When financial work incentives pay for themselves: evidence from a randomized social experiment for welfare recipients (original) (raw)
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ILR Review
The Self-Sufficiency Project (SSP) was a social experiment conducted in two Canadian provinces during the 1990s that tested a generous financial incentive program for welfare recipients. A little-known subsidiary experiment, called SSP Plus, had a three-way design that tested the incremental effect of adding employment services to the generous financial incentive program. Employment services are viewed by many welfare analysts as an important component of an overall strategy for helping welfare recipients escape poverty and achieve stable employment. This paper presents the results of the SSP Plus experiment. Adding employment services encouraged more people to take up the earnings supplement, and it appeared to have long-term effects on full-time employment and welfare receipt. This might be because the services improved the jobs people obtained. Compared to program participants who lacked the added services, SSP Plus members had higher earnings and wage rates, and also appear to h...
Financial Incentives for Increasing Work and Income Among Low-Income Families
1999
This paper investigates the impact of financial incentive programs, which have become an increasingly common component of welfare programs. We review experimental evidence from several such programs. Financial incentive programs appear to increase work and raise income (lower poverty), but cost somewhat more than alternative welfare programs. In particular, windfall beneficiaries --those who would have been working anyway --can raise costs by participating in the program. Several existing programs limit this effect by targeting long-term welfare recipients or by limiting benefits to full-time workers. At the same time, because financial incentive programs transfer support to working low-income families, the increase in costs due to windfall beneficiaries makes these programs more effective at alleviating poverty and raising incomes. Evidence also indicates that combining financial incentive programs with job search and job support services can increase both employment and income gains. Nonexperimental evidence from the Earned Income Tax Credit (EITC) and from state Temporary Assistance to Needy Families (TANF) programs with enhanced earnings disregards also suggests that these programs increase employment, and this evidence is consistent with the experimental evidence on the impact of financial incentive programs.
Financial incentives and welfare reform in the United States
Journal of Policy Analysis and Management, 2001
This paper uses a microsimulation model to ask whether welfare recipients in the United States would work full-time if offered an earnings supplement that was conditioned on full-time employment. The simulations suggest that the earnings supplement would increase full-time employment, with little additional cash transfer cost to the government. In contrast, financial incentives currently being used by many of the states are increasing employment and income, but are encouraging primarily part-time employment. Encouraging full-time employment is particularly important in light of new time limits on welfare receipt. Faced with a loss of welfare benefits, many recipients may find that part-time earnings do not allow them to be economically self-sufficient.
Welfare to Work: Does It Work for Kids? Research on Work and Income Welfare Experiments. Fact Sheet
2002
Noting that a central tenet of the 1996 welfare reform law was that work was the best way to improve the lives of single parents and their children, this fact sheet summarizes research on the impact of parental work on children in families receiving welfare. The fact sheet delineates key research findings from experimental studies of the effects of pre-1996 mandatory parental employment programs and earnings supplements on infants and toddlers, school-age children, and adolescents. Findings were drawn from 10 welfare demonstration programs measuring effects on school-age children, 16 programs measuring effects on adolescents, and 2 programs measuring effects on infants and toddlers. Findings indicated that school-age children benefit when their parents are in programs that increase both employment and income. Increasing mothers' employment without increasing family income did not help children on welfare. The two studies examining effects on infants and toddlers did not find evidence that these program harmed or benefited them. Adolescents had negative academic outcomes when their parents were involved in mandatory employment, earnings supplements, or time-limited assistance programs. Several possible explanations for the effects of the programs are identified. Implications for policy relate to the benefits of policies that increase family income, the lack of benefits for increasing work without increasing income, the importance of child care assistance, and the concern about adolescents' negative academic outcomes associated with increased parental employment, independent of family income increases. (KB)
Social programs as positive inducements for tax participation
Journal of Economic Behavior & Organization, 2012
A significant amount of non-compliance with the personal income tax is due to individuals who have not filed a tax return and so who are not "in the system". We use experimental laboratory methods to examine the effect of positive inducements for filing a tax return. Our design captures the essential features of a voluntary income reporting and tax assessment system: human participants earn income, they must decide whether to file a tax return, and, conditional upon filing, they must choose how much income to report. Taxes are paid on reported income only. Unreported income of filers may be discovered via a random audit, and the participant then pays owed taxes plus a fine. Inducements for filing are introduced as treatments: a social safety net (e.g., unemployment replacement income) that is conditional upon past filing behavior, and a tax credit that is available only to those who file. Our results suggest that an untargeted tax credit can encourage participation, but that targeting the credit to low income earners offers a stronger inducement to file. Also, the provision of a social safety net via unemployment benefits has a positive, albeit an indirect, impact on participation.
Basic Income Studies, 2018
Many opponents of BIG programs believe that receiving guaranteed subsistence income would act as a strong disincentive to work. In contrast, various areas of empirical research in psychology (studies of intrinsic motiva- tion; non-pecuniary benefits of work on social identity and purpose; and reactions to financial windfalls such as lottery winnings) suggest that a BIG would not lead to meaningful reductions in work. To test these compet- ing predictions, a comprehensive review of BIG outcome studies reporting data on adult labor responses was conducted. The results indicate that 93 % of reported outcomes support the prediction of no meaningful work reductions when the criterion for support is set at less than a 5 % decrease in either average hours worked per week or the rate of labor participation. Overall, these results indicate that adult labor responses would show no substantial impact following a BIG intervention.
1997
The Self-Sufficiency Project (SSP) entry effect experiment was designed to measure the effect of the future availability of an earnings supplement on the behavior of newly enrolled income assistance (IA) recipients. It used a classical randomized design. From a sample of 3,315 single parents who recently started a new period of IA, one-half were assigned to the program group and were informed that if they remained on IA for the next 12 months they would be eligible for the SSP supplement; the other half were assigned to the control group. SSP group members were asked questions and attended focus-group interviews to verify they understood the nature of the SSP supplement offer. Results indicated between one-half and three-fourths of them had relatively precise knowledge. The primary focus of the experiment was to determine whether some individuals would prolong their stay on IA to gain SSP eligibility. Analysis of the delayed exit effect suggested it was fairly small, on the order of 3 percentage points, i.e. 3 percent of all new applicants for IA. (Appendixes include additional data tables and list of 21 references.) (YLB) Reproductions supplied by EDRS are the best that can be made from the original document.
Assessing the External Validity of an Experimental Wage Subsidy
2008
In Canada, a policy aiming at helping single parents on social assistance become self-reliant was implemented on an experimental basis. The Self-Sufficiency Entry Effects Demonstration randomly selected a sample of 4,134 single parents who had applied for welfare between January 1994 and March 1995. It turned out only 3,315 took part in the experiment despite a 50% chance of receiving a generous, time-limited, earnings supplement conditional on finding a full-time job and leaving income assistance within a year. The purpose of this paper is to determine whether a non-response rate of 20% is likely to harm the external validity of the experiment. We compare the estimated impact of the program using experimental data only to that obtained using additional data on individuals not taking part in the experiment. We find strong evidence of non-response bias in the data. When we correct for the bias, we find that estimates that rely on experimental data only significantly underestimate the true impact of the program. JEL Classification: