In their working years, caregivers face trade-offs between family caregiving and paid work. The incentives embedded in social safety net programs complicate these trade-offs for lower-income families because these programs increasingly provide benefits only to those who work, effectively raising the cost of providing care to family members.
One of the largest work-contingent programs, the earned-income tax credit (EITC), may impact family care because of its size, effects on labor supply, and benefits structure. The EITC provides $60 billion in benefits to approximately 31 million households each year. Unmarried taxpayers receive about three-quarters of all EITC benefits, and the vast majority of beneficiaries are unmarried mothers of dependent children.
Many people eligible for substantial EITC benefits are likely to provide care to parents since many caregivers for older adults also have children at home. Research estimates that seven million caregivers for adults aged 50 or older are working parents with children under 18 and that 24 percent of adult children assisting their parents aged 65 and older have children under 18 in their household. Research on caregiving shows that daughters, especially unmarried daughters, play a central role in caring for their parents.
Although the EITC has well-documented positive effects on employment, researchers are only beginning to understand how it impacts the time that recipients spend on nonwork activities, including caregiving. The EITC has been shown to increase employment of single mothers, so it may reduce the amount of time adult daughters have available to provide care to their parents. Moreover, the credit increases recipients’ income, raising the cost of forgoing work to provide care.
Our research examines whether increased EITC generosity reduces the caregiving older adults receive from their EITC-eligible daughters. It leverages the fact that federal and state rule changes between 1992 and 2014 resulted in varying EITC benefits for women across the country. Additionally, it uses data from the Health and Retirement Study, a biennial survey of more than 20,000 Americans aged 51 and older, to differentiate between those who help their parents with chores regardless of parental need and those who care for parents who need it.
Our findings indicate that when the generosity of the EITC increased, unmarried EITC-eligible daughters provided less assistance with chores and functional limitations to their parents. This effect is especially pronounced among daughters with parents aged 65 and older. Specifically, a $500 increase in average EITC benefits resulted in a 24-hour reduction in the amount of care per month that survey respondents aged 65 and older with at least one functional limitation received from their adult children. This finding indicates a total reduction of 288 hours in annual hours of care. Under a very conservative estimate that it would cost $10 per hour to hire someone to replace this loss of care, a $500 increase in EITC benefits would lead to a $2,880 annual increase in costs to older parents of lower-income unmarried mothers.
The evidence from our research suggests that other adult children may have stepped in to help their parents with chores. However, our research finds no evidence that other adult children responded by providing more help to parents with functional limitations. Additionally, our findings provide no evidence that unmarried EITC-eligible daughters or other adult children increased financial transfers to their parents, but there is some evidence of increased use of paid care. Our research concludes that older parents with unmarried EITC-eligible daughters received less care after EITC generosity increased. Furthermore, these older parents increased their use of paid care, but their children did not fund these increases, and the additional paid care did not completely offset the reductions in care from their children.
Our findings highlight an important unintended consequence of including work requirements in social programs and have implications for the well-being of older adults and the structure of social safety net programs. Over the past several years, many debates have occurred about whether to impose work requirements in other programs, including Medicaid and food stamps. The 2021 child tax credit provided benefits to families with children regardless of employment, but Congress did not make it permanent largely due to debates about whether the benefit should be contingent on employment. Our research shows that work requirements unintentionally cause benefits recipients to have less time to provide care to their parents and that paid care or care from other adult children is unlikely to fully compensate for this setback. Beyond the individual economic and health costs that parents may incur from a loss in care, research has shown that family care reduces nursing home entry and the use of paid home health care. Thus, the costs that reductions in family care impose on the health care system could be large.
Note
This research brief is based on Katherine Michelmore, Anna Wiersma Strauss, and Emily E. Wiemers, “Does the EITC Reduce Caregiving for Parents?,” National Bureau of Economic Research Working Paper no. 32583, June 2024.
