Creating and Testing Social Policy: Evidence from SEED for Oklahoma Kids Research Yunju Nam, Youngmi...
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Transcript of Creating and Testing Social Policy: Evidence from SEED for Oklahoma Kids Research Yunju Nam, Youngmi...
![Page 1: Creating and Testing Social Policy: Evidence from SEED for Oklahoma Kids Research Yunju Nam, Youngmi Kim, Margaret Clancy, Michael Sherraden, and Robert.](https://reader033.fdocuments.in/reader033/viewer/2022051820/56649c915503460f9494bcec/html5/thumbnails/1.jpg)
Creating and Testing Social Policy:Evidence from SEED for Oklahoma
Kids Research
Yunju Nam, Youngmi Kim, Margaret Clancy, Michael Sherraden, and Robert Zager
Federal Reserve Bank of Dallas November 1, 2011
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Child Development Accounts
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Child Development Accounts (CDAs)
• Child Development Accounts are saving and asset building accounts, initiated by public policy.
• Ideally, CDAs are lifelong (begin at birth), universal (available to all), and progressive (greater subsidies for the poorest children).
(for policy concept, see Sherraden, 1991)
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Asset Building for Development Often via Education
• CDA policies are focused on asset building for child development, education, lifelong well-being.
• Saving behavior matters for CDAs, but this is not the primary focus.
• Psychological and behavioral effects may include hope, control, future orientation, effort (e.g., Elliott & Beverly, 2011).
• By design, CDA policies can be very paternalistic, with automatic enrollment, restrictions on access until a certain age, and restrictions on use.
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Inclusive 529 College Savings Plans
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Inclusive 529 College Savings Plans
• Some state 529 plans are more progressive than others.
• A number of states have implemented inclusive policy strategies.
• Inclusive features make 529s more accessible to low- and moderate-income families.
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• Most plans require small initial contributions (median is $25).
• Eleven states provide matching contributions for low-to-moderate income families.
• States offer a limited selection of funds with different risk and return characteristics.
• The trend toward low fees continues, but not all plans are low cost .
529 Plan Potential for Inclusion
(for 529 policy assessment, see Clancy et al., 2004, 2006, 2011)
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Potential of 529 Plans for a Universal and Progressive CDA in the US
• Every state has at least one 529 plan.
• Inclusive features that can be built into the policy—which would not happen via saving products in the market.
• Centralized CDA administration facilitates outreach, a systematic database, and assessment.
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SEED for Oklahoma Kids (SEED OK)
Research Design and Early Results
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A Policy Test of CDAs:SEED for Oklahoma Kids (SEED OK)
• Policy and research initiative designed to test the idea of universal and progressive accounts, lifelong asset building
• SEED research is multi-method: Experiment, Account Monitoring, and In-depth Interviews
• Oklahoma selected for the SEED OK experiment through a competitive process
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• An experiment with random sample of newborns from a statewide population
• Oversamples of African Americans, Latinos, and American Indians
• Random assignment to treatment group (n=1,358) and control group (n=1,346)
• Integrated into an existing policy structure—the Oklahoma College Savings Plan, or OK 529
SEED OK Research Design
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SEED OK Research Data
Type Dates Source
Birth records April - Jun 2007 andAug - Oct 2007
Oklahoma StateDepartment of Health
Baseline survey Aug 2007 - Apr 2008 RTI International
OK 529 account and savings records
Jan 2008 - June 2009(quarterly through 2014)
Program Manager(TIAA-CREF)
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Oklahoma College Savings Plan (OK 529)
• State-sponsored 529 savings program
• Tax deduction and tax-free growth of earnings
• Can be used for post-secondary education at:• Colleges and universities• Graduate and post-graduate schools• Community colleges• Certain proprietary and vocational schools
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SEED OK 529 Savings Plan Account
• Auto-enrollment in the OK 529 for treatment group newborns
• Account owned by the state
• Treatment child named as beneficiary
• $1,000 initial deposit
• Invested in the OK 529 Balanced Option
• State-owned account can be used for post-secondary education until child reaches age 30
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Other Features of SEED OK Design
• Savings match for income-eligible treatments on their deposits of up to $250 per year for 4 years (2008 - 2011)
• Follow-up telephone interviews with all treatments and controls in 2011 and possibly again later
• In-depth interviews with select SEED OK participants from Fall 2009 through Spring 2010 and possibly again later
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SEED OK 529 Accounts
• SEED OK tracks three types of OK 529 accounts for the child:
• State-owned• Participant-owned (parent or caregiver)• Other private (relatives or friends)
• As a policy concept, these can be viewed together as a single integrated 529 account.
• Any control has complete access to open a 529 account in the SEED OK experiment.
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SEED OK Accounts and Incentives
Account Type Treatment Control
State-owned account
• OK 529 account opened automatically with $1,000
• No state-owned OK 529 account
Participant-owned account
• OK 529 account opening encouraged
• Time-limited $100 account opening incentive
• Savings matched, if income eligible
• OK 529 account may be opened
• No information or incentives offered
Other private account
• Family, friend, etc. can open account for child
• No incentives
• Family, friend, etc. can open account for child
• No incentives
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A Compromise to Test the Policy
• The CDA policy concept is a single, integrated account into which all deposits would flow.
• SEED OK uses an existing policy structure (OK 529), and so must use the current account structure.
• In SEED OK, different deposits go into different 529 accounts, all with the child as the beneficiary.
• This is cumbersome and imperfect—but allows us to test the policy concept.
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SEED OK Key Research Questions
Can Child Development Accounts increase:
(1) 529 account holding,
(2) saving by participants, and
(3) total 529 assets?
Later, SEED OK can assess (4) child development and well-being.
(see Nam et al., 2011)
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529 Account Holding
99.9% for treatments vs. 2.3% for controls, and 16.4% of participants have their own account
Huge impacts―compare to:
• 62% take up of 529 account in MI SEED impact assessment, with $800 initial deposit, but requiring sign up (Marks et al, 2009).
• 3.8% of OK households with children up to age 18 holding any OK 529 account (State Treasurer, 2011).
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Participant Savings
Average savings of $43 by treatments vs. $13 by controls in their private accounts:
• Effect size (saving amount), so far, is positive but quite modest.
• We know from qualitative research that families have a hard time thinking about college savings with newborns (especially during a recession).
• Nevertheless, positive impact on “seeding” college savings for people who might not otherwise save. We will see if they save more going forward.
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Asset Building
Mean 529 total assets are $1,080 for treatments vs. $40 for controls:
• Because asset building is a main SEED OK goal, this is strong and meaningful policy result.
• To be sure, this outcome is structured and paternalistic—as all CDA policies are...but Social Security and 401(k) retirement plans are also structured and paternalistic.
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Overall Account Openingand Savings Impacts
• State-owned account: close to 100% success of automatic account opening with $1,000 deposit for treatment participants (one out of 1,361 declined account)
• Impacts of SEED OK on account opening and on deposit and saving amounts are statistically significant for the state-owned and participant-owned accounts, but not for other private accounts
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Summary and Conclusions:Child Development and Well-Being
The long-term test will be whether CDAs eventually yield positive impacts on:
• parental attitudes and behaviors • child development in early years• child expectations for education• child educational performance• child health and other measures of well-being
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Summary and Conclusions:Toward an Inclusive CDA Policy?
• If a universal and progressive CDA policy is desirable (in the way that universal Social Security is desirable), then SEED OK has demonstrated policy feasibility by using the 529 policy system.
• If the critical policy test is positive impacts on education and other measures of well-being of children, then SEED OK is still in the early stages.
• Wave 2 of the survey has just been completed.
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Acknowledgements
SEED OK:
• Policy Demonstration: Oklahoma Governor, Treasurer, and Department of Health; TIAA-CREF
• Funders: Ford Foundation, Charles Stewart Mott Foundation, Lumina Foundation for Education
• Survey Research: RTI International