Does the EITC Reduce Caregiving for Parents?

Families provide substantial care to older adults with functional limitations. Policies that incentivize work have the potential to reduce this valuable care. This study uses the Health and Retirement Study (HRS) and a simulated benefit approach to examine the consequences of increases in the generosity of the Earned Income Tax Credit (EITC), a work-contingent cash benefit, for the care that parents receive from their EITC-eligible daughters. We find that a $500 increase in EITC generosity reduces the care that parents age 65+ with functional limitations receive by 13-24 hours per month, and that this is due to a reduction in the likelihood of receiving intensive care (40+ hours per month). We assess the full effect of this reduction in caregiving by examining whether financial transfers increase as a substitute for care, whether other children or spouses fill the care gap, and whether paid caregiving increases in response to declines in family care. We find no evidence of increased financial transfers and that care gaps remain for older parents that are not filled by other children, spouses, or paid care providers. We conclude that an unintended consequence of the EITC is that the older parents of EITC recipients receive less care overall in response to increased EITC benefit generosity.