Can%20Financial%20Work%20Incentives%20Pay%20For%20Themselves?%20%20Final%20Report%20on%20the%20Self-Sufficiency%20Project%20for%20Welfare%20Applicants%20Reuben%20Ford,%20David%20Gyarmati,%20Kelly%20Foley,%20Doug%20Tattrie%20with%20Liza%20Jimenez%20www.srdc.org

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Can Financial Work Incentives Pay For
Themselves? Final Report on the
Self-Sufficiency Project for Welfare
ApplicantsReuben Ford, David Gyarmati, Kelly
Foley, Doug Tattriewith Liza Jimenezwww.srdc.or
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Self-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

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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

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A generous supplement to full-time earnings
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Three SSP studies

• 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)

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A 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

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Applicant Study ResultsTaking 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

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Receipt of Income Assistance
Year 1 Year 2 Year 3 Year 4 Year
5 Year 6 Year 7
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Earnings

• SSP increased earnings by
• 1400 in Year 2
• 2400 in Year 3
• 1300 in Year 6
• 7,859 over 6 years

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Effects 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

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Benefit cost analysis (over 6 years)
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Comparison 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

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Key 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

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