Asset-Based Social Programs: A Critical Analysis of Current Initiatives

This paper was prepared for an Organization of Economic Cooperation and Development (OECD) conference on asset-based strategies and has also been published by the OECD.  The paper reviews the current status of asset-based programs, defined as programs intended to assist low-income households to increase their financial assets.  Among OECD countries, only Canada, the UKand the US are identified as having such programs.  Two programs in Canada, one of which is a randomized control experiment (RCT) with Individual Development Accounts (IDAs), and the other an education savings plan, are reviewed.  The RCT is yet to report, but preliminary results are mixed.  Canada’s education saving plan is promising, but it is experiencing low take-up.  In the UK, the Child Trust Fund and the Savings Gateway programs are reviewed. While the Children’s Trust Fund appears popular, there are some troubling potential counter-redistributive long-run implications. Savings Gateway 2 was set up as a study with control groups. Although there is a rush to judgment in the UK, the results have still not been adequately analyzed.  Finally, the paper finds that there are only about 20,000 IDAs in the US, a surprisingly low number given the attention to this type of program in the US.  The results of the one IDA controlled experiment in the US were mixed, with troubling high administrative costs amounting to about $3 for each $1 of recipient benefits.  The paper concludes that an asset-based perspective is an important way to view social programs, but no panacea.  Asset-based programs need to be carefully designed and evaluated, as any other type of social program.