Transcript Slide 1

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
Child Development Accounts
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)
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.
Inclusive 529 College Savings Plans
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.
529 Plan Potential for Inclusion
• 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 .
(for 529 policy assessment, see Clancy et al., 2004, 2006, 2011)
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.
SEED for Oklahoma Kids (SEED OK)
Research Design and Early Results
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
SEED OK Research Design
• 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 Data
Type
Dates
Source
Birth records
April - Jun 2007 and
Aug - Oct 2007
Oklahoma State
Department of
Health
Baseline survey
Aug 2007 - Apr 2008
RTI International
OK 529 account
Jan 2008 - June 2009 Program Manager
and savings
(quarterly through 2014) (TIAA-CREF)
records
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
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 postsecondary education until child reaches age 30
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
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.
SEED OK Accounts and Incentives
Account Type
State-owned
account
Treatment
• OK 529 account opened
automatically with $1,000
• OK 529 account opening
Participantowned
account
Other private
account
•
•
•
•
Control
• No state-owned OK 529
account
• OK 529 account may be
encouraged
opened
Time-limited $100
• No information or
account opening incentive incentives offered
Savings matched, if
income eligible
Family, friend, etc. can
• Family, friend, etc. can
open account for child
open account for child
No incentives
• No incentives
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.
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)
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).
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.
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.
Overall Account Opening
and 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 participantowned accounts, but not for other private
accounts
Summary and Conclusions:
Child Development and Well-Being
The long-term test will be whether CDAs eventually
yield positive impacts on:
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•
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•
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parental attitudes and behaviors
child development in early years
child expectations for education
child educational performance
child health and other measures of well-being
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.
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
Resources and Contact Information
http://csd.wustl.edu/
[email protected] 314-935-8178