Challenge

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Building a Personal Safety Net with the Earned Income Tax Credit

The public safety net has increasingly functioned as a system that rewards work, but many low-wage workers now face a double bind: unstable incomes and volatile expenses. How can we break this cycle of choosing between security and investment?
40M
People Impacted
$ 654B
Potential Funding
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the problem
Nature and Context

Examining how low-wage workers make resource allocation decisions under conditions of uncertainty by examining how they spend and save their tax refunds could help communities create financial stability for more people. More than three quarters of families experienced an income or expense shock in the past three years. Although many had aspirations for upward mobility, the insecurity of daily life meant they devoted most of their refund dollars to creating a personal safety net to cushion against income and expense shocks. What appeared to be distinct types of allocations often had the same underlying rationale goal of improving a family’s economic security in the near term. By saving, purchasing durable goods, stockpiling household staples, and paying off debts to kin and creditors at tax refund time, families leveraged their tax refund dollars into multiple forms of self-insurance.

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