Fighting Poverty, Losing Time? The Earned Income Tax Credit and Time Poverty and Quality of Time

• In Event: Differential Implementation and Impacts of Policies to Combat Poverty and Food Insecurity

Abstract

Background: Time is an essential resource for achieving well-being. People acquire both material and non-material benefits through the use of their time. However, time is inherently scarce. Individuals with limited discretionary time may experience “time poverty.” How people allocate their time also significantly impacts its quality. Experiencing time poverty and lacking high-quality time can adversely affect health, well-being, and asset accumulation.

The Earned Income Tax Credit (EITC) is one of the largest anti-poverty programs in the United States, providing tax credits to low-income families, particularly those with children. Reflecting the work-centered philosophy of U.S. welfare policy, the EITC promotes self-sufficiency by encouraging labor force participation and offering refundable tax credits. The program’s effects have been widely evaluated, showing positive impacts on employment, poverty reduction, health, child outcomes, and well-being. However, little is known about whether the EITC affects time poverty or time use quality. To our knowledge, this study is among the first to examine the EITC’s impact on time poverty and quality.

Methods: This study uses data from the American Time Use Survey (ATUS; 2003–2023). We restrict our sample to single mothers aged 18 to 59 without a bachelor’s degree—a group most likely affected by the policy. We define time poverty in two ways: first, by measuring the total minutes of free time per day; second, by identifying relative time poverty as having less than 50%, 60%, or 70% of the median free time in the sample. Time quality is measured using four indicators: the ratio of free time to work time; duration, measured by the average time spent on a single free-time activity; childcare multitasking time, captured by free time spent while simultaneously caring for children; and time fragmentation, measured by the number of distinct free-time activities in a day. To estimate policy effects, we exploit variation in EITC generosity across states and years using a Difference-in-Differences (DID) design. The model controls for individual, household, and state characteristics as well as state and year fixed effects.

Results: We find that a $500 increase in EITC generosity is associated with a 6.6-minute decrease in daily free time. The probability of experiencing relative time poverty increases by 0.6%, 0.9%, and 1.1% under the 50%, 60%, and 70% thresholds respectively. An increase in EITC benefits also leads to a 2.9% decline in the free-to-work time ratio and a 1.6-minute reduction in the duration of free-time activities. Childcare multitasking time decreases by 0.5%, while free time fragmentation shows no significant change.

Conclusions: Our findings suggest that while the EITC promotes employment and economic well-being, it may also contribute to increased time poverty and reduced time quality, particularly in terms of available free time and activity duration. However, we find no evidence that it increases time fragmentation or multitasking during childcare. While the EITC is widely praised for its employment effects, its unintended consequences on time poverty and time quality warrant greater attention to fully understand the policy’s multidimensional impacts.

Authors

• Wan-Hsuan Chiang, National Taiwan University
  Presenting Author

• Julia Shu-Huah Wang, National Taiwan University
  Non-Presenting Co-Author