end of the year rather than just a little bit more each month.
Neither Kelly nor Amy had heard of the option. Kelly asked what it was, and she
felt that the option would help her situation. The researcher explained that it was not
possible to give her any kind of tax advice, but told her she could talk with her tax
preparer or call the IRS to get more information about this option.
Reactions to the First Receipt of the EITC
When asked about their reaction to hearing about the EITC, three women
mentioned that they were very surprised because they did not expect to get much money
back on their tax return. One of the interviewees first thought that it must “be too good to
be true” (Patty). Another woman also began wondering how she could use the money to
her “greatest advantage.” Sharon thought that it was a good idea because she felt that
poor people pay a larger percentage of their income in taxes, so this was a fair way to help
those people. When the other women heard about the program, they thought that it
sounded great and would help them out very much. Barb said it was “neat” because she
got back more money than she thought she was going to get.
Each recipient was also asked what she thought whenever she actually received
her first EITC benefit. Patty said, “When I got that first check, I looked at it, and I about
fainted because it was more money than I had ever gotten at one time....” Sharon
immediately began thinking of the bills that she needed to pay. Amy thought of the
48
things she could buy her son. The others mentioned that they were excited and wondered
what they would do with the money.
Reactions to the Program
All of the women felt the EITC program was an extremely good one. They noted
that it helped many families pay their bills and get through the “tight squeezes” when
things are especially difficult. Some of the women mentioned that they were afraid the
program may be discontinued. Patty said:
I think if they did that [stop the program], they’re going to hurt a lot of people. I
mean, there’s a lot of families that are out there struggling to make it and they
need that extra money to basically survive. There’s a lot of them out there and
they get the money [EITC] and they live on that money for several months and
that’s just living expenses.
Lisa was emphatic when she said that she thought the program was “an excellent
one.” She said she felt “blessed that they [the government] were beginning to realize that
there were people around that needed it.” She was especially afraid that one day the
program may be discontinued. She did not know what she would do if she was not any
better off than she currently was and they stopped the program. When asked what would
happen if she would not be able to get the EITC anymore, she replied, “That would be
like trying to breathe without oxygen.” She said she would have to cut back in some
areas to make up for the lost money, but she had no idea where she would be able to do
that as a result of things being so tight already.
49
When asked if there was anything that they would change if they could about the
program, most felt that they would not change anything. Kelly and Lisa both said
laughingly that the only way the government could make it any better would be to give
people more money. Sharon and Nancy felt that the guidelines should be expanded to
include more people. Sharon noted that just because someone makes above the
guidelines does not mean that they are making ends meet, so she felt that the guidelines
should be extended. Overall, these seven women seemed to think the program was an
effective one that helped them get through the “rough times.”
Money Management
Tax Preparation
All of the women have been to tax preparers to get their taxes done, and most do
not pay extra to get their refund back quicker. Patty and Lisa both went to a tax preparer
after their divorce. They felt this would be easier because they might not understand how
the tax laws work for single parents. Patty did her own taxes in the past, however, and
will probably do them again in the future. Kelly and Nancy said they went to a tax
preparer because their parents had done so, therefore they assumed it would be okay.
They also felt it was easier than having to do it themselves. Sharon was afraid she would
not do them correctly because she felt the tax laws were complicated. She said,
Because I didn’t want to screw them [her taxes] up. They’ve got so many
laws and they get new stuff out every year and if you’re not just right up
there and know exactly what you’re doing then you’re gonna be penalized
for it and it’s easier for me to pay her [the tax preparer] $30 and she can
50
have it done in two days and sent in and it’s a lot easier than me having to
have a headache, to have to do it myself.
Amy did not know how to do them herself. Barb generally fills the forms out herself, but
then takes them to a tax preparer to check over them to make sure they are correct and to
have the tax preparing company file her taxes electronically. None of the women
mentioned any problems with their tax preparer, and most thought they were very helpful.
Priorities for Spending
When asked how they determined how they would use their EITC money, all the
interviewees said they paid their bills first. When asked which bills they paid first, most
said that they paid whichever bills were the most past due. Lisa mentioned that her house
and car payment take precedent over nearly everything else because she does not want to
lose either of them. Nancy said she paid whichever bills were due at the beginning of the
month and then she bought food. Most of the women said they paid their bills and then
used whatever was left over, which generally was not much, to meet less urgent needs.
The women also said that they follow these general “guidelines” with all types of income,
not just their EITC money. Sharon commented, “A lot of people don’t do that [pay their
bills], but that is ridiculous to me. My bills are paid before anything else happens.” Lisa
also noted that for larger bills, she would often try to make a larger payment on the debt,
and then contact the person to whom she owes the money and try to set up some kind of a
payment plan where she could make smaller payments. That way, they would know she
was still trying to pay the debt back, even though it might take smaller payments and
51
more time. Making those larger payments to reduce the bulk of the debt was also a top
priority for her if she had enough money to do it after paying her house and car payment.
Planning
The women were also asked about their planning with the EITC. With the first
EITC payment, Kelly did not have a plan for how she would use her first EITC payment,
but all the others did. When the other women received their money, they knew what they
wanted to use it for. However, only Patty had a written budget. All the others had more
of a “mental” budget. The women in the study also rely upon a mental budget for their
income in general (not just for EITC money). Patty said that the first time she got the
EITC, she and her husband (she was still married at that time) sat down and wrote out all
the things they wanted to use the money for that year and in future years. She said that
now that she is divorced, her plans have changed, but that she still tries to write out how
she hopes to use the money. The others used the EITC money according to their mental
plans.
Use of EITC Money
The women used their EITC money for a variety of purposes. Throughout the
years, Patty has used the EITC for several things, and it has come in especially useful
since her divorce. When her children were born and she was still married, she mostly
used the money for her children. She said she used the money for diapers, clothes, and
basic necessities. Since her divorce, she has needed new clothes (she lost some weight)
and used some of the money for that purpose. Also after her divorce, she was left with
52
many bills that needed to be paid. She noted that without the EITC she would not have
been able to get out of debt.
It’s helped me get out of debt. Basically because this year I did pay off
quite a few of my bills that were left to pay off and that’s helped a lot
because I don’t think if I wouldn’t have got that money, I don’t know how
I would have paid them off. I would still be struggling (Patty).
She is currently using much of her money for home improvements and to buy things such
as paint for the house.
She also uses her money for what she called “spending money.”
This was some money that she set aside in order to do some things with her children, such
as go to the movies.
Kelly mostly uses her money to pay for bills she has gotten behind on. She uses
the money “to get caught up.” She also uses the money for her car payment. She
mentioned that when her son was born, she thought he was going to be a girl, so she was
able to buy some more clothes for him because she only had items for a girl at the time.
She laughed, saying that without the EITC money her son would have had to wear
dresses. She also bought other things to prepare herself for her baby’s birth.
Sharon generally has one purpose for her EITC money. She uses the money to
pay bills that are due and debts she owes. She said that throughout the year she must
borrow money from her parents in order to make it through. Therefore, she uses her
money to pay them back. She then uses whatever is left over to pay bills, especially any
that may be overdue. She feels it is very important to pay her bills and stay caught up. If
there is any left over money, she uses it to buy something for her son.
53
Lisa has used her money in several different ways throughout the years. When
she first received her EITC benefit, she asked several people what they thought she
should do with the money. She was very concerned with not squandering it. Her banker
suggested that she put the money in an account and then, if need be, “borrow” against the
account and pay herself back. She felt this was a good idea, and therefore, put all of it
into savings. She said that the first year she had gotten the EITC was the first year she
was on her own (after her divorce) and she was very afraid of not having enough money
to make it. She wanted to have the money in the bank for whenever she might need it.
Therefore, if an emergency arose, she would use the money for that need. She did,
however, try to use the money for only major items. For instance, her refrigerator broke
down, so she was able to buy a new one with the money she had. Then her car broke
down and she needed $500 for a down payment on a car in order to be approved for a
loan.
I hated to get rid of it [the money in the bank], but I had it sitting there. I
felt like that was pretty good on a person of my income to be able to go out
and buy a car by myself and have the down payment by myself. I didn’t
have to ask nobody. I just wrote out the check (Lisa).
She did not have enough money to “pay” her account back as she had originally planned,
but at the same time, she was able to use the EITC money to meet some of her needs.
In the following years Lisa used her money for home improvements. Because of
these needed improvements, she was not able to put the money into savings as she had
hoped. The man she started dating had helped her with some of the bills and so she used
54
her money to pay him back. Whatever money was left over, she used for other bills that
were due and for additional things for her house, such as new carpet.
Amy has only received the EITC once. Last year, she had a baby and moved to a
new home. Therefore, her attention was focused on these two areas. She said the
majority of her money went toward buying things that she needed for the house such as
curtains. The rest of the money was spent on items for her son such as a jumpy chair.
She noted that without the EITC money she received, she would not have been able to
buy the things for her house that she needed but did not have.
Nancy seemed to have a single purpose for her EITC money: bills. She noted that
she basically used all of her money on paying bills that were due and making up for
things that were behind. She said that often in November and December, she gets behind
because she is trying to prepare for Christmas. She mentioned that she can either pay her
bills or buy things for her children for Christmas. Because she wants to get her children
some items for the holidays, she tends to get behind on her bills in these months.
Therefore, the beginning of the year is a time to catch up and her EITC money helps her
do this. Barb also uses her money to get caught up on bills. She said that she also has
used her money to buy a car when she needed one. She also noted:
A lot of people think I’m crazy, but I give all my kids a hundred dollars
out of it, every year. Mainly because right around Christmas time I’m flat
broke and I don’t have very much to give them. They’re allowed to do
whatever they want to with it.
55
Economic Context
Effects of the EITC
During the interview, effects of the EITC were also discussed. When asked
whether the recipient thought that the EITC had affected their children’s lives, all felt
that, at least indirectly, it had positively affected their children’s lives. Most felt that their
children would not have been able to have some of the things they do without the EITC
money. For instance, Sharon noted that she was able to put some money toward a go cart
for her son with some left over EITC money. Patty commented that her daughter knows
that with this money, she gets to pick out one thing for herself, which she would
otherwise not be able to do. Lisa said that with her money she is able to buy what the
children need, but also it helps them because they can live in a decent house because of
the money. Nancy stated that it has indirectly helped her children because the money has
kept them from losing the lights, water, and phone.
All of the women feel it has affected their lives in a positive way as well. Many
feel that they would have had to have done without a lot of things. Barb mentioned that it
has helped her have the everyday things that many people take for granted. She also said
that “if the money wasn’t there, part of the time I would be sunk. I wouldn’t have [a way
to make it].” Sharon said it has kept her from having to borrow as much money from her
parents. Kelly noted that “it’s made money problems more easier.” Lisa also said that it
has helped her tremendously. She commented, “I really think that I wouldn’t be up on my
feet right now [without the EITC].”
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Welfare
All seven of the women are either currently receiving, or have received in the past,
some kind of welfare. It was interesting to hear what each woman considered to be
“welfare.” For example, some of the women considered food stamps or AFDC (Aid to
Families with Dependent Children) to be welfare, while others did not. Some also
considered Medicaid and SSI (Supplemental Security Income) as a welfare payment,
while some did not. Most of the women are currently receiving food stamps. Two are
also currently receiving SSI. Many of the women also have access to Medicaid for their
children. One woman also mentioned that she was on section eight housing, a program in
which the government pays part of her rent.
The issue of child support payments came up as well. Six of the women had been
married before, and at least two of them brought up concerns about not receiving their
child support from their ex-husbands. After Lisa’s divorce, she had to get AFDC
payments because her husband was not paying his child support, and at the time, she had
no other family members to help her. She is still not receiving any child support
payments. She said that as soon as her husband starts working somewhere long enough
for his wages to be garnished he moves on to another job. Out of three years, he has only
paid one or two months of child support.
Many of the women mentioned that they do not want to receive welfare of any
kind, but feel there is no other option. “I’m working now and I receive food stamps. I
don’t like it [public assistance], but sometimes you have to do what you have to do.”
When asked about whether or not they had received welfare, several of the women
seemed to talk a little more quietly with a moment of hesitation before answering. Some
57
offered “justifications” of why they had to receive public assistance, as if to avoid
judgment. When Sharon was asked if she had ever received welfare payments, she
immediately began talking by saying, “Very little. The only reason I did that is my child
is disabled. He was in a leg cast for a year and a half. He had to go to the Shriner’s
hospital in St. Louis every eight weeks....” It was not until later in the conversation that
she actually told me what kinds of welfare she had received.
While food stamps have helped some of the participants, some think that the
process of getting food stamps is frustrating. Lisa said:
Food stamps is the one that aggravates me the most because you have to
sign up so often. You’re supposed to turn in an income change within ten
days, but yet if your income goes down and you turn it in they don’t make
sure that they upgrade you within ten days and right now I’m only getting
like $50 a month [in food stamps] and during the length of time that I was
without a job, they didn’t upgrade it at all. And I just finally got my first
paycheck and I’m sitting here thinking, ‘Why do I have to turn this in
because I’ve done all this time without?’
Sharon thought it was not worth the trouble filling out all the paperwork for food stamps.
She said it would take up so much of her time filling out all the paperwork that she
decided not to bother. It was not worth it to her. While some of the respondents do not
know where else to get help, the welfare system is very frustrating to them.
It was interesting, however, because all seven women made some kind of a
comment about abuse of the welfare system. All of the them said that they believed there
was a lot of abuse of the system. Some felt very adamant about it. “I think too many
58
people abuse the system and do nothing” (Patty). “There’s a lot of people out there [that
abused the welfare system]. There are a lot. I know a lady that’s got welfare for
seventeen years and don’t want to work” (Kelly) “I have a problem with people that are
drawing welfare that should be working...I could give you a list [of people abusing the
system]” (Sharon). Many of the women thought that the system needed to be changed
somehow to reduce the number of people abusing the system. Therefore, even some of
the people who are receiving the benefits of the welfare system think that the system itself
needs to be changed.
When asked if they received the EITC while receiving some sort of public
assistance, most of the women had. They knew that they could receive food stamps, for
example, and still be eligible for the EITC as long as they were working. The researcher
mentioned to Nancy that some people do not realize that they can receive some public
assistance and still be able to receive the EITC. Nancy noted that she does not have to
worry about figuring out what would count against her or not because her tax preparer
just takes care of that for her.
When asked if they saw the EITC as being different than welfare benefits, all of
the women except one said “yes.” However, several women held different views about
the EITC. Some women noted that they had never really even thought about it and
struggled to come up with an answer. When they talked with the researcher, it was the
first time that they thought about how they viewed this money. After thinking about it for
a while, Kelly thought that the EITC was probably not really different than other welfare
benefits because it came from the government. She was the only one that held that
opinion.
59
Patty described welfare as being a way to “get on your feet and get going,” but
that it was not enough to “completely get you on the right track to getting a job.” She
thought the EITC was something that allowed people to leave the areas they live in order
to find work, as she did. She also thought the EITC was something she could use to
better herself and invest in her skills, which would also help her find a better job. Sharon,
Nancy, and Barb all felt the EITC was different than welfare benefits because they had to
work in order to get it. Barb said, “You work and you’ve got every right to it. You earn
it.” Sharon even saw it as more of a tax break. She said, “I pay in taxes. I look at it like
it’s just a tax break for lower income families.” While they felt it was different because
they worked for it, Amy thought it was different simply because it does not come from
“the welfare office.”
Lisa, on the other hand, did not see the EITC as merely being a tax break. She
said:
I consider it their [the government’s] way of evening the odds against people that
don’t make enough money to survive...So I think it’s their way of saying, ‘Hey,
look at these people. She’s got two kids...’ and they’re sitting there saying, ‘She
needs help.’ I agree [laugh]. No contest. You wanna give me some money, I’ll
take it. I don’t feel badly about it.
While some of the women in the study may have been somewhat embarrassed that they
had received welfare benefits, because most of the women did not see the EITC as being
a welfare benefit, there was not the same kind of shame or stigma some might feel for
receiving welfare benefits.
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Work Attitudes
When asked if they thought the EITC has affected their feelings about work, most
of the women said “no.” Kelly was the only one who said that she thought the EITC
made a difference in her attitude about working. She mentioned that she did not like to
work, but that the EITC “makes me want to work because the more you work, the more
you get back.” Most mentioned that they liked to work and that they would work whether
or not they received the EITC. For example, Patty explained that she used to not like to
work because she had to work instead of being able to stay home with her children. She
was married at the time and her husband did not want to work, so she had to. However,
her attitude toward work changed after her divorce when she found a job she loved. Her
job allowed her to meet many different kinds of people, which she enjoyed.
Sharon also noted that she loved to work. She was not sure exactly what she liked
about it, but she liked being busy. She said, “I’ve always worked. Even if I had money,
I’d still have to work. I’d be crazy [if she did not work]. I just have to work.” She noted
that she had been at work the day she went into labor with her son, and went back to work
a week after he was born.
Lisa is currently working two part-time jobs in order to make ends meet. She
admits that she thinks she will never make the kind of money to disqualify her from
receiving the EITC. She, however, added “it [the EITC] wouldn’t keep me from trying to
get up into a higher income level just because I thought, ‘Well, why work that hard if I
can get this money back?’” She also commented that in the past she tried to find jobs to
help her “upgrade” her situation where she could get on-the-job-training and begin to earn
a higher income. At her last job, she had a situation just like this; however, her boss was
61
replaced, and she lost her job. She knows she will be working until her retirement,
whether or not she receives the EITC.
Nancy has found it extremely difficult to find a job that would pay her a decent
wage on which she could support her family. She commented that in the area where she
lives, it is nearly impossible to find such a job without some experience and that most
jobs for which she would be qualified are dead end jobs. Barb, who lives in the same
area as Nancy, has never had a hard time finding a job. However, she noted that she has
had much experience in many different areas and also commented, as Nancy had, that it is
very important to have experience in order to find a job. She also added that she does not
“like sitting at home” and that work “gets me out, out of the house. Out of the same
routine.” She also said she loved working with and being around people. Barb, however,
has realized that after making a certain amount of income, her EITC payment will be
reduced. Therefore, she tries to work at least to get the maximum so she will know how
much her benefit will be.
Difficulties of Poverty
Along with all of their hopes and plans, however, the women interviewed must
deal with some difficulties that people not living in poverty do not have to face. These
difficulties are often the reason they are not able to pull themselves out of their situations.
Because these issues affect how the interviewees are using their EITC money, and what
this money is helping them do, it is important to consider some of difficulties faced.
Finding a job with adequate wages is a big issue with the women in the study.
None of them have attended college, so they do not have an advanced education to their
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advantage. Most of them have had to find jobs with little experience and little education.
Many of them just make do with what they can find. Barb mentioned that she has worked
everywhere from fast food to nursing homes to cleaning motels. Because most of the
interviewees have not gained much experience from the work they have had, they are not
able to advance to higher paying positions. As already mentioned, Nancy noted that she
could not find a decent paying job without leaving the area, an option that she feels is not
available to her. Jill, who drives several miles to her job, agrees that in her area, she had
to leave in order to find a better job. When Sharon lost her last job because her father had
a heart attack and she had to take care of him, she and her son mowed yards to make
some money. She said they started wondering where their next meal was coming from
because they just were not making enough money. At first she was doing all right, but
soon her bills began to pile up. Of course, she could only mow yards when the weather
was nice, which was another obstacle to face.
Lisa explained that she had tried working on the weekends or the evenings in
order to make some more money. However, she does not have anyone to watch her
children. She would not make enough money to pay someone, and she does not have any
family members close who would be able, and her children are not yet old enough to stay
home alone. Nancy commented that child care was her main obstacle to not leaving the
area to find a job as well. She tried putting her child in a child care center in her town for
low-income people. She discovered, however, that the facility is only for welfare
recipients. Therefore, as a result of Nancy working, she was not able to send her daughter
to the center. She is not able to afford any of the other day care centers in the area.
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Barb talked about missing some of the everyday things that people take for
granted. For example, her microwave quit working and she has not been able to afford a
new one. Lisa noted that without Medicaid, her children would never be able to go to the
doctor. “And that’s a terrible thing to say, because then that means that there would be a
lot of times that they would suffer illnesses that they need to be treated for. I won’t go to
the doctor myself because I can’t afford to go.” Christmas was a time of year that was
mentioned by several of the women. It seems the interview participants struggle between
creating a “normal” life for their children and dealing with their terribly low incomes.
“It’s either buy Christmas or pay your bills. And it’s really hard for the kids to really
understand that one” (Nancy). Lisa talked about trying to buy clothes for her children so
they would be more like the others. “I mean, you are judged by how you dress and how
you look.”
Transportation is another big issue for many of the women studied. It is difficult
for them to afford better vehicles, yet they often have trouble with the ones they currently
have. Many of the women wanted to use their EITC to buy better, newer cars. One
woman discussed the fact that it was also difficult for her because her husband had done
all the work on her car whenever she had been married. Now that she is divorced,
because she does not know how to take care of it, she must pay someone to do it.
Lisa’s car broke down and she decided that she would get a newer model car than
the one she had so it would be more dependable. Her bank would not loan her the money
because of her income, so she went to a dealership. The dealership loaned her the money,
but they were charging her about 20% interest on the loan. She did not know where else
to go, though, to get the loan. She felt her options were limited.
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Never getting ahead is another issue that was brought up. Sharon said:
I mean, when you live from paycheck to paycheck, and then what you
can’t make up for during the year, you have to make up for at the end of
the year and it takes every bit of that [EITC], you’re starting right back
over again. In the hole. It would make things better, like if you started the
year out ahead instead of behind. You know especially, everybody’s
behind after Christmas, and then you get this money coming in and you try
to play catch up and then you’re behind again, so you never get caught up.
It’s just the same every year, every year.
Some of the women have been living with the same financial situation for years. They
have never yet been able to break out of their financial “chains.”
Fear is another issue for many of the interviewees. They do not know how long
their jobs will last, what their next job will be, what would happen if an emergency came
up, what they would do if their car broke down, etc. Lisa had her electricity shut off once
for not paying her bill. She had started a new job and they waited four weeks to pay her.
In the meantime, she had some bills piling up. She said that she probably would have had
enough money in her checking account to pay the bill, but she was afraid to use what little
money she had because she was scared some other emergency would come up. She was
hoping she would get paid in time to pay the bill. Unfortunately, she did not, and then
she had to use even more money to get the electricity turned back on.
A final difficulty faced by several of the respondents was finding adequate
housing at a price they could afford. Because the researcher was able to meet six out of
the seven women in their homes, it was possible to see their living conditions during the
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interviews. Most of the women interviewed lived in the poorest sections of their towns.
One lived in the housing projects. Another one had just moved out of the projects in her
area. Some lived out in the country, separated from others by poor conditions as well as
distance. Some of the women spoke of difficulties with their houses such as leaking
roofs, mold, and old carpet that aggravated allergies. These conditions do not promote
good health for the participants or their children, and of course, they often do not have the
money to pay for medical bills. Even though the participants live in small towns, crime
tended to be higher in these poorer areas as well. Their children may also not have had as
much access to other children, good child care, libraries, etc.
Despite their many setbacks and the difficulties they must face, many of the
women interviewed see their situation improving. Amy mentioned that she just got a
raise at work that will bring in a little bit more money. Going back to work has helped
Sharon, and has encouraged her that her future will get better. Nancy noted that the main
thing that would help her situation would be to get a better paying job. Even though she
is not sure how she would be able to do that, she is hopeful that her future will improve.
Being able to pay her bills by being able to go back to work would be the most important
thing for Barb to improve her current situation. She is confident that once her children
have started school again, she will be able to go back to work and earn enough to get the
EITC for this year.
Lisa is not as confident that her situation will improve. She is currently trying to
decide how to “upgrade” her situation. She is considering going to school to get training
of some sort. She will have to find some training classes near her area, which may be
difficult at a time when she would be able to attend. She noted that one of the scariest
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parts about going back to school is that it does not guarantee that she would be able to
find a better paying job, and then she would have wasted all of that time, energy, and
money. She also wants to try to improve her situation quickly.
I’m wanting, that if I am gonna upgrade my situation, to do it before my kids get
to the age to where they’re ready to move out. I’m wanting to make it better while
I’ve got the kids at home...So what I’m looking at here, a lot of people say, ‘Stay
where you’re at.’ You know, my house payments are minimal compared to rent
payments even and you know a lot of people say, ‘Just stay where you’re at and
don’t try to do any better.’ And I’m thinking, if I’m gonna do better, I want to do
it while the kids can actually reap the benefits from it.
Future
Reactions to Future Income
With the possibility of a state EITC, there would be an opportunity for some of
the women in the study to get an even larger benefit in the future. Therefore, they were
asked what they would do if they would be able to get a larger benefit. The researcher
heard several comments such as “I’d probably faint” (Patty) and “I’d probably fall over”
(Barb). Sharon remarked that it would make her life a lot easier. Some were also
suspicious as to how they could get more money. Nancy’s first comment to the question
was “How?”
They all came up with plans, though, for what they could do with the money.
Patty said she would get a better model of a car and do some more home improvements.
Her kitchen needs new linoleum and her living room needs new carpet. She said she
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would also buy some new clothes that her children need. She would also pay off any bills
she had and would be debt free. Kelly commented that she would start saving “because
usually I get it [the EITC] and it’s gone.” She said she would save for any future needs,
for clothes for her children, and for college so her sons could go. Lisa immediately
expressed a desire to use the money for the down payment on a nicer house so her
children would have a better place to live. She wanted to improve her situation while her
children are still at home, and a larger EITC would help her reach that goal. She has
currently not yet been able to save enough to obtain that goal. Sharon thought the extra
money would help her get ahead. She feels that she starts out every year the same:
behind. She uses her EITC money to pay bills and any debts she owes, so nothing is left
over for her to get ahead. With the extra money, she said that she might be able to finally
start a year out ahead rather than behind.
Amy would use the money to trade in her car and buy a different one because it is
difficult to get her son in and out of the car she currently owns. She would also buy some
“extra” things for her son such as a swing set and other toys for the yard so he could play
outside. Nancy also thought of her children when asked the same question. She said she
would just buy some things for her children that they do not normally get. “If there was
something in the store that they would want, I would buy it extra. Just normal things that
I would normally not buy” (Nancy). Barb noted that she is not able to drive her car right
now because it is not licensed, so she would either fix and license that car or get a new
one that ran better. She would also pay off any bills she had.
Future Expectations
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All of the women expect to continue receiving the EITC in the future, and many
of them are already making plans as to how they will use the future money. Patty has
already made some plans for the future. She wants to get a new car next year. She is
currently driving her parents’ car and she wants one of her own that she can pay off
completely. She also needs to get a new roof put on her house because hers has leaks in
it. Kelly also plans on getting a new car that will be more dependable. She eventually
hopes that she will have enough left over that she can start saving some money for her
children. She expressed a desire for them to go to college one day.
Sharon said she does not really have any new plans because she will probably
have to use the money as she always has. At the end of the year, she will need to pay off
any bills due and if she has borrowed money from her parents (which she does every
year), she will pay them back. If there is anything left over, she buys something for her
son. This is what she has always done, and what she will probably continue doing.
Nancy’s plans are also the same as before. She will use her money to get caught up on
bills, buy food, and buy anything they may need at the time.
Lisa has a hope of being able to improve her situation for herself and her children
by moving into a better house. She said:
There was one time that I had the big dream that if I could save back like
two years, maybe three years, in a row that I would be able to take a step
up and get me a better house. And especially if I could sell this house,
which with all the work I’ve done on it, I’d like to think that I could get
more out of the house than what I paid for it, and be able to go ahead and
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upgrade our living situation with it [the EITC]. I don’t know if I’ll ever be
able to do that or not, but it’s a thought that had been in my head.
Amy’s plans for next year are the same plans she had when I asked her what she
would do if she could get a larger EITC benefit: get a different car. She hopes to be able
to get a four door car so she could more easily get her son in and out of the car. Barb
wants to eventually use her EITC to go back to school to get training for a better job. She
is not sure what she wants to pursue; however, the tax field interests her. Even her
children are already making plans for their money for next year. (Barb is the woman that
gives each of her children one hundred dollars each year.) One of her sons wants to put
his money into savings to keep it, while another is saving for a Nintendo.
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CHAPTER V
Discussion
Though it has been estimated that the majority of people who qualify for the EITC
know about the program (Scholz, 1996), there are still people who do not know about or
completely understand the advanced payment option. However, it also seems that some
people know about the option but think the lump sum would help their situation more. It
may be that having a larger sum of money at once may help those who live in poverty
more than getting just a little at a time.
It seemed that for most of the women in this study, having more money at once
gave them the sense of utilizing their money better and of having more control over what
bills they would pay or what needs they would take care of first. The lump sum may give
some women a greater sense of control over their situation. It may be that with the larger
sum of money at once, it is easier for the women to plan out how they will utilize the
money. With this larger sum, it also seems that the women can see their situation
improving more than if they have just a little more in their paychecks each month. The
lump sum may help the improvements in their lives seem more “tangible” because they
are able to actually list off the things they have been able to do with the money. Any
improvement may, in turn, provide the hope the women need to make their situation even
better. This money may help women feel that they themselves are more in control of their
lives when they are able to make decisions about how to spend the money and then are
able to see positive results from those decisions. As their sense of control increases, their
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confidence in themselves may then also rise. However, it may also be that even nonEITC receipts would prefer to receive a larger tax refund than having less taken out of
their paycheck each month. The phenomenon of many EITC recipients not using the
advanced payment option, may in fact not be attributed to their financial standing, but to
more of a general desire to receive a large amount of money at one time.
It also proves interesting that all of the women interviewed have gone to tax
preparers to get their taxes done, and some simply because they are afraid of doing them
incorrectly. Though it may not cost that much to get them done (one woman said it cost
about $30), for the study participants, every dollar matters. Therefore, it seems that
places such as Volunteer Income Tax Assistance (VITA) sites where volunteers help
people with their taxes free of charge may either be unavailable or unknown to them.
Education to teach women how to do their own taxes may also help save them some
money. Whether it is simply a lack of exposure to programs that could teach women to
do their own taxes or a lack of confidence in their own abilities, the women interviewed
must look to others to help them with their taxes. On the other hand, many of they would
not even know about the EITC without the help of their tax preparers. Though the
women have to pay to have their taxes done, they found out about the program by doing
so. In some cases, they end up getting much more back by paying a small fee up front.
The fact that most of the interviewees did not pay extra to receive their refund more
quickly may also prove to be a sign of financial responsibility and good resource
management.
It seems that the EITC program is viewed as being effective and necessary by its
recipients. There were no major complaints about the program, and generally only good
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things were said. There is some fear, however, of the program being taken away. Fear
seemed to underlie many of the comments made by the women in the study. Their
dependence on others and the EITC program has brought about some fear because they
do not know how dependable the things around them are. At the same time, however, the
participants also seem to be relieved, if only for a short time, to have the EITC. Most of
the women held the view that the program was doing a great amount of good and were
very positive when discussing it. It seems the EITC may give some single mothers a
greater internal sense of control because they are able to decide how to spend their money
to meet their needs. This in turn may help them view their situation with greater control.
Once again, the ability to make their own decisions may help the respondents’ confidence
in their own abilities to manage their lives. This confidence may actually help them
manage their lives more effectively or get better employment. Their children in turn, will
also learn to have greater confidence, be less dependent on others, make wise decisions
and see the consequences of those decisions.
It seemed that even though some of the women did not specifically say they were
surprised to get the EITC for the first time, there was an underlying theme of surprise just
in the way they described the first time they got it. They were not expecting it, and it
came as a much needed relief. Paying bills that were due seemed to be the biggest
priority for all of the women in the study. Some were concerned about not losing their
homes, cars, and utilities. It seemed they wanted to pay their bills and keep up, but
because of their situation, sometimes they were just not able. The EITC has helped many
of them stay (or get) caught up.
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As the literature reviewed suggested, most of the women did not have a written
plan of any kind. In fact six out of seven did not. This is not to say that they did not have
a plan, but simply that their plans were not written out. They may not see the benefits
from writing their plans down or they may feel that they do not have the time. It may also
be that they do not feel they have enough “left over” after they take care of their needs
that it is worth writing anything down. They may also feel that too many other needs or
emergencies would change their written plan. All said they did have a mental plan they
lay out in their mind. More research needs to be done to see if people are more
financially successful or better able to meet their needs or goals if they have a written
plan.
It also seems that the respondents are using their EITC to basically stay “afloat.”
They would have to do without necessities and would be forced to find other sources of
help without the EITC. They have used their money in ways that they see fit in their own
families. In this way, the EITC is “individualized.” The women have generally used
their money where they have perceived the greatest need. However, even though many
needs are being met with the EITC money, the interviewees do not seem to be getting
“ahead” either. The money seems to be bringing them to a level where they can stay
more caught up with their bills than without the money, but that is all. Even with the
EITC, an emergency or accident may set the participants in the study behind; they just
may not be as behind as when they did not have the EITC money. It is not enough to use
the EITC alone to progress financially and improve their lives. Better paying jobs seem
to be important, and in these cases, lacking. Without other means of getting beyond just
paying the bills and the bare minimum, the women interviewed will stay “bound” in their
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chains of poverty, and it will be unlikely for them to drastically change their situation.
The balance they hold between staying caught up and falling behind is very delicate. The
EITC helps keep this balance, however, it cannot tip the scales in favor of a secure
financial future.
As briefly mentioned before, the responses given by the women who were
interviewed seem to speak to a bigger issue--the issue of independence. Because of this
money, the women studied do not always have to look to parents, the welfare system,
friends, etc., for financial help. However, as their dependence on these other sources
decreases and their dependence on the EITC increases, the interviewees again place
themselves in a very vulnerable situation because they have become dependent on a
stream of money over which they have little control. If the EITC program were ever
reduced or discontinued, many of the women in the research study would find themselves
in even more difficult situations. For the time being, though, they are able to meet many
of their needs on their own. They are not as trapped in their poverty as they would be
without the extra money. As things come up, they have some cushion on which to fall
back. This may not keep them from moving from crisis to crisis, however it may enable
them to deal with a crisis when it arises. These women seem to believe that the EITC has
helped them deal with their financial situations a little better and that they would in fact
be much worse off without it.
Their dependence on others affects their financial lives. As the story was told in
the Findings section, one of the women needed a new car and had to get a loan from the
car dealership because she felt she could not get a loan anywhere else. She had to depend
on the dealership for the money she needed, and in exchange, she had to pay 20% on the
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loan. The dependence many of them have, through perhaps no fault of their own, causes
their choices and options to be greatly limited. In a world where others may have many
different options from which to choose, many poor women see their choices as being
greatly limited simply because they do not have adequate resources. Because many of the
fathers do not pay their child support obligations, once again, these mothers must look to
other sources to get the income they need in order to raise their children. However,
because many of the mothers do not have a well developed support system and they do
not have adequate jobs, they are forced to turn to government-provided sources of
additional income. The fathers’ failure to pay child support again creates a dependence
on others in the women interviewed.
Part of the dependence the respondents in the study face, though, is not financial.
They must dependence on others in a psychological way as well. For instance, some of
the women mentioned that their ex-husbands were the ones to always make the major
decisions for the family. Therefore, when they separated, the women in the study did not
have good decision making skills. They were scared to decide many things alone because
they never had the opportunity in the past. Therefore, the participants in the study have to
depend on others—salesmen, family members, friends, etc.—to help them make
decisions. Great harm, both financial and psychological, may come to them if they trust
in the wrong people to make their decisions for them.
During the interviews, it appeared easier for the women to talk about their
experience with the EITC than with whatever they considered welfare. Some of the
women were fairly knowledgeable about the rules of the welfare system and the EITC
because they knew they could receive some welfare benefits and still get the EITC.
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Others did not seem concerned with learning the rules or regulations of the welfare and
EITC systems; they just “let their tax preparers take care of it.” It was interesting that not
all the women considered welfare to consist of the same benefits. Because all of them
have received some kind of welfare benefits, though, they could all compare the welfare
system to the EITC program. They each had a slightly different perspective as to what the
purpose of the EITC actually was. It was also important to note that even the women in
this study who are a part of the welfare system see it as being abused, and hold some of
the negative stereotypes about people receiving welfare. Several felt the rules of the
welfare system should exclude more from the welfare rolls while the EITC guidelines
should include more workers. It seems that as long as one has to work in order to receive
some governmental assistance, the money is “deserved” and the receipt is acceptable.
They feel one must be trying to help oneself in order to get aid from the government, and
as long as the person is working and doing the best she can, then the help is appropriate
and not looked down upon by others. These women do not want something for nothing,
and expect others to do the same. They are used to working hard in all aspects of their
lives in order to make ends meet, and they do not want someone who does not work hard
to receive aid and be helped if they themselves are not.
Because one must work in order to receive the EITC, attitudes about work are
extremely important. For most of the interviewees, work is enjoyable and they feel they
need to work whether or not they would be receiving the EITC. Most do not seem to be
working only enough to receive the maximum benefit, as some literature reviewed
suggested. Most say they would gladly make more money, even if it would reduce their
EITC benefit, if they were able to find a job that paid the appropriate wages. Finding a
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job with livable wages, however, is a great task because none of research participants
have any training past a high school degree, and the small towns where they live often do
not offer the kinds of jobs on which they could support a family. Even though many
spoke of the poor wages they received, their work gave them a great sense of
independence and accomplishment. The EITC can work hand-in-hand with this sense of
accomplishment that work brings. As the women see their work is being rewarded
through the EITC, they may have a greater incentive to work even more, thereby earning
more income and hopefully increasing their chances of improving their situations.
These women do not fit the stereotype of a “lazy,” poverty-ridden single mother
trying to get as much out of the system as possible. They tend to work as hard as they can
in order to make ends meet, and feel welfare is only there if absolutely needed. Several of
the women commented that welfare is only a last resort. These women seemed to want to
be able to support themselves, yet felt that with their skills, they were not able. They do
not know what to do to improve their job situation. They must struggle with many issues
when trying to improve their job situations: how to get better job experience; what to do
if their transportation fails when trying to get to work; whether to return to school or how
to afford it; what to do with their children when at work or at school; what more
schooling will accomplish if jobs in the area are scarce, etc. Just like Lisa, who was
considering returning for more schooling, many of them are still trying to decide how to
get a job where livable wages can be earned.
Some literature (Rupered and Payne, 1993) and some people that work with low
income families claim that low income people do not plan into the future. This may be
because people, such as the women interviewed, may feel that their future is too bleak to
78
plan for. It may be that they are too busy trying to make ends meet to make plans for the
future. They may not know what the future holds and are afraid that their plans will
constantly be changed. Even some of the women interviewed seemed afraid that the
EITC program may be discontinued at some point in the future. However, in spite of all
of these possibilities, most of the women interviewed are expecting to get the EITC again
in the future, and are already planning uses for their future EITC. It may be that as the
interviewees start to integrate the EITC into their lives, their plans for the future may
grow because they see their control over their financial situation improving. Researchers
such as Rupered and Payne (1993) who originally found that low income people have an
external locus of control, may find that their research does not hold as true with those
who are receiving the EITC. They may make plans because there is a chance that those
goals could be reached. This “regular” source of income may make their lives more
stable, and in turn, facilitate planning.
Even the interviewees’ current plans for the future entail taking care of
“necessity” items such as fixing their homes, providing for their children, and obtaining
more reliable transportation. Even if they were given an even larger EITC, most said they
would still use it on necessities, transportation needs, and many of them thought of extra
things that they would like to buy their children that they normally do without. Many of
the women interviewed are bothered that they are not able to get the same things for their
children that many other children not living in poverty have. Therefore, though they may
be planning more into the future, their plans still pertain to avoiding emergencies and
taking care of basic needs rather than plans on personal development or goals that reach
beyond simply meeting basic needs.
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These women living in poverty are faced with so many obstacles and difficulties.
It was overwhelming to the researcher to realize all the difficulties with which they deal
on a daily basis. Though they are hopeful, one truly must wonder if the women in this
study will ever be able to really pull themselves out of the cycle of poverty. When they
live from paycheck to paycheck and any minor crisis can set them back, even a small
raise at work will not help if they are only making minimal wages. “Improvement” to
them may mean getting a raise or finding a job that pays a little higher wage. It does not
necessarily mean moving above the poverty level. Their hopefulness was surprising even
to the researcher. It is questionable whether their hopefulness is justified. Some of them
have not been able to pull themselves out of poverty for years, and without some kind of
further education or training they may never be able to get jobs that pay substantially
more.
Some like Lisa, on the other hand, may be hopeful, but are also scared at the same
time. Trying to decide what to actually do to improve their situation is an obstacle that
must be faced. The participants admit that the EITC has helped them, but it is obvious
that it has still not moved them beyond living from one paycheck to the next. They are
still barely making it, being set back easily. Something more still needs to be done,
though it is difficult to even decide how to deal with all the issues such as child care,
affordable and decent housing, transportation, training for better jobs, and finding
adequate employment in job-deficient communities. On top of all of these issues, being a
single mother and having to depend on others (if someone is available on which to
depend) adds even more difficulty to finding an appropriate solution to meet these many
needs.
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CHAPTER VI
Summary
General Discussion
As more women, and especially single mothers, return to the work force to leave
the welfare rolls, the condition of women in poverty will grow to be an even more
important issue than it currently is. Because more women than ever are divorced, how
they live and how they will raise their children on a single income will need to be
addressed. The Earned Income Tax Credit will continue playing a large part in the
financial lives of many low-income women, but the difficulties faced by so many women
in poverty are difficult to ignore and even more difficult to separate from the financial
aspect of their lives. Fear and the lack of stability in many single mothers’ lives drive
many of their actions and determine how their money will be spent. Not having stable
jobs that will pay decent wages, living in areas where jobs with livable wages are difficult
to find, and not having the education or training to find better work, all encourage many
of the interviewees to depend upon the Earned Income Tax Credit.
More than just their jobs are unsure: their daily lives are often unstable. They
frequently wonder if they will have enough money to eat, to pay the bills (a top priority),
and to deal with any emergencies that may arise. They do not know if they will be able to
go to the doctor if they have a sick child. Without help from sources such as Medicaid,
many women and their children would suffer with common illnesses that could easily be
treated. Without help from sources such as the Shriner’s hospitals, more serious
82
handicaps could not be helped (as was done for Sharon’s son). Being too young to
understand, many of their children do not understand why the electricity or the phone are
shut off, why their clothes look different than the other children’s, and why Christmas is
such a struggle. Yet these children may not be safe from a life of poverty in their adult
lives. The cycle may continue with them. It is difficult to know what to do to stop this
cycle. While trying to create a stable, safe, “normal,” environment for their children, poor
women often struggle within themselves as to how to improve their living conditions and
how to train themselves and their children to break out of the cycle which they are in.
More schooling does not guarantee a better job in some areas.
Even working at their current jobs and receiving the maximum EITC possible, the
research participants are not drastically improving their situations. They are paying some
of their bills, improving their homes, and purchasing better cars; yet they are still not able
to move out of poverty. Even with the EITC, one emergency could set them back and
ruin much progress that was made. Though the interviewees seem thankful for the EITC
and do not know what they would do without it, they have not yet moved out of the cycle
of living from one paycheck to another.
It is almost as if the women interviewed only have time to go to work and pay
their bills. Though this is a greatly simplified view of their lives, it does not seem that
they have the time to make improvements to themselves as many others try to do. One
woman who was interviewed did not know how much money she made a year. She
talked about getting her paycheck and then just paying the bills. She got her money and
then just did what needed to be done, knowing there would be nothing left over. Nothing
is left over to go to school, to go on vacation, and to do many of the other “luxuries” that
83
other families enjoy. In the stories they told about themselves and their children, they
were often dealing with one emergency after another. Their future EITC money would go
to needs that had not yet been met. These things include “emergencies,” such as a leaking
roof, that were on hold because there just was not a way to deal with them. They fall
behind in bills and in meeting needs all year waiting to get their EITC money, knowing
and hoping that they can get caught up. Lisa even said that many businesses will
sometimes wait for her to pay her bills if she explains her situation to them because they
know she will be getting the EITC.
It is surprising that in the midst of these conditions, the women interviewed
remain hopeful. They hold on to the thought that things could possibly get a little better
for them, that their financial situation could improve somehow. Even though some of the
women discussed the difficulty of finding better jobs in their areas, getting better work
was a way that was given by several women to improve their situation. They did not,
however, know how they were going to find a better job. One woman was able to use her
EITC money to help her leave the area and find a better job, but when the researcher tried
to call her about another possible interview, her phone had been disconnected. For some
of the women in the study, their situation may slightly improve and then take a turn for
the worse before they are able to further improve it.
More money will not solve many of their difficulties. Yet at the same time, the
EITC has provided some relief for many of the participants. Though they may not be able
to make financial progress and break the cycle of moving from one emergency to another,
they are staying afloat. They are getting bills paid that they otherwise would not be able
to pay. They are buying things for their children that they need, and they are doing
84
needed improvements to their homes. Their transportation is being improved, which in
turn can help them find better jobs and be able to keep those jobs. The hope the
interviewees have may in fact be in part because of the EITC. Even though some of them
are afraid the program will be stopped for whatever reason, they are already planning for
the future. Even though their future plans may not extend far into the future, their plans
extend to at least next year’s EITC. Because some researchers such as Rupered and
Payne (1993) suggest that those living in poverty may only have a very short term
planning perspective, the EITC may be a force in lengthening their planning horizon.
Also contrary to some current stereotypes, the research respondents suggested that
they do not like being on welfare, even though they have all received some sort of welfare
benefits before. They view welfare as a system that is often abused and needs reform,
and at the same time is a method of last resort for them. They all noted that they did not
know what else to do to meet their needs, and did not have any other support systems to
turn to in order to get those needs met. This lack of a support system has also caused
difficulties for some of the women interviewed. Though some have family members who
can watch their children or help them with certain needs, others do not. Others cannot
leave their children with a parent or friend, and are therefore limited in their work hours
and other activities they are able to do. They also may not have someone to turn to to
help them fix their car or do small home improvements. If they do have friends or family
to turn to, many of their friends are in a similar situation, and therefore, must help their
friends deal with issues of poverty on top of their own.
Some literature that was reviewed suggested that the EITC would discourage
work, though this does not seem to be the case with the women interviewed. Several of
85
the women interviewed commented that they like to work and would do so whether or not
they received the EITC. One even said that the EITC encouraged her to work because she
knew she would be getting money back. Therefore, the EITC could be a major force in
aiding people trying to get off the welfare rolls. It may be an encouragement to work for
some, and it may give others the added courage needed to work because they will know
that they have this money available to them if they meet the requirements.
As the women interviewed expect to receive the EITC again in the future and
have already begun planning for future years, they are becoming more and more
dependent on the EITC. It may be, then, that as Friedman’s theory describes, the
interviewees may not merely see this money as transitory income, but rather permanent
income, which they will count as a regular source of income. Lisa said:
The only thing I fear is that for whatever reason, that they’ll decide not to
give it in the future. Now that I’ve gotten used to getting it, it would really
put me in a predicament because so far the tax preparer has told me that
this seems to be an ongoing thing. Hopefully they’re not considering
getting rid of it for any reason, but that would be the one thing I would
have to worry about. If I cannot upgrade my situation and they decide to
take that away, then the people that get it, the ones that actually use it for
what they need it for, would suffer greatly.
Patty commented, “If you know you’re gonna get it each year, I think that’s gonna help
with more people making goals for themselves. Like, with this money this year, we’re
gonna do this. And a lot of them reach that goal, and I think that’s a good self esteem
thing for a lot of people.” They are both commenting that people are beginning to count
86
on receiving the EITC and including it in their plans. They may be looking to it as a
regular source of income. These data may suggest that as women look to the EITC more
and more, they may begin to consider it to be a part of their permanent income as
Friedman’s theory implies and may begin to plan even more carefully how they will use
this money.
As people count on and receive their EITC and are able to meet some of their
needs with it, the encouragement they receive may help them make more plans for the
future and in turn see more goals that being met. Even if some of those desires that are
hoped for are not reached because of obstacles that are encountered, at least they are
beginning to think further into the future and to make more plans. Perhaps the planning
process can increase their hope for the future and that can in turn help them improve their
situation to some extent. Also, if they consider the EITC as part of their permanent
income, they may be more careful how they spend it and make more plans than they
ordinarily would. For instance, if they knew they were only getting this money one time
and would never get it again (it would only be transitory income), they may have more of
a tendency to “blow” it on something frivolous or less useful. It seems they would have
less of a tendency to “waste” their money if they saw it as being a part of their regular
income.
Along with this dependence, however, come some grave consequences. The more
dependent people become, and the more people consider the EITC to be a part of their
“permanent income,” the worse off they will be if the program is ever stopped or greatly
reduced. The recipients will be forced to turn to other sources to have their needs met.
Many of them do not know how they would pay their bills or what they would do to
87
survive without it. Some other source of help would almost positively need to be put in
place. Many said they would “do without a lot of things” if the EITC was taken away.
Some admitted that they had no idea what they would do it the program were stopped.
Some said they would have to cut back in some areas, though they did not know how they
would because they hardly had enough to make it as it is. The implications of stopping
the program would be potentially disastrous, and would put many struggling families in
an even more difficult situation.
Implications
Other implications besides the strain that would be placed on poor families if the
EITC would be taken away can be seen through this study. Though planners of programs
for low income families, and especially single mothers, may have some difficulties in
reaching their audience, it is important that low-income people are not left behind. If not
only for themselves, their children need to be reached so they will not continue the cycle
of poverty in which they have lived.
This research has implications for policy makers as they attempt to change laws to
benefit the poor. First of all, lawmakers and advocates for single mothers should focus
on how to improve the child support enforcement laws. Some of these mothers would
not be in as bad a situation as they currently are if the father of the children would pay
child support. These women do not have the power to force their ex-husbands to pay, but
they desperately need the money they were promised. When they do not receive the child
support money, their child must do without some of their needs being met, and the
88
mothers must look to other sources for help. Policies that are more strict about garnishing
men’s wages or the ex-husband’s EITC (if received) should also be considered.
This type of research could also be beneficial to those trying to help prevent
women from entering poverty. More thought needs to be given to why women are
entrapped in poverty and what could be done to stop it before it occurs and what would
have to happen to keep people from being trapped in a cycle of poverty.
Some of the views of welfare and working may also affect new policies that
would go into effect. For instance, since the interviewees seemed willing to work and felt
more comfortable receiving help which they did not consider “welfare,” other programs
that require work or community involvement may be effective. As Missouri law makers
consider a state level EITC and any future welfare laws, EITC recipients’ views of the
program as compared to welfare should play a role in the development of these laws.
Programs that do not simply give “something for nothing” may in fact have greater, far
reaching positive effects and should be considered by law makers. It would be especially
helpful to consider different people’s views of what “welfare” is in developing these
policies. Also, since most of the women interviewed did not feel the advanced payment
option would be beneficial to them, it may be that a new approach should be developed to
explain the option to people. Perhaps the funds that would be used to promote this option
could be used on helping EITC lump sum recipients develop more effective planning
skills.
It may also be useful for volunteer organizations, churches, or social service
agencies to offer education classes on issues such as basic car maintenance and home
repairs. Many women do not know how to do these things, and if they did, they would be
89
able to save money by not having to pay someone to do it. Also, education about
decision making skills may help. One woman who was interviewed commented that her
husband had been the one to make all the major decisions, and when she was divorced,
she suddenly had to start making all the decisions herself. Those who have not finished
high school could be encouraged to get their General Education Degree (GED), which
may in turn help them get better jobs. Those who have finished high school could be
encouraged to apply for scholarships or grants for community colleges or other training
programs. These same organizations or agencies may also be able to “pool” mothers
together who do not have any other support systems. They could then take turns
watching each other’s children, for example, when needed or help each other cope with
the difficulties of poverty.
People who work with low income, single mothers could learn from studies such
as the one conducted. They should not try to rush their projects, and they must remain
flexible. Situations may come up where the mother cannot keep an appointment. It is
important to remember that this audience is difficult to reach. They often do not have
phones; they may not want to call long distance, and their phones may be disconnected.
They may also be intimidated by others of higher socioeconomic status, or may not feel
comfortable talking about their financial situation, and their physical isolation may also
make them harder to reach. It would be important to build long lasting relationships in
order to gain their trust.
Transportation may also be an issue, so it may be easier to meet one on one with
this audience. If they are comfortable, they may be willing to meet in their home. The
person working with them must be willing to travel out of his or her way and to go into
90
poorer neighborhoods in order to get to the people they are trying to help. Because child
care is often an issue, their children will likely be in the home while the social service
workers or other helpers are trying to reach the mother. Because of a lack of education,
some mothers may not read well, and the language for any materials used should be
simple to understand. Also, these mothers are busy trying to find time to be with their
children, and it may be difficult to find a time to meet with them. Those trying to help
these mothers may need to take materials for the children to do while the person is
working with the mother.
The obstacles to reaching this group of people seem overwhelming; yet they are
perhaps in greatest need of it. These women have often been isolated because of the time
and effort it takes to reach them. The more social service workers and others trying to
help this audience can learn about the needs and difficulties faced by low-income people,
the easier it will be to reach them. Though it may be difficult, a group of people in need
of so much can reap some of the greatest benefits from someone who is willing to
understand the difficulties of poverty.
Future Research
This study has by no means answered all the questions related to the EITC or
discovered all the difficulties faced by those living in poverty. This study was merely a
starting place for further research. How its recipients perceive the EITC within their
income could also be studied in greater depth to perceive to what extent people are
integrating the program into their financial plans. What goals, if any, single mothers
living in poverty have set for themselves and how they plan to meet those goals could
91
also give social service workers greater understanding into the needs and frustrations
faced by this group. Two parent families who receive the EITC as well as AfricanAmerican EITC recipients should also be studied to see if their usage differs from those
of Caucasian women. The indirect effects of the EITC over time should also be
researched to see if the program is in fact increasing hope in the future and confidence in
decision making in the lives of its recipients. In summary, the integration of the EITC
into the financial lives of its recipients and the resulting needs that are being met may still
not be enough to move single mothers out of the cycle of poverty. The part the EITC
plays in the process of keeping mothers and their children from moving from one crisis to
another will need to be closely studied over time.
Conclusion
These data suggest that one problem in trying to understand low income families
is that there are many assumptions associated with poor families that have rarely been
challenged by the way research is conducted. This small qualitative study that consisted
of just seven people has already begun to show that many of these commonly held
assumptions may not hold true. Researchers such as Rupered and Payne (1993) have
suggested that poor families have a great sense of hopelessness. However, all of the
women in this study held on to the hope that their situations would improve, and many
were able to discuss ways in which they thought their lives would change for the better.
Poor families have often been labeled as “irresponsible” and “lazy,” yet most of the
interviewees said they would work whether or not they received the EITC and noted that
they enjoyed work. The participants in the study tried their best to pay their bills and
92
keep their homes and cars. They did plan (though most did not have written plans) how
they would spend their money and even planned into the future. Though some may claim
that those who live in poverty do not have financial management skills, the women
interviewed were able to make ends meet from just a few thousand dollars per year. They
were able to creatively make their money last for the things they needed. Finally, some in
society have held the assumption that poor families want “something for nothing.”
Nevertheless, the women who participated in this study all felt welfare was only a last
resort. They were willing to work hard for what they needed, and did not expect help
from others.
In summary, this study showed that most of the women interviewed:

preferred to receive their EITC payment in a lump sum rather than through advanced
payments,

used their EITC payment for bills, housing and transportation needs, and other
necessities,

paid bills that were most overdue or most important to them before anything else,

expected to receive the EITC in the future and already had plans for the money,

viewed the definition of “welfare” differently and felt the EITC was not the same as
welfare, and

faced many difficulties because of their financial situation.
93
APPENDIX I
Sociodemographic Information
Please fill in the following information. You are not required to give this information if
you do not want to. You do not need to put your name on this paper.

Your age _______

Number of children you have _______

Age of your children _______

Town where you live _______________

Your education level _______

What was your parents’ education level?

Mother _______

Father _______

Step-parents _______

How many hours are you employed each week? _______

What type of employment do you have _______
Please check a category range that includes your annual income:

$5,000 - $6,000

$6,000 - $7,000
 $7,000 - $8,000
 $8,000 - $9,000
 $9,000 - $10,000
 $10,000 - $11,000
 $11,000 - $12,000

$12,000 - $13,000

How many years have you gotten the Earned Income Tax Credit? _______

Approximately, how much was your last Earned Income Tax Credit Payment?
94
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