Introduction
Research Questions
- What does the evidence say about financial incentive interventions for people with low incomes?
- Do financial incentive interventions increase earnings, employment, education or training, and do they reduce the receipt of public benefits?
- What are the most effective financial incentive interventions?
Interventions that use financial incentives reward clients for engaging in specific activities (such as work) or achieving certain goals (such as completing training). This evidence snapshot summarizes what rigorous research can tell us about 16 interventions that used financial incentives as their primary service and the interventions’ impacts on earnings, employment, the receipt of public benefits, and education and training. The data comes from high- or moderate-quality studies conducted between 1992 and 2014 and reviewed by the Pathways to Work Evidence Clearinghouse.
Purpose
This evidence snapshot describes the effectiveness of programs that were identified by the Pathways Clearinghouse as using financial incentives as their primary service. It summarizes what we know about these programs and their impacts so TANF administrators, policymakers, researchers, and the general public can apply the evidence to their context and the questions that matter to them.
Key Findings and Highlights
On average, interventions that use financial incentives improved outcomes, especially earnings and employment. In particular, for intervention participants -- as compared with comparison groups that did not receive intervention services --
- Short-term annual earnings increased by $1,092, and long-term annual earnings increased by $858, on average, across the 15 financial incentive interventions for which these outcomes were examined.
- Short-term employment increased by 3 percentage points and long-term employment increased by 2 percentage points, on average, across the 15 financial incentive interventions for which these outcomes were examined.
- The proportion of individuals receiving public benefits decreased by 1 percentage point in the short term and 3 percentage points in the long term, and the amount of public benefits received increased by $161 in the short term but decreased by $86 in the long term, on average, across the 11 financial incentive interventions for which these outcomes were examined.
- Education and training attainment increased by 2 percentage points, on average, across the five financial incentive interventions for which this outcome was examined.
- Five financial incentive interventions improved more than one type of outcome.
Methods
The Pathways Clearinghouse assigned an effectiveness rating to each intervention in each of four outcome domains: earnings, employment, public benefit receipt, and education and training. The rating describes whether the intervention is likely to produce favorable results in that domain if faithfully replicated with a similar population.
For this snapshot, the Pathways Clearinghouse calculated the average impact for each domain by averaging impacts within moderate- and high-quality studies, then within interventions (because there may be multiple studies on a single intervention), and then across financial incentive interventions. The average includes all studies, not just those with a supported rating or statistically significant findings, because these studies still provide useful evidence in considering the overall effectiveness of financial incentives.
This snapshot describes the interventions using financial incentives that had positive impacts on earnings, employment, public benefit receipt, and education and training, and highlights interventions that were effective in multiple outcome domains.
Citation
Stein, Jillian, and Dana Rotz (2022). Evidence snapshot: Financial incentives, OPRE Report #2022-41, Washington, DC: Office of Planning, Research, and Evaluation, Administration for Children and Families, U.S. Department of Health and Human Services.
Glossary
- Financial incentives:
- The Pathways Clearinghouse defines financial incentives as bonuses that clients receive for engaging in specific activities or achieving certain goals.
- Primary service:
- The Pathways Clearinghouse defines an intervention’s primary service as the principal service of the intervention, meaning (1) a large proportion of intervention group members received and a large proportion of comparison group members did not, and (2) the service was described by the study authors as most integral to the theory of change tested by the study.