# Presentation: 135719

## Financial Incentives as a Tool for Encouraging Employment Retention and Advancement among Current and Former Welfare Recipients: A Cross-National Comparison 

- Rick Hendra, MDRC
- National Welfare Research and Evaluation Conference
- Administration for Children and Families
- U.S. Department of Health and Human Services
- Washington D.C.
- June 4, 2007

## Topics

- Use of financial incentives as a retention and advancement tool in the 2 ERA studies.
- Take up of incentives in the 2 ERA studies.
- Impacts on services.
- Impacts on economic outcomes.
- Policy implications and open research questions.

## Policy Context

- Post-welfare reform, many welfare recipients left welfare and went to work, but remained in poverty.
- Financial incentives have been used in some programs to boost the income of workers in low-wage jobs, thereby encouraging work and reducing poverty by “making work pay.” These programs showed promising economic results.
- Studies suggest that incentives + services are more effective than incentives alone.
- MDRC currently testing several programs that  use financial incentives to promote retention and advancement among low-wage workers: ERA-Texas and ERA-United Kingdom.

## Purposes of Financial Incentives

- In the context of employment retention and advancement programs:
- encourage continued contact with case managers/advisors
- encourage behavior most likely to result in employment retention and advancement
- support employment by helping to cover costs of employment (such as childcare, transportation, etc.)

## Financial Incentives in ERA-Texas

- Monthly bonuses of $200 given out, for a maximum of 12 months, to workers who transition off of TANF and work full time for 4 consecutive months:
- work 30 hours per week in each week in the month, and
- participate in a retention or advancement activity for at least 3 hours each month.

## Financial Incentives in UK ERA

- Paid only for full-time work (at least 30 hours per week)
- Available to those who work at least 13 weeks out of a 17-week period
- Bonus paid is 400 GBP (about $720) per 17-week (about 4-month) period
- If job lost within a 17-week period, a new 17-week period starts when new job found and started

## Both programs combined financial incentives with pre- and post-employment servicesConceptual Map of the Texas ERA Program 

- ERA
- Texas

**Pre-employment case management/**
**Job Search**

- Post-employment case management (stabilization/adv)
- Monthly Incentive

- Employment Retention and Advancement

## ERA-TX and UK ERA Results

- Results for 2 of 3 Texas ERA programs are encouraging.
- The early results in UK ERA are also encouraging.
- Suggests that financial incentives are a promising component of an ERA strategy.

## Incentive Take-up Rates in the Two ERA studies

## Incentive Receipt Rates in ERA-Texas and UK ERA Are Rather Low 

| Outcome | TX: Corpus Christi | TX:
Fort Worth | TX:
Houston | UK: New Deal for 
Lone Parents |
| --- | --- | --- | --- | --- |
| All program group members |  |  |  |  |
| Ever received a stipend (%) | 30.0 | 21.7 | 20.4 | 18.6 |
|  |  |  |  |  |
| Among those receiving a stipend |  |  |  |  |
| Number of months from RA 
to first stipend (%) |  |  |  |  |
|      Less than 6 | 15.4 | 20.7 | 9.8 | n/a |
|      6 to 12 | 26.2 | 30.7 | 28.5 | n/a |
|     13 to 24 | 35.5 | 33.6 | 38.4 | n/a |
|     Over 24 | 22.9 | 15.0 | 23.3 | n/a |

**Incentive Receipt Rates in ERA-Texas and UK ERA Are Rather Low **

**Notes:**
Note, I justed added table title from table 2.2 of the TX Report

## It took a long time for people to find a job and work consecutively for four months, so incentive receipt increased deep into the follow-up period. Suggests that UK receipt rates should increase over time. 

|  |
| --- |

| Percentage of Program Group Receiving ERA incentive in 
Corpus Christi, |
| --- |
| by Quarter from Random Assignment |
| Texas  |

***It took a long time for people to find a job and work consecutively for four months, so incentive receipt increased deep into the follow-up period. Suggests that UK receipt rates should increase over time. ***

## In Texas, 45 percent of those eligible never got a stipend. 

**In Texas, 45 percent of those eligible never got a stipend. **

## In UK-ERA (NDLP group), about 75% those eligible got the stipend, but only one quarter of the full sample was eligible at the 12-month follow-up point. 

## Many requirements and steps may have decreased stipend take-up

- Numerous requirements/steps to get stipend in Texas:
- 1: Find full time job.
- 2: Work FT for 4 consecutive months.
- 3: Submit documentation on the hours worked.
- 4: Participate in monthly employment related activity.
-     MDRC conducted interviews with ERA staff on why some participants did not use the stipend, and many of the reasons were tied to the program’s structure and the steps necessary to receive the incentive.

## Texas: Incentive Considerations

- Past studies have shown that financial incentives to encourage work have had large effects on increasing employment, earnings, and job stability, and reducing poverty. These studies generally had higher incentive take-up rates.
- Delayed and slightly weaker effects in Texas may be due to:
- The series of steps necessary for one to qualify for the financial incentive, and the fact that more intensive post-employment case management did not start until the incentive kicked in.
- While the sites made a good faith effort to market the incentive, it may not have been sufficient.  (Info on incentive was provided along with a lot of other info and the incentive could seem far in the future to some.)
- The control group received a relatively strong work-focused welfare-to-work program.

## Who was most likely to take up the stipend? (Evidence from Texas)

- Stipend receipt was highest among those with a strong employment history prior to random assignment.
- This group may be more likely to find jobs and benefit from ERA-provided post-employment services. This group generated the “first wave” of impacts in Texas.
- The “second wave” of impacts (in Year 3) appears to be driven by those with less attachment to the labor market.

## Impacts on Program Participation in ERA-Texas and UK ERA

## Year 1 Impacts on Contacts with Program Staff 

**Year 1 Impacts on Contacts with Program Staff **

**Notes:**
Slide from Table 3.1 and UK ERA Data table for NDLP

## Impacts on Areas in Which Respondents Received Help 

**Impacts on Areas in Which Respondents Received Help **

**Notes:**
Slide from Table 3.1 

## Economic Impacts in ERA-Texas and UK ERA

## Year 3, Impacts on UI-Covered Employment and Earnings for Corpus Christi, Texas

| Outcome  | ERA Group | Control Group | Difference (Impact) |  |
| --- | --- | --- | --- | --- |
| Earnings ($) | 5,400 | 4,665 | 735 | ** |
| 
Ever Employed (%) | 69.0 | 63.8 | 5.2 | ** |
| Average quarterly employment (%) | 50.5 | 46.6 | 3.9 | ** |
| 
Employed 4 consecutive quarters (%) | 
32.1 | 
29.8 | 
2.3 |  |
| 
Total Income ($) | 
8,303 | 
7,793 | 
510 |  |

**Year 3, Impacts on UI-Covered Employment and Earnings for Corpus Christi, Texas**

**Notes:**
Tried typing in numbers, you might want to consider separating the sites into three slides.

## Year 3, Impacts on UI-Covered Employment and Earnings for 

| Outcome  | ERA Group | Control Group | Difference (Impact) |  |
| --- | --- | --- | --- | --- |
| Earnings ($) | 6,424 | 5,515 | 909 | ** |
| 
Ever Employed (%) | 65.9 | 64.1 | 1.8 |  |
| Average quarterly employment (%) | 49.6 | 46.4 | 3.3 | * |
| 
Employed 4 consecutive quarters (%) | 
33.7 | 
28.7 | 
5.0 | 
** |
| 
Total Income ($) | 
9,518 | 
8,477 | 
1,041 | 
*** |

**Year 3, Impacts on UI-Covered Employment and Earnings for **
**Fort Worth, Texas**

**Notes:**
Tried typing in numbers, you might want to consider separating the sites into three slides.

## Year 3, Impacts on UI-Covered Employment and Earnings for 

| Outcome  | ERA Group | Control Group | Difference (Impact) |  |
| --- | --- | --- | --- | --- |
| Earnings ($) | 4,992 | 5,027 | -35 |  |
| 
Ever Employed (%) | 59.3 | 60.4 | -1.1 |  |
| Average quarterly employment (%) | 43.0 | 43.3 | -0.3 |  |
| 
Employed 4 consecutive quarters (%) | 
26.6 | 
25.9  | 
0.7 |  |
| 
Total Income ($) | 
8,544 | 
8,550 | 
-6 |  |

**Year 3, Impacts on UI-Covered Employment and Earnings for **
**Houston, Texas**

**Notes:**
Tried typing in numbers, you might want to consider separating the sites into three slides.

##  Year 1 Impacts on Employment and Earnings for 

| Outcome  | ERA Group | Control Group | Difference (Impact) |  |
| --- | --- | --- | --- | --- |
| Total earnings ($) | 3,594 | 2,783 | 811 | *** |
| 
Ever Employed (%) | 66.2 | 61.7 | 4.5 | ** |
| Number of months employed (%) | 5.7 | 5.1 | 0.6 | *** |

** ****Year 1 Impacts on Employment and Earnings for **
**UK ERA New Deal for Lone Parents**

**Notes:**
Tried typing in numbers, you might want to consider separating the sites into three slides.

## Conclusions

- Financial Incentives are a promising tool for promoting employment retention and advancement.
- The ERA-Texas and UK ERA programs are showing gains, but they may have done even better if they simplified incentive eligibility steps and requirements and better marketed the stipend.
- Houston did not have impacts: Post-employment services were not well-implemented.  Suggests that stipends alone may not be enough, and that stipends might work best in conjunction with services.

## Open Research Questions

- To what extent were the impacts in ERA-TX and UK ERA concentrated among those who received the incentives?
- If more people took up the incentive, would the impacts have been more aligned with other make-work-pay programs?
- What was the interaction between the effects of taking up stipends and the effects of other retention and advancement tools, such as job search, and pre & post-employment services?