Understanding Economic Risk for Low-Income Families: Economic Security, Program Benefits, and Decisions About Work
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Understanding Economic Risk for Low-Income Families
Prepared for:
U.S. Department of Health and Human Services, Assistant Secretary for Planning and Evaluation
U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation
Key Findings
- Benefit program participants were less likely to say they would accept a higher-paying job if it meant facing benefit loss. However, knowing that lost benefits could be easily resumed (if needed again later) made respondents more likely to accept a higher-paying job and more willing to lose benefits. more likely to accept higher-paying jobs.
- Respondents were also more likely to accept higher-paying job opportunities associated with more stable job situations compared to unstable job situations.
- Lower marginal tax rates and higher net income increases (earnings increase minus value of benefit loss) each, on their own, made benefit program participants more likely to accept higher-paying jobs.
- The key findings were consistent across genders, races and ethnicities, parental statuses, and which benefit program the participant received. However, there were important differences in the relative magnitude of the impacts.
Each year more than one-quarter of all Americans rely on means-tested benefits for basic needs such as food, health insurance, housing, and child care. Recipients of these benefits have to consider trade-offs when deciding to accept a new, higher-paying job opportunity: Will the greater income outweigh the potential loss of benefits when their earnings increase? People who lose benefits most often have to start the application process from scratch. In addition to the burden of reapplying, there is a risk that their application will be rejected, or they may have to spend weeks or months without needed benefits while waiting for their application to be approved. Given this risk and uncertainty, people might be reluctant to take higher-paying jobs that push their income above the eligibility thresholds for their benefits—especially if the recipient views the job opportunity as unstable and likely to end unexpectedly, at which point they would need benefits again.
To understand how benefit recipients consider new opportunities, we conducted a discrete choice experiment with recipients of four means-tested benefit programs. Respondents considered five vignettes describing fictional people benefit recipients who were faced with a decision of whether to take a higher-paying job. For each vignette, we asked respondents to decide whether the person should or should not take the higher-paying job. We varied the vignettes by pay increase, benefit loss, job stability, and the ease of regaining lost benefits.
We analyzed results using a Bayesian framework which increased the power of the survey to produce meaningful findings. Our results highlight the importance of all three factors in the decisions of survey respondents.
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