Are workfare programs worth the cost?

Rebecca Stropoli | Jun 30, 2021

Workfare programs, which offer temporary jobs to economically disadvantaged people, are prevalent across the world, and may appear superior to traditional welfare programs. Regular work experience can boost future employment opportunities and earnings, plus improve overall well-being. 

However, the positive long-term effects of workfare programs are limited, and it isn’t clear they’re more effective than simple cash-transfer programs, according to Chicago Booth’s Marianne Bertrand, Bruno Crépon of France’s Center for Research in Economics and Statistics, and the World Bank’s Alicia Marguerie and Patrick Premand

The researchers analyzed the effects of a World Bank–funded program implemented in Ivory Coast, Africa, following a political crisis in 2010-11. Workfare programs, they write, often target areas that have experienced recent shocks, such as violent uprisings or natural disasters. 

The program, implemented in four waves from 2012 to 2015, recruited men and women between the ages of 18 and 30. Some were unemployed, and others were self-employed or had low-paying jobs with no formal contracts. Ultimately, 12,000 participants worked on road maintenance crews six hours a day, five days a week, for six to seven months, making minimum wage. All chose to apply for the program and were selected through a lottery system. 

Bertrand, Crépon, Marguerie, and Premand analyzed the period from July 2013 to February 2014, when participants were placed into one of three road maintenance crews. Two of the groups also gave participants training in basic entrepreneurship and job searches. Surveys were conducted before, during, and 12–15 months after the program. 

During the program, the share of participants working in wage-paying jobs jumped by 48 percentage points, and weekly hours worked increased by 16. Meanwhile, the share of participants who were self-employed dropped by 10 percentage points, and self-employment hours decreased by six per week. “This highlights that youths reorganize their portfolio of activities to participate in the program,” the researchers write.

Participants also reported higher earnings and savings, positive changes in work habits and behaviors, and increased well-being during the program. 

Fifteen months after the program ended, participants overall still had higher savings than they did before the program, along with an elevated level of psychological well-being. However, the surveys registered no lasting behavioral changes, nor a better chance that someone would be employed in a stable wage-paying job. There was a small positive impact on earnings, but much less than the cost of the program.  

Having people self-select into workfare may be a problem, the researchers write. Workfare programs often involve public works and manual labor, and are premised on the notion that only the most disadvantaged will volunteer to do work that may be considered unpleasant. But in developing countries, where many people are underemployed through informal jobs that pay below the legal minimum wage, workfare programs may cast too wide a net, failing to attract only the most vulnerable (those with the fewest earning possibilities).  

Using machine-learning techniques to analyze new potential ways to target participants, the researchers calculate that the Ivory Coast program could have been 30–50 percent more cost-effective if it had accepted only women, or only participants with the lowest predicted baseline earnings. Even with this improved targeting, however, the overall impact on earnings would have still been below the program’s costs.

This doesn’t necessarily mean countries should abandon workfare programs, the researchers write. The program positively affected well-being and savings, and workfare could also potentially reduce crime, given that a 30-hour increase in work engagement for each participant leaves less time for other activities. Paying people to maintain and upgrade public roads, reservoirs, and the like could also benefit regions with poor infrastructure.

However, the researchers note, some of these gains might also be achievable through a simple cash-transfer program. The benefits would have to be quite large—probably unrealistically so—for a workfare program to be cost-effective.