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Why Many US Parents Fail to Collect Government Benefits
- By
- August 22, 2023
- CBR - Economics
Government assistance can be a lifeline for struggling families. During the pandemic, however, many US families missed out on as much as $3,600 in annual support payments per child because they didn’t apply for one reason or another.
Government efforts to get them to do so might have been more effective if the benefits were framed in weekly or monthly terms, matching how people budget, according to research by University of Pennsylvania’s Wendy De La Rosa, Chicago Booth’s Abigail Sussman, and Code for America’s Eric Giannella and Maximilian Hell.
The American Rescue Plan Act of 2021 expanded the child tax credit for low-income families from $2,000 a year to $3,600 for children younger than 6 and to $3,000 for those aged 6–17. Most families got automatic monthly deposits to their bank accounts, and the program ultimately helped more than 65 million US children. But when it expired in December 2021, funds intended for an additional 4 million children remained unclaimed, largely because the families made too little to file tax returns and the Internal Revenue Service didn’t have the information required to automate their enrollment.
The government launched programs encouraging these families to claim their CTC benefits, emphasizing the annual amounts, in keeping with established practice. The researchers tested whether communicating weekly or monthly figures, more in line with how households think about their spending, would have worked better.
Make the benefit match the budget
In a pilot study involving lower-income households, the researchers established that fewer than 1 percent reported budgeting on a yearly basis, while 28 percent reported doing so weekly, and 40 percent, monthly.
Then they conducted three large-scale field experiments using text messages sent to a random sample of CTC-eligible US residents that Code for America—a nonprofit focused on improving government services—had in its database.
In the first experiment, the researchers texted close to 8,500 people, some of whom received a message highlighting the $3,600 annual amount and others, a message describing the benefit as $69 a week. All were encouraged to visit the CTC website to claim their benefits. The researchers then tracked which participants did so. They find that 35 percent of participants who received the text highlighting the $69 weekly amount visited the site, compared with 28 percent who visited after receiving the $3,600 text.
In the second experiment, with about 8,250 participants, the benefit amount was changed to $300 monthly. This time, 32 percent of recipients who were sent the monthly figure via text visited the CTC website, compared with 27 percent who visited it after receiving the text with the annual amount.
The third experiment, unlike the first two, asked people to think directly about their budgeting habits. Nearly 14,200 participants did so before being told about the monthly or yearly CTC amount. The researchers find that when a monthly budget was prompted, clicks to the website increased relative to the prompting of a yearly budget.
One takeaway is that the average participant finds $69 weekly or $300 monthly to be more relevant to their lives than $3,600 annually, says Sussman.
“People prefer income streams when they are described in terms that match their common budgeting periods because this match may help them simplify, plan, and effectively manage their resources,” the researchers write.
Wendy De La Rosa, Abigail Sussman, Eric Giannella, and Maximilian Hell, “Communicating Amounts in Terms of Commonly Used Budgeting Periods Increases Intentions to Claim Government Benefits,” Proceedings of the National Academy of Sciences, September 2022.
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