work-req

Work Requirements Don’t Work

In 2015, the Supplemental Nutrition Assistance Program (SNAP) prevented 8.4 million people from living in poverty. This essential and effective safety net program helps people with low incomes purchase food for themselves and their families—an estimated 40.8 million Americans were living in poverty in 2015; absent SNAP benefits, that number would have been 49.1 million. Despite its success, SNAP is facing rule changes that would cause people to lose benefits—harming those who need it most and weakening the poverty-fighting power of the program. Sadly, even though these rule changes cause unnecessary harm, they are being sold to the public as an effort to make SNAP more effective.

The latest proposed rule announced in early February would impose stricter work requirements on people who use SNAP. Currently, to access food benefits for more than three months, SNAP recipients must report that they meet certain work requirements. Sensibly, states may request a waiver of this time limit in areas of high unemployment. The new proposed rule would change how those requests from states are handled. This would, according to the Food and Nutrition Service, “encourage broader application of the statutory ABAWD [able-bodied adult without dependents] work requirement, consistent with the [current] Administration’s focus on fostering self-sufficiency.”

In plain English: under this new rule, work requirements would become stricter, and fewer people who really need help would get healthy food.

That’s because work requirements force people to repeatedly prove their employment status in order to maintain their benefits. The stricter requirements become, the less room there is for error, but all people make errors, like missing deadlines, or forgetting small details. Unfortunately, research about poverty has shown that living in chronic scarcity—scarcity of money, time, and cognitive bandwidth—makes it even easier to make mistakes, because people are busy juggling a constant stream of urgent matters, like paying rent, managing an unpredictable work schedule, and figuring out how to feed their family on a stretched budget. In fact, a new report on child poverty claims that work requirements for welfare programs are “as likely to increase as to decrease poverty.”

Today, we released Work Requirements Don’t Work, a new white paper demonstrating why attaching strict work requirements and a burdensome reporting process to a basic need like food violates three principles for designing programs that serve people with scarce resources: cut the costs, create slack, and reframe and empower.

Cutting the costs of using a program means reducing unnecessary complexity and asking less of people’s time and mental energy. To do this, programs should reduce barriers to entry and cut needless strings that are attached to benefits.

To create slack, programs should account for inevitable human errors or unanticipated events in a person’s life. This means being generous (unconditionally) and putting safeguards in place to prevent the loss of benefits.

Programs that reframe and empower use intentional language and treat families as experts on their own lives—because they are. For people to escape poverty, they first must believe they have the power to effect change in their own lives. That starts with society treating them with trust and dignity.

Stricter work requirements for SNAP fail on every count here: they increase the temporal and cognitive costs of using SNAP, they reduce slack for people already living on the edge, and they send a terrible message to people who use SNAP: We don’t trust you. Making it harder for people who just need some help to get a basic need like food will only intensify the effects of chronic scarcity, and will do nothing to help people escape poverty.

So-called “reforms” that make basic essentials harder to get will harm the people with the most need. If we really want SNAP to remove even more people from poverty each year, policy-makers should be focused on making it easier (not harder) for eligible people to enroll and maintain their benefits—and their dignity.

More Opportunities to Support Student Financial Health

The start of a new academic year should be an exciting time for the 19.9 million students who recently began or are continuing in college. But for many students, college also brings stressful financial decisions. These decisions weigh on many students, but the burden is often heaviest for those who are balancing school with full time jobs, care-taking responsibilities, and other individual circumstances in their lives. We know the college experience is rife with hidden behavioral barriers that get in the way of students’ financial stability—and crucially, their path to graduation. Between rising tuition and fees, extremely expensive textbooks, and the costs of transportation, housing, and food, managing the costs as a college student in the United States is undeniably challenging. In fact, it’s a major reason many students don’t complete their degree, which puts students in the double bind of having to bear the price of postsecondary education without reaping the benefits. While support is available in the form of financial aid, scholarships, and loans, navigating the systems for accessing these options presents its own set of challenges, and managing the funds they make available is seldom straightforward.

Fortunately, there are opportunities to ease this burden for students. With the generous support of MetLife Foundation, we’ve identified five high-potential opportunities, rooted in insights from behavioral science, to support students’ financial health on the journey to, through, and after college. Some of these areas already have a robust evidence base and are ripe for expansion and scaling of impactful solutions. Others represent opportunities to investigate new solutions to the challenges of student financial health.

One such opportunity is to expand and scale interventions to increase FAFSA filing among students. Perhaps unsurprisingly, submission of the Free Application for Federal Student Aid (FAFSA), which can unlock thousands of dollars in financial support, can be linked to persistence through college, especially among low-income students. What may be surprising is that every year students forgo billions of dollars in grant funds (which don’t have to be paid back) because they either submit their applications late, or don’t apply for aid at all. Although filling out a form may seem straightforward on its face, with more than 100 fields to fill out – some of which are complex, intimidating, and require a time commitment to find the information – the FAFSA can be a daunting challenge.

Light-touch solutions grounded in behavioral science have been shown to consistently and significantly boost FAFSA filing rates at minimal cost, but even these successful solutions are not always scaled widely. Moreover, FAFSA programs often target incoming students only, leaving returning students without needed support throughout the re-submission process. As we’ve learned in our own work with students at City University of New York (CUNY), this is a huge opportunity for impact, as many students don’t renew their FAFSA in large part because they incorrectly associate the submission process with starting college, and don’t realize they need to file it each year they’re in school.

Knowing this, our recent work with the CUNY aimed to expand proven FAFSA support programs to continuing students. The intervention consisted of a series of emails and text messages encouraging students to make a plan to complete the FAFSA at a certain time and location, correcting misperceptions about eligibility and the consequences of not filing, making support services more salient, and providing regular and well-timed reminders of critical steps. When tested with three CUNY campuses, FAFSA renewal rates increased by 31%. In addition to being effective, the intervention package is highly cost-effective: each dollar spent on the communications to students generated almost $250 in additional student aid.

It is critical for college administrators and other practitioners to scale these proven interventions to ensure that all students have access to the support they need to complete the FAFSA and receive all of the aid for which they are eligible. It could be the difference between persistence and dropping out for many students. 

Another high-potential opportunity we’ve identified is testing new approaches to optimizing the selection of loan repayment plans for students leaving college. Student loan delinquency and default is a growing challenge for those who have left college (whether they earned a degree or not). In fact, 11.5% of people who began student loan repayment in 2013-14 were already in default three years later. In many cases, default may be avoidable through enrollment in income-driven repayment plans, which scale payments to borrowers’ ability to pay. However, up to 80% of people eligible for these plans don’t sign up.

Some promising interventions have been tested in this space, but more experimentation is needed to enhance the process through which students choose a loan repayment plan. For example, exit counseling could, in theory, be an effective channel for reaching students with actionable, just-in-time advice about the loan repayment plan that’s right for them. Unfortunately, as of now, the channel is not optimized, lacks personalization, and overloads students with information.

Both researchers and practitioners can contribute to the existing knowledge base by exploring new approaches to guide students through loan repayment, and by measuring effects of those approaches on student financial health.

These and other opportunities are detailed in our new brief: Insights and Opportunities: College Student Financial Health and Behavioral Science. We hope that it serves as a starting point for practitioners, funders, and other stakeholders to take fuller advantage of the power of behavioral science to improve student financial health and, ultimately, college completion and a better path toward success in their post-college lives.

The Path Forward to Increase Retirement Savings in Mexico

A recent report by the World Economic Forum estimated that by 2050 the retirement savings gap may reach $400 trillion, leaving hundreds of millions of people at risk of poverty in old age. This problem is particularly acute in Mexico and across Latin America. Aging populations, low mandatory contribution rates, and large numbers of informal sector workers (who do not have contributions withdrawn from their paychecks) combine to leave most workers starkly underprepared and many without any formal retirement savings at all. In Mexico, it’s estimated that even workers making the mandatory minimum contributions would need to save an additional 7% of their income to be adequately prepared for retirement. The 60% of Mexicans who work in the informal sector and do not make these mandatory minimum contributions are left even more vulnerable.

Increasing voluntary retirement savings is one approach to narrow the gap. Currently less than 0.5% of the nearly 40.5 million registered account holders in Mexico make even one contribution a year, despite efforts to increase accessibility and educate people about the importance of saving.

A behavioral approach

In 2015, ideas42 began a partnership with MetLife Foundation, in collaboration with the Mexican government regulatory commission CONSAR and private retirement fund administrators known as Afores, to tackle the problem from a behavioral perspective: exploring new ways to narrow the savings gap by encouraging voluntary retirement savings. We identified four important behavioral barriers and six design principles to combat them.

In the years since, we’ve worked with our partners in Mexico to design and implement solutions employing these six principles, testing over 30 unique designs, as well as many different combinations of these interventions. The lessons emerging from this work are summarized in our final report: Using Behavioral Science to Increase Retirement Savings in Mexico: A look at what we have learned over three years. Here’s a sample of what we’ve learned:

  • Capturing attention is the critical first step. We redesigned the envelopes used to mail account statements and sent text messages to draw attention to retirement savings, increasing the likelihood that the statements were opened and read. We learned that messaging matters: some of these messages had a significant impact on engagement and contribution rates, while others did not. Moreover, with a single, isolated intervention, most recipients still did not engage. No one technique or channel, no matter how well designed, can alone solve the problem – the “trick” is to communicate clearly, across multiple channels, and perhaps more often than might seem necessary to capture and maintain attention, keeping savings top of mind.
  • Once you have people’s attention, offering clear feedback on how they’re doing can make the path forward easier to follow. We redesigned retirement account statements to use a visual savings thermometer to signal the “health” of recipients’ retirement account in a more concrete way than simply showing the account balance. Along with other changes to the redesigned statement such as personalized savings tips, this led to a 40% increase in the number of account holders making contributions.
  • Even those who intend to save more may not follow through, and behavioral interventions can help bridge the final step and motivate action. Empathizing with our future selves can help make it easier to overcome the temptation to put off saving. We designed an exercise allowing account holders to “meet” their future selves, applying an aging photo filter to a selfie through a smartphone app, to make their needs in retirement feel vivid. The result was a 13% increase in the number of account holders making contributions.

The path forward: moving beyond voluntary contributions

We’ve learned a lot from this collaboration about techniques that, when combined and scaled across the millions of retirement account holders in Mexico, have great potential to meaningfully increase retirement savings. Despite these successes, our work in Mexico has also underscored the need for more comprehensive solutions that have proven effective in other contexts, such automatic enrollment into retirement savings at a higher default rate and gradual increases in contribution amounts as income grows. To ensure that the 60% of Mexicans who work in the informal sector aren’t left behind, it’s also critical to create a more inclusive system with alternative paths for enrollment and contribution. Doing so will require collaboration among policymakers and industry stakeholders to continue to develop, test, and scale new solutions for the populations that are hardest to reach, but also most vulnerable.

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