Post on 19-Dec-2015
Can Financial Work Incentives Pay For Themselves?
Final Report on the Self-Sufficiency Project for Welfare Applicants
Reuben Ford, David Gyarmati, Kelly Foley, Doug Tattriewith Liza Jimenez
www.srdc.org
Can Financial Work Incentives Pay For Themselves?
Final Report on the Self-Sufficiency Project for Welfare Applicants
Reuben Ford, David Gyarmati, Kelly Foley, Doug Tattriewith Liza Jimenez
www.srdc.org
Self-Sufficiency ProjectSelf-Sufficiency Project Experiment to test whether financial incentives
encourage single parents to leave welfare for full-time work
The project had twin goals:
to create credible evidence about the effects of changing policy
to demonstrate that a particular policy - focused on earnings supplements - could be effective
HRDC, Statistics Canada, MDRC, SRDC, US and Canadian academics, Provinces of NB, BC, local delivery partners and others
Results from surveys, administrative data, Program Management Information System
Experiment to test whether financial incentives encourage single parents to leave welfare for full-time work
The project had twin goals:
to create credible evidence about the effects of changing policy
to demonstrate that a particular policy - focused on earnings supplements - could be effective
HRDC, Statistics Canada, MDRC, SRDC, US and Canadian academics, Provinces of NB, BC, local delivery partners and others
Results from surveys, administrative data, Program Management Information System
SSP program features SSP program features Voluntary
Single parents on welfare for at least one year
Once eligible, one year to get full-time work
Receive supplement for up to three years
Supplement is generous Doubles earnings from a minimum wage job
Voluntary
Single parents on welfare for at least one year
Once eligible, one year to get full-time work
Receive supplement for up to three years
Supplement is generous Doubles earnings from a minimum wage job
A generous supplement to full-time earnings
A generous supplement to full-time earnings
0
200
400
600
800
1000
1200
1400
1600
1800
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50
Hours worked each week
After-
tax in
com
e (
$)
With SSP supplement No SSP supplement
The long-term Recipient study:• How do a cross-section of long-term welfare recipients respond
to the offer? (5,700 participants in BC and NB)
The “SSP Plus” Study:• What happens when employment services are offered to long-
term recipients in addition to the incentive? (300 additional participants in NB)
The Applicant and “Entry Effects” Studies:• Does the financial incentive encourage single-parent, new
income assistance recipients to stay on income assistance longer than they would normally in order to qualify for the supplement?
• What is the effect of the supplement offer for new welfare applicants? (3,315 participants in BC)
The long-term Recipient study:• How do a cross-section of long-term welfare recipients respond
to the offer? (5,700 participants in BC and NB)
The “SSP Plus” Study:• What happens when employment services are offered to long-
term recipients in addition to the incentive? (300 additional participants in NB)
The Applicant and “Entry Effects” Studies:• Does the financial incentive encourage single-parent, new
income assistance recipients to stay on income assistance longer than they would normally in order to qualify for the supplement?
• What is the effect of the supplement offer for new welfare applicants? (3,315 participants in BC)
Three SSP studies
A social experimentA social experiment• Half the study participants were told that if they stayed on
welfare for a year, they would be eligible for the supplement (the program group)
• Half (the control group), selected at random, were not• Following both groups’ behaviour over time allows us to:
• Attribute causality to SSP offer• Eliminate systematic selection bias due to non-
participants differing from participants• Obtain internally valid estimate of average treatment
effect – difference between mean outcomes for program and control groups
• Supplement these results with additional process research
• Half the study participants were told that if they stayed on welfare for a year, they would be eligible for the supplement (the program group)
• Half (the control group), selected at random, were not• Following both groups’ behaviour over time allows us to:
• Attribute causality to SSP offer• Eliminate systematic selection bias due to non-
participants differing from participants• Obtain internally valid estimate of average treatment
effect – difference between mean outcomes for program and control groups
• Supplement these results with additional process research
Applicant Study Results:
Taking up the supplement
Applicant Study Results:
Taking up the supplement
Nearly three fifths of the program group became eligible by staying on welfare for 12 months
27 per cent of the program group — nearly half of those who became eligible — took up the supplement
Different groups of program group members were about equally likely to find full-time work in time to receive supplement payments
On average, supplement “takers” received nearly $20,000 in supplement payments
Nearly three fifths of the program group became eligible by staying on welfare for 12 months
27 per cent of the program group — nearly half of those who became eligible — took up the supplement
Different groups of program group members were about equally likely to find full-time work in time to receive supplement payments
On average, supplement “takers” received nearly $20,000 in supplement payments
Receipt of Income AssistanceReceipt of Income Assistance
-20
0
20
40
60
80
100
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77
Months from random assignment
% R
ec
eiv
ing
Inc
om
e A
ss
ista
nc
e Program Group
Control Group
Impact
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Earnings
•SSP increased earnings by:
•$1400 in Year 2
•$2400 in Year 3
•$1300 in Year 6
•$7,859 over 6 years
Effects on IncomeEffects on Income Supplement payments and increased earnings more
than offset falls in income assistance amounts for much of the study period
Individual monthly income up
$229 after 30 months
$162 after 48 months
Proportion with low incomes (family income below LICO) fell
14.4 percentage points in month 30
6.3 percentage points in month 48
SSP increased projected income taxes
Supplement payments and increased earnings more than offset falls in income assistance amounts for much of the study period
Individual monthly income up
$229 after 30 months
$162 after 48 months
Proportion with low incomes (family income below LICO) fell
14.4 percentage points in month 30
6.3 percentage points in month 48
SSP increased projected income taxes
Benefit cost analysis (over 6 years)Benefit cost analysis (over 6 years)Accounting Perspective
Component of AnalysisFinancial effects ($)
Transfer payments 2,130 -2,130 0Transfer payment administration 0 -98 -98Operating cost of SSP 0 -1,060 -1,060Program Management Information Systems 0 -48 -48Supports for work 0 -484 -484Earnings and fringe benefits 8,534 0 8,534Taxes and premiums -2,775 2,775 0Tax credits -384 384 0
Net gain or loss (net present value) ($) 7,504 -660 6,844
SocietyProgram
GroupGovernment
Budget
Comparison to Recipient StudyComparison to Recipient Study Net earnings gain of $7,859 over the study period
($7,370 over equivalent period) was twice the earnings gain for long-term recipients in BC
Net cost to governments was about 10 cents per $1 gained by participants. It was 67 cents per $1 for Recipients in BC
Taken together, results imply that if SSP were implemented as a policy, it would be effective in reducing current IA expenditure and would become even more cost-effective in the long run
Net earnings gain of $7,859 over the study period ($7,370 over equivalent period) was twice the earnings gain for long-term recipients in BC
Net cost to governments was about 10 cents per $1 gained by participants. It was 67 cents per $1 for Recipients in BC
Taken together, results imply that if SSP were implemented as a policy, it would be effective in reducing current IA expenditure and would become even more cost-effective in the long run
Key messagesKey messages
Proven strategy to accelerate welfare to work transition
large increases in employment, earnings and income and
reduced welfare receipt and poverty
Cost-effective policy
comes very close to paying for itself when increased taxes and reduced IA receipt are taken into account
Results can be used to predict effects
The Recipient study and Applicant Study results together demonstrate that cost-effectiveness will increase over time
Proven strategy to accelerate welfare to work transition
large increases in employment, earnings and income and
reduced welfare receipt and poverty
Cost-effective policy
comes very close to paying for itself when increased taxes and reduced IA receipt are taken into account
Results can be used to predict effects
The Recipient study and Applicant Study results together demonstrate that cost-effectiveness will increase over time