Oklahoma Applies Behavioral Economics to Child Care
The state's welfare agency tried new strategies to help parents and child care providers avoid an interruption in benefits.
In Oklahoma, about 39,000 households receive government subsidies to pay for child care. Surprisingly, about two-thirds don't renew their benefits on time. It creates added work for everyone -- from the caseworker, who has to re-interview and reverify the parents' eligibility, to the child care provider, who can experience an interruption in payment.
So a couple of years ago, the Oklahoma Department of Human Services decided to do something about it. They partnered with MDRC, a social policy research organization and a federal contractor, to try three "nudge" experiments, or small interventions that can encourage people to make better decisions. For the past six years, the U.S. Administration for Children and Families (ACF) has funded several projects in seven states to apply the principles of behavioral economics in welfare programs. Now, Oklahoma was applying it to child care subsidies.
Officials tried simply sending reminder postcards to clients. The rate of on-time renewals, however, was virtually the same for those who received postcards and those who didn't. "We weren't really surprised," said Charles Pruett, who manages the child care assistance program for the Oklahoma Department of Human Services. It would be easy for a parent to overlook the renewal notices, he added, since "we mail them stuff all the time."
The nudge experiment that had the clearest positive impact focused on mailing monthly notices to child care providers who listed clients nearing their renewal deadlines. The lists were color coded: green for two months from the deadline, orange for one month and red for three weeks. Providers were instructed to discuss the deadlines with their clients and offer assistance in collecting necessary documents, such as pay stubs.
MDRC also set up a control group of clients who didn't receive postcards and whose providers didn't receive the reminder mailings about upcoming client deadlines. The clients whose providers knew about the renewal deadlines saw a 3 percentage point increase in on-time renewals. While that's relatively small, on a statewide scale that would translate to roughly 1,000 families a year avoiding an interruption in their benefits. "Of course, we hoped it would be more than that," said Pruett. "But we still consider it a success."
Modest impacts appear to be the norm among the series of nudge interventions funded by the ACF. The first to report results was a project involving incarcerated parents in Texas who could avoid mounting debt by opting out of child support payments while in prison; an intervention resulted in an increase of 11 percentage points in those opting out, but the majority of eligible prisoners (about 61 percent) still did not participate. With the Oklahoma child care subsidy experiment, the 3-percentage-point increase "wasn't earth shattering," said Alexander Mayer, a researcher with MDRC, "but the real advantage to these interventions is that they're low cost and scalable."
Indeed, the results have been positive enough that the ACF announced last September it was contracting with MDRC for five more years of behavioral interventions in human services. That's in addition to $4 million the agency awarded in 2014 to seven states and the District of Columbia for pilot projects that use behavioral economics at state child support agencies.
And the Obama administration isn't the only funder interested in nudge experiments to help the public sector. Last year, Bloomberg Philanthropies announced a separate initiative called What Works Cities, which focuses on data-driven performance management and pays for technical assistance from the Behavioral Insights Team, another firm that specializes in applied behavioral economics.
Despite the pilot's success, however, the Oklahoma Department of Human Services is not continuing with the color-coded monthly mailers to child care providers. Instead, Pruett said the department plans to share the same basic information about upcoming renewal deadlines through a data portal where child care providers will be able to check when clients are close to losing their benefits. The cost of mailing the notices statewide would have been about $30,000 a year, according to MDRC estimates. The state would prefer to save money by providing the same information electronically, Pruett said.