Safety-net Benefits Research Articles

Implementing the Expanded Child Tax Credit: What Worked, What Didn’t, and How to Move Forward

The Child Tax Credit (CTC) expansion was an extraordinary experiment not just in policy design but also in policy implementation. As such, it cast light on the possibilities and blind spots of using the tax system to deliver safety-net benefits. The rapid and widespread take-up of the benefit reflected the use of a specific implementation tool that reduced administrative burden for the public: auto-enrollment via the tax system. But use of this tool also excluded families who could benefit from the program but were disconnected from the tax system. These tended to be families with the lowest incomes. Thus, while the CTC expansion offered a classic example of “targeting within universalism” by broadening a policy’s beneficiaries while making it more redistributive, its implementation revealed that a different sort of targeting is needed to reach those with the lowest incomes and to achieve the hoped-for redistributive impact.

Improving Delivery of the Social Safety Net: The Role of Stigma

Abstract Many low-income households in the United States miss out on social safety net benefits because of the information, compliance, and psychological costs associated with take-up of government assistance. Yet, the empirical evidence on the impact of learning and psychological costs on take-up, and how to reduce them, is mixed. Leaning on an administrative burden framework, this article measures the role of reducing learning costs and stigma on demand for rental assistance in two field experiments (N = 117,073) conducted in two US cities. We find that providing information about emergency rental assistance increased program application requests by 52% compared to a no-communication control group. Moreover, subtle framing changes aimed at destigmatizing rental assistance increased engagement with the communication by 36% and increased application requests by about 18% relative to an information only group, with potentially larger effects for renters of color. In two subsequent online experiments (N = 1,258), we document that the destigmatizing framing reduces internalized stigma, without affecting perceptions of the program itself.

Linking Safety Net Schemes and Poverty Alleviation in Nigeria

This article discusses shared experiences of receiving safety net benefits by research participants and whether such benefits help poverty alleviation. Towards that end, it suggests improving safety net schemes. By following a qualitative research approach and purposive and snowball sampling methods, 24 beneficiaries were interviewed in the six geopolitical zones of Nigeria. With the aid of Nvivo 12pro, content and thematic technique were used to analyse the data. Key themes that shaped the participants’ experiences were: Institutional framework, strategic plan and documentation, continuous improvement and follow-up, community targeting and reliance on state support. It argues that the adoption of safety net schemes towards poverty alleviation needs to have an institutional framework and local engagement. Overall, it reenforces the government’s role in human capacity development by unravelling the relevance of policy and institutional programmes as a guiding path towards ameliorating the poverty level not only in Nigeria but also in similar countries in Africa.

A First Step in Understanding Influences on System-Involved Women’s Changes in Financial Need

Financial need strongly predicts women’s recidivism. However, little is known about influences on change in system-involved women’s financial need. Qualitative data from women with significant increases and decreases in financial need show the importance of tailored assistance finding jobs to improve financial status, and the relevance of worsening physical health and limited access to safety-net benefits to increasing financial need. Prior convictions act as a barrier to employment especially for Black women, and younger women most often associated financial problems with lack of mental health care. Gender, race, and age responsive assistance is needed to improve system-involved women’s financial standing.

State‐level social safety nets for families coping with job loss

AbstractCritics of the modern American welfare state allege that safety net benefits discourage work by providing sufficient resources to replace earned income. Yet, research in social policy has long depicted the US safety net as parsimonious and inadequate relative to its European counterparts, even when considering benefits from programs that reward favorable work histories. Other theories predict variability across states and regional clustering even amid low overall spending. Moreover, the recent COVID‐19 outbreak has exposed the insufficiency and lack of resilience of the major US safety nets in the face of unprecedented unemployment. This study examines the benefit expenditures on three safety net programs available to American families with recently unemployed breadwinners—Temporary Assistance for Needy Families, Supplemental Nutrition Assistance Program, and Unemployment Insurance—as a proportion of median annual income for a given state‐year between 1997 and 2017. We examine the overall spending as well as variability and clustering across states. We find that the average benefit expenditure comprises only 42% of median income, and while there is substantial variability around this average, only one state is above 78%. We also find that spending levels appear to be regionally clustered. We conclude that safety nets for the recently unemployed and their families are weak relative to earned income and that the extent of this weakness varies by state, with some regional patterning.

Efficiency versus Equity in the Provision of In-Kind Benefits

The government often contracts with private firms to deliver in-kind safety net benefits. These public-private partnerships generate agency problems that could increase costs, but cost-containment reforms may discourage firm participation. We study a 2012 reform of California's Special Supplemental Nutrition Program for Women, Infants, and Children that reduced the number of small vendors. We show that within-ZIP-code access to small vendors increases take-up among first-time and foreign-born mothers, suggesting that small vendors are distinctly effective at lowering take-up barriers among women with high program learning costs. Thus, cost containment reforms may have unintended consequences of inequitably reducing program access.

"He Needed Just About Everything": Caring for Aging Adults Postincarceration.

We conducted a thematic analysis on semi-structured interviews with 11 caregivers. Caregivers discussed how prior incarceration coupled with aging present barriers to housing, employment, and safety-net benefits-making caregiving more difficult. Caregivers assist their older care recipients to develop essential life skills (e.g., scheduling tasks, applying for services) and navigate the dynamic aging process (e.g., loneliness, illness). Caregivers struggle to gain care recipients' trust, often due to their past trauma. Caregivers play essential roles supporting older adults postincarceration, yet they experience significant challenges with limited resources. This study informed the development of a resource guide to assist caregivers. Dedicated programs and policies are needed to address these needs at the local level.

How Much Do Outside Options Matter? The Effect of Subsidized Health Insurance on Social Security Disability Insurance Benefit Receipt

New government health insurance programs may affect participation in existing safety-net benefits that provide health insurance as a secondary aim. We examine whether the outside options for health insurance made available by the Affordable Care Act affected Social Security Disability Insurance (DI) application decisions. Using the universe of U.S. individual income tax records spanning 2007-2016, we first estimate the effect of Medicaid expansions using a state difference-in-differences identification strategy, but find small and statistically insignificant estimates. However, when we estimate the effect of being eligible for high vs. low Marketplace subsidies based on geography, we find some evidence consistent with subsidies increasing DI claiming among those with prior access to Employer Sponsored Insurance, and decreasing DI claiming otherwise. Overall, we find suggestive evidence that outside options for health insurance do matter, though magnitudes are small and results are statistically precise only for Marketplace coverage.

Why Employment During and After COVID-19 Is a Critical Women's Health Issue.

Why Employment During and After COVID-19 Is a Critical Women's Health Issue.

Does a Guaranteed Basic Income Encourage Entrepreneurship? Evidence from Alaska

While the concept has been around for years, recently the policy notion of a “guaranteed basic income (GBI) or universal basic income has had a resurgence of interest. In addition to rationales relating to fairness and response to structural employment shifts due to automation and globalization, another motivation sometimes put forward for these plans is to encourage risk-taking by providing a safety net. One would think this would imply greater entrepreneurial activity if an unsuccessful entrepreneur had the GBI to fall back on. In this paper we investigate a rare long-standing example similar to a GBI in the US, the Alaska Permanent Fund Dividend program. This was not put forth as a GBI and is frankly too small an annual amount to fully allow an individual to rely on these funds, but for a moderate-to-large family the APF can replace a large share of a poverty-level of income. Receipt of the APF also does not preclude a family from receiving other safety net benefits (e.g., food stamps, unemployment compensation), suggesting that the downside risk for a potential entrepreneur may be lower than in other US states. We initially examine trends in small-firm births in Alaska over time from the Census Bureau's Business Dynamics Statistics 1977-2014 before and after the institution of the APF program (the first payment was in 1982) relative to other US states to investigate a possible impact on entrepreneurship, with results suggestive of a positive effect (perhaps wearing off over time). We then turn to micro data to look at changes in self-employment behavior in Alaska, with somewhat similar findings.

Mitigating loss of health insurance and means tested benefits in an unconditional cash transfer experiment: Implementation lessons from Stockton's guaranteed income pilot.

•Cash transfers, universal basic income, and guaranteed income have re-emerged as potential solutions to income volatility.•Methods used in Stockton's guaranteed income experiment, are testing how GI can exist alongside existing safety net benefits.•A multi-tiered approach to mitigating potential means tested benefits loss is both effective and ethically sound.

Transfer Payments in Appalachia: Understanding Changes in Per Capita Transfer Payments in an Integrating Region

Coming out of the 1960s, unearned income has expanded to comprise over one-third of total personal income. Transfer payments, commonly social safety net benefits, comprise the largest component. In Appalachia, where transfer payments have historically been relied upon at an elevated level, their importance has decreased as the region integrates into national economic processes and economic structures change. This integration has been uneven, with multiple theories and processes offered as explanation. As such, no complete understanding of the factors leading to a change in transfer payment income in Appalachia has yet been made. To inform this deficiency, this paper utilizes spatial regression techniques to examine the role of Appalachian disadvantage and economic integration in county level transfer payment income change in Appalachia, 1990–2010. Results indicate that trajectory stemming from local structures of Appalachian disadvantage drive transfer payment change more so than specific industries related to neo-classical growth. Further, results identify a spatial structure where factors of disadvantage (e.g. unemployment) produce stronger spillover effects than factors of advantage (e.g. manufacturing growth) in changing transfer payment reliance.

Bank Acquisitiveness and Bailouts: Evidence on European Banks during the 2008 Financial Crisis

Theoretical prediction that banks may pursue M&A strategies to exploit too-big-tofail subsidies caught attention in the backdrop of 2008 financial crisis. Using a sampleof 1603 M&A transactions of large European banks over the period of 1990-2006, weinvestigate whether and how bank acquisitiveness relate with their bailout supportduring the recent financial crisis. Our findings suggest towards a positive relation ofbank acquisitiveness not only with the probability of external support but also withthe level of such support. We also find that the bailout beneficiary banks in our sampledemonstrated a significant restraint in their post-crisis acquisitiveness. While our findings broadly substantiate ex-post materialization of safety-net benefits for highlyacquisitive banks, terming the post-crisis restraint on acquisitive behaviour of bailoutbeneficiaries as voluntary or the one imposed by regulators rests an open question.

Policy Analysis: Minimum Wage in the Portland Metropolitan Area

Oregon’s current minimum wage of $9.25 per hour is unsustainable as it does not provide adequate nutritional resources or housing for full time workers. Additionally, employers of minimum wage workers often rely on social safety net benefits for their workers, which effectively publicly subsidizes wages. This creates an unnecessary burden on the taxpayer. Oregon Senate Bill 1532 increases the minimum wage incrementally within Portland’s Metropolitan Area to $14.75 in 2022. This wage provides full time minimum wage workers enough income for adequate nutrition and reasonable housing while reducing worker reliance on social safety net programs.

The influence of gender and product design on farmers' preferences for weather-indexed crop insurance.

Theoretically, weather-index insurance is an effective risk reduction option for small-scale farmers in low income countries. Renewed policy and donor emphasis on bridging gender gaps in development also emphasizes the potential social safety net benefits that weather-index insurance could bring to women farmers who are disproportionately vulnerable to climate change risk and have low adaptive capacity. To date, no quantitative studies have experimentally explored weather-index insurance preferences through a gender lens, and little information exists regarding gender-specific preferences for (and constraints to) smallholder investment in agricultural weather-index insurance. This study responds to this gap, and advances the understanding of preference heterogeneity for weather-index insurance by analysing data collected from 433 male and female farmers living on a climate change vulnerable coastal island in Bangladesh, where an increasing number of farmers are adopting maize as a potentially remunerative, but high-risk cash crop. We implemented a choice experiment designed to investigate farmers' valuations for, and trade-offs among, the key attributes of a hypothetical maize crop weather-index insurance program that offered different options for bundling insurance with financial saving mechanisms. Our results reveal significant insurance aversion among female farmers, irrespective of the attributes of the insurance scheme. Heterogeneity in insurance choices could however not be explained by differences in men's and women's risk and time preferences, or agency in making agriculturally related decisions. Rather, gendered differences in farmers' level of trust in insurance institutions and financial literacy were the key factors driving the heterogeneous preferences observed between men and women. Efforts to fulfill gender equity mandates in climate-smart agricultural development programs that rely on weather-index insurance as a risk-abatement tool are therefore likely to require a strengthening of institutional credibility, while coupling such interventions with financial literacy programs for female farmers.

Housing hardship and energy insecurity among native-born and immigrant low-income families with children in the United States.

The costs for rent and utilities account for the largest share of living expenses, yet these two critical dimensions of material hardship have seldom been examined concurrently in population-based studies. This paper employs multivariate statistical analysis using American Community Survey data to demonstrate the relative risk ratio of low-income renter-occupied households with children experiencing "rent burden," "energy insecurity," or a "double burden" as opposed to no burden. Findings suggest that low-income households are more likely to experience these economic hardships in general but that specific groups are disproportionately burdened in different ways. For instance, whereas immigrants are more likely to experience rental burden, they are less likely to experience energy insecurity and are also spared from the double burden. In contrast, native-born African Americans are more likely than all other groups to experience the double burden. These results may be driven by the housing stock available to certain groups due to racial residential segregation, decisions regarding the quality of housing low-income householders are able to afford, as well as home-country values, such as modest living and energy conservation practices, among immigrant families. This paper also points to important policy gaps in safety net benefits related to housing and energy targeting low-income households.

Financial incentives to work in the context of a complex reform package and growing wages: the Polish experience 2005–2011

We examine the consequences of changes in work incentives in Poland between 2005 and 2011 resulting from a complex tax and benefit reform package and substantial real wage growth. While marginal and participation tax rates (PTRs) in the majority of analysed cases fall as a result of the introduced reforms, the conclusions from looking at replacement rates (RRs) for the population eligible for means tested benefits are generally different. These suggest that despite significant tax giveaways incentives on the labour market weakened for families with children and for those eligible to safety net benefits. Yet despite these negative policy implications, we show that work incentives improved substantially over the period due to significant real wage growth. When analysing the effect of the reforms on financial incentives to work, we often find conflicting conclusions when using the PTRs and RRs to reflect financial attractiveness of employment. This is not necessarily surprising, but serves as a note of caution on the use of each of them independently.

‘Too systemically important to fail’ in banking – Evidence from bank mergers and acquisitions

In this paper, we examine the systemic risk implications of banking institutions that are considered ‘Too-systemically-important-to-fail’ (TSITF). We exploit a sample of bank mergers and acquisitions (M&As) in nine EU economies between 1997 and 2007 to capture safety net subsidy effects and evaluate their ramifications for systemic risk. We find that safety net benefits derived from M&A activity have a significantly positive association with rescue probability, suggesting moral hazard in banking systems. We, however, find no evidence that gaining safety net subsidies leads to TSITF bank's increased interdependency over peer banks.

Long-Term Bank Funding Cost: Does Sovereign Matter?

We analyze the long-term funding costs faced by banks from US, UK and euro-area on the international bond market with a focus on the value of implicit and explicit public guarantees. By looking at the risk-premia at issuance on 5,500 bonds, we find that: i) both explicit guarantees as well as sovereign creditworthiness have a substantial effect on the cost of bonds; ii) large institutions enjoy lower issuance costs, most likely due to the too-big-to-fail safety net; iii) since the onset of the global financial crisis, systemic banks (the so called G-SIFIs) underwent an enhanced market discipline paying an additional premium on new bond issuances. In particular, we show that non AAA-rated governments add a burden to the cost of debt issuance by the domestic banking system. This implicit negative support intensified in the most acute phase of the euro-area sovereign debt crisis: we estimate that the absence of the backing of an AAA-rated government amounted, ceteris paribus, to an average increase of 150bp in the cost paid by banks when issuing unsecured bonds in 2011. However, once we restrict the sample to banks for which CDS spreads are priced in the market – usually larger institutions which are more involved in the issuance activity – we find that the bond premium reflects more closely the characteristics of each institution (soundness and creditworthiness), with the role of government somewhat reduced. By distinguishing between banks’ absolute size and systemic relevance, we find that financial investors were able to disentangle the two issues. Or results suggest that the larger the magnitude of the balance sheet the lower the premium paid at launch on bonds, which in turn suggests that the safety net benefits granted to too-big-to-fail institutions encompass also lower funding costs on the primary bond market. At the same time, we find that there are matters of concern regarding the systemic relevance of financial institutions: their involvement in complex derivative trades and their business model have made them less transparent and less easy to price. In this respect we find evidence of enhanced market discipline: since the onset of the global financial crisis systemically important banks – which before the crisis were enjoying a reduction in the spread – paid, ceteris paribus, a larger premium of around 50 basis points on their bond issuance.

Safety-net benefits conferred on difficult-to-fail-and-unwind banks in the US and EU before and during the great recession

This paper investigates the links between regulatory arbitrage, financial instability, and taxpayer loss exposures. We model and estimate ex ante safety-net benefits from increased leverage and asset volatility at a sample of large banks in US and Europe during 2003–2008. Hypothesis tests indicate that, in both crisis and precrisis years, difficult-to-fail-and-unwind (DFU) banks enjoyed substantially higher ex ante benefits than other institutions. Compared to the US sample, safety-net benefits prove significantly larger for DFU firms in Europe and bailout decisions are less driven by asset size. Introducing a proxy for differences in government susceptibility to regulatory capture helps to explain bailout decisions in Europe. Our findings suggest that authorities in both venues could better contain safety-net benefits if they refocused their information systems on monitoring volatility as well as capital.