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May 19 -- The Office of the Assistant Secretary for Planning and Evaluation (ASPE), Department of Health and Human Services (HHS), invites comments to OMB by June 27, 2022 regarding its proposed study: Understanding Economic Risk for Low Income Families: Economic Security, Program Benefits, and Decisions about Work.

The purpose of this project is to understand the role of economic risk in public benefit recipients’ decision making about whether to increase earnings. This study will investigate the factors that influence the decisions made by people with low incomes to increase earnings (or not) by presenting beneficiaries with vignettes about other people with the opportunity to increase their earnings and asking them what decision they would make in similar circumstances. The vignettes will vary the risk of an opportunity, the ease of regaining benefits if income later dropped, and the extent of the earnings increase. The job opportunities and associated risks will vary systematically. The choices that study participants recommend will provide insight into the relative importance of these different factors – both alone and in combination. Guided by a better understanding of the role of risk and risk tolerance in families’ decisions about work, the government could design policy levers to reduce risk and thereby support families’ choices to increase earnings and achieve greater economic security.

Increasing the employment earnings of individuals is central to federal poverty reduction policy for working-age adults. Most social services aim to serve as temporary supports for adults who will eventually return to the workforce. For this reason, it is important to understand how policies can incentivize or disincentivize increased employment. Central to this concern is understanding how to phase out public support for people as their earnings increase without discouraging benefit recipients from pursuing opportunities to improve their circumstances.

A previous ASPE study conducted with working parents who received one or more government benefits found that, when faced with a decision about increasing earnings, these parents considered multiple complex (and at times competing) factors (Chien et al., 2021). In addition to the more obvious consideration of benefit reductions, working parents also considered at least two dimensions of economic risk when deciding whether to increase earnings: (1) the risk of an earnings reduction (for example, from job loss) at a later time; and (2) in the case of an earnings reduction, the risk of being unable to regain benefits lost due to the original earnings increase.

Unfortunately, little is known about how beneficiaries perceive job opportunities that might result in loss of benefits. The research team is aware of simulation studies that illustrate the effects of policy on beneficiaries’ income under different scenarios. The research team is also aware of qualitative research on beneficiaries’ experiences. However, to our knowledge there is no quantitative data on how beneficiaries decide whether to pursue job opportunities. In addition, discourse about benefits cliffs often conflate several different policy challenges that are important and interrelated, but which might have distinct effects on beneficiaries’ perceptions and choices. These challenges include abrupt cliffs, steep cliffs, risks involved with pursuing opportunities to increase earnings, and challenges in regaining benefits should earnings decline.

The most serious cliff effect is a policy that leads social benefits to drop dramatically in response to small increases in earnings, producing a net loss of resources for beneficiaries. For example, eligibility for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ends abruptly as soon as household income exceeds a specific threshold. Policymakers and economists largely agree that this kind of benefits cliff is a challenge that prevents beneficiaries, employers, and policymakers from achieving their preferred economic outcomes (National Conference of State Legislators, 2019).

Steep cliffs in which benefits decline at a rate that does not exceed earnings but lead beneficiaries to feel as though they are running in place are also common (Albeda & Carr, 2017). Policymakers are not always aware of steep cliffs, which sometimes emerge from the combined policy decisions for different federal, state, and local programs. It is likely that, if the rate of decline is too steep, the additional earnings might not seem worth it, especially if acquiring these earnings requires taking a job that is more difficult or time consuming than the beneficiary’s current employment. The extent to which steep cliffs influence employment choice depends on how beneficiaries think about job opportunities. For example, do they tend to focus on the net gain in earnings alone, or do they focus on the difference between their net and gross income?

Beneficiaries raise the risk of accepting new employment and the difficulty of regaining benefits as important elements to the decision to accept a new job (Chien et al., 2021). Although the causes of these concerns are distinct from the cause of benefit reductions, they can contribute to cliff effects by lowering the expected value of a job opportunity, which people form by combining the value of each possible outcome (Barberis, 2013). When making this calculation, people might discount the value of increased wages because the job might not work out and, if it does not, they might not be able to regain the benefits they relied upon.

The decision to accept a new job can be complicated and high stakes. It is difficult to know how different elements of a job opportunity work together to motivate or discourage people to act. Understanding whether these features affect decision making alone or in concert, their relative influence on decision making, and whether their impacts vary across subgroups, will provide evidence about which policy levers are most likely to influence behavior. The research team will share these findings with federal agencies that administer benefits programs and will use them to inform decisions about how to encourage increases in employment earnings. Additionally, no legal or administrative requirements necessitate the collection. ASPE is undertaking the collection at the discretion of the agency.

The goal of this project is to better understand the information beneficiaries use to make decisions about employment opportunities and how this information might be incorporated into choice of whether to accept a new position. More specifically, the research team examines three factors that have direct impacts on the expected value of a job opportunity: 1) the risk of later job loss, 2) the ease of regaining benefits, and 3) the level of earnings increase. The study will examine whether these factors could be important for beneficiaries’ decision making and, if so, estimate the relative magnitude of their impact. The research team expects the information collected to contribute to the body of knowledge on Administration for Children & Families (ACF) programs.  

This study will examine the following research questions (RQs):

RQ 1:     How do potential earnings affect job acceptance rates?
RQ 1a:    Are beneficiaries more likely to accept jobs with higher gross earnings?
RQ 1b:    Are beneficiaries less likely to accept jobs that result in greater benefits     loss, holding net earnings constant?

RQ 2:     Are beneficiaries less likely to accept high-risk job opportunities—that is, those less likely to result in long- term employment?

RQ 3:     Are beneficiaries more likely to accept job opportunities when it is easier to regain benefits if needed?
RQ 3a:    Are beneficiaries more likely to accept a job if benefits can be automatically regained if needed compared to if they must reapply for them?
RQ 3b:    Are beneficiaries more likely to accept a job if they can retain their benefits than if they can be automatically regained if needed?

RQ 4:     Do the factors listed in RQs 1–3 interact with one another? For example, does the decision to take a high-risk job depend on how easy it is to regain benefits if needed?

RQ 5:     Do the factors listed in RQs 1–3 depend on the type of benefit that might be lost? For example, is the difficulty of regaining benefits of greater concern for Supplemental Nutrition Assistance Program (SNAP) beneficiaries (who lose access to these benefits during the redetermination process) than for Medicaid beneficiaries.

The study will use a discrete choice experiment to explore the importance of these considerations when low-income individuals are presented with a hypothetical opportunity to increase earnings. Statistical analysis will explore interactions between factors and threshold effects. The focus population will be persons currently receiving benefits from at least one of the following programs: Supplemental Nutrition Assistance Program (SNAP), Medicaid/Children's Health Insurance Program (CHIP), housing assistance, Child Care Development Fund (CCDF) subsidies, and/or Temporary Assistance for Needy Families (TANF). The study will explore whether different preferences are exhibited by parents with children and by persons of different races and ethnicities.

This study strives to improve the quality of data collected about how benefit recipients make decisions. To achieve this, we will recruit 2000 benefits recipients and ask them to complete a web survey in which they make decisions about different hypothetical job opportunities.  

Participants will complete a one-time survey with several data collection components. Survey respondents will be recruited from NORC’s AmeriSpeak panel. The first section of the survey collects relevant demographic and biographical information. Next, respondents will hear five vignettes describing different job opportunities. The job opportunities will have varied financial benefits (wage increases and benefits loss). The opportunities will also have varied risks that the job opportunity might or might not work out and different levels of ease or difficulty to regain benefits.  

The study is exploratory, using a within-subjects design and standardized vignettes to maximize the ability to detect differences between treatment levels. The study will provide some insight into whether each of these factors has an independent effect on beneficiaries’ decision making, or if they are likely to interact with each other.  

The characteristics of the job opportunities will be varied simultaneously within a single factorial experiment. A factorial experiment is one that simultaneously examines several factors, each of which can have two or more levels or categories. Using a factorial design makes it possible to test a number of different treatments concurrently and to consider how the effects of each factor might interact with each other. Furthermore, a factorial design will allow the researchers to observe why people make certain decisions about employment opportunities and the availability of benefits. For example, the research team will observe the willingness for people to accept safer vs. riskier job opportunities depending on the ease or difficulty of regaining benefits.

ASPE website: https://aspe.hhs.gov/
HHS submission to OMB: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202205-0990-002 Click IC List for data collection instruments, View Supporting Statement for technical documentation. Submit comments through this site. [Note: Submitted to OMB May 26 -- commenters have 30 days, i.e., until June 27.]
FRN: https://www.federalregister.gov/d/2022-10730

For AEA members wishing to submit comments to OMB, the AEA Committee on Economic Statistics offers "A Primer on How to Respond to Calls for Comment on Federal Data Collections" at https://www.aeaweb.org/content/file?id=5806

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