Human Well-Being and In-Work Benefits: A Randomized Controlled Trial

Abstract

Many politicians believe they can intervene in the economy to improve people's lives. But can they? In a social experiment carried out in the United Kingdom, extensive in-work support was randomly assigned among 16,000 disadvantaged people. We follow a sub-sample of 3,500 single parents for 5 ensuing years. The results reveal a remarkable, and troubling, finding. Long after eligibility had ceased, the treated individuals had substantially lower psychological well-being, worried more about money, and were increasingly prone to debt. Thus helping people apparently hurt them. We discuss a behavioral framework consistent with our findings and reflect on implications for policy.

Keywords: randomized controlled trials, government policy, in-work benefits, wage subsidies, well-being, happiness

JEL Classification: I31, D03, D60, H11, J38