Who’s Caring for the Kids? The Earned Income Tax Credit and Childcare Arrangements

Abstract

Labor force participation among mothers in the U.S. has increased dramatically over the past several decades, driven in part by social policies that provide benefits that are contingent upon paid work. Little is known, however, about how these work-contingent social policies affect childcare arrangements. We study the effect of the Earned Income Tax Credit (EITC)—one of the largest work-contingent cash transfer programs in the U.S.—on childcare arrangements, using data from the Survey of Income and Program Participation. Our findings suggest that, for children under three, the EITC increased the use of childcare, the number of hours children spent in care, the likelihood of parents paying for care, and the use of multiple care arrangements. It seems to have little effect on childcare arrangements for older children.