Child benefits are typically paid on a per-child basis, without restrictions on family size. In this paper we generate unique evidence on the effects of capping child benefits by family size by examining the introduction of the UK’s ‘two-child limit’. Under the policy, all children born on or after 6 April 2017 are no longer eligible for means-tested child benefits if they are born into a family with two or more existing children. The UK government justified this policy on grounds that it would incentivise employment among larger families. We use mixed methods – combining quasi-experimental quantitative techniques and qualitative longitudinal research – to investigate the policy’s employment effects. We find no evidence that capping child benefits increases employment. Labour market activity among larger families seem to be particularly ‘sticky’ in response to reductions in benefits income, likely due to parents’ commitment to unpaid care, the scale of caregiving responsibilities and barriers to paid work. Our qualitative evidence also indicates that the effects of negative income shocks can render such policies counter-productive by pushing people further away from the labour market.
