One approach: (1) Type should be created with black fill and a background of None. I added a small left indent and set First Baseline Offset to Leading (2) Create a path with the Pen tool in the shape of the inverted type and space around it on the top, bottom, left and right. Fill with black. (3) Send it to the back behind the type. (4) Select the type and fill with Paper color.
ADDENDUM: Group the type frame and the shape frame together if you need to move the type effect around.