Financial Incentives and Sanctions: Can They Improve Employment Outcomes for Low-Income Adults?

Author(s): Wissel, Sarah and Borradaile, Kelley.

Organizational Author(s): Mathematica Policy Research

Funding Source: U.S. Department of Health and Human Services

Resource Availability: Publicly available

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Summary

Summarizes interventions that use financial incentives and sanctions to improve employment outcomes of low-income adults, as described in rigorous studies conducted from 1990 to mid-2014, and provides suggestions for future research to more thoroughly understand the impact of financial incentives and sanctions.

Description

The Office of Planning, Research, and Evaluation (OPRE) in the Administration for Children and Families (ACF) sponsored the Employment Strategies for Low-Income Adults Evidence Review (ESER)--a systematic review of the literature published from 1990 to mid-2014 on the effect of employment and training programs and strategies for low-income individuals. This brief is one in a “series of briefs [that] offers a synthesis of the findings of ESER for policymakers, practitioners, and officials who seek to improve the employment and earnings outcomes of low-income adults through research-based interventions. This brief focuses on financial incentives and sanctions interventions…from 1990 to mid-2014” (p.1).

“Trained reviewers examined the strength of the causal evidence for each study…then rated each study based on its rigor (not on the effectiveness of the intervention).…The ESER team identified a ‘primary strategy’ for each intervention[:]…the service most treatment group members received and most comparison group members did not.…The team determined the primary strategy for each intervention by having two reviewers independently read the description of each intervention, identify a primary strategy, compare their assessments, and discuss until they reached agreement” (p.2). The team only reviewed studies that used “randomized controlled trials or comparison group designs” (p.1).

“This brief describes 12 interventions identified by ESER that featured financial incentives or sanctions as their primary strategy and their impacts on employment and earnings” (p.1). “It also profiles four promising interventions and their impacts in more detail, including impacts on the receipt of public benefits” (p.1). Lastly, the authors provide recommendations for future studies (p.10).

“Of the 12 interventions identified by ESER as primarily using financial incentives and sanctions, most were delivered to parents receiving public benefits. Eight of the interventions were exclusively delivered to people who were public benefits clients, either applicants or participants. Typically, these clients were single mothers. The other 4 interventions were delivered to a broader group of low-income people” (p.2).

“Eleven of the 12 interventions provided incentives to help participants work more or earn more money. Fewer than half of the interventions established both incentives and sanctions. The most common approach was to establish a higher earnings disregard”(p.3).

(Abstractor: Author and Website Staff)

Major Findings & Recommendations

Observed impacts and highlights of promising interventions
• “Most interventions had a mix of null and favorable impacts on short- and long-term earnings, though there were a few exceptions. For example, all the impacts on earnings were favorable two to four years after the start of [one program] and three to six years following [another]” (p.7).
• “Interventions that use incentives or sanctions as their primary strategy can improve employment outcomes for low-income single parents. However, not all interventions that targeted single parents were effective. Those that did improve employment outcomes were all implemented in the early 1990s and were compared to public assistance policies that no longer apply to low-income individuals and families” (p.9).
• “Four interventions had generally favorable impacts on both employment and earnings: Family Transition Program, Self-Sufficiency Project, Connecticut’s Jobs First Program, and Indiana Welfare Reform” (p.8). “The[se] four promising interventions might have different impacts if… compared…to current policies” (p.10).

Recommendations
“To better understand the impact of financial incentives and sanctions on employment and earnings, future studies could isolate specific incentive and sanction strategies from other factors that could affect these outcomes. In such studies, the intervention and comparison programs would need to be similar in every respect, except that the intervention group would receive a given incentive or sanction— such as earnings supplements or employment activity sanctions—and the comparison group would not. These studies could include a mix of participants— such as people who do and do not receive cash assistance and people from one- and two-parent families. This would allow the researchers to determine which strategies work best and for whom” (p.10).

(Abstractor: Author)

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Workforce System Strategies Content Information

Methodology: Literature Reviews

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Publication Date: 2016
Posted: 8/7/2018 5:48 PM
Posted In: Workforce System Strategies
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