Considering Debt and Young Children in Active Labour Market Programmes

This blog is based on an article in Social Policy and Society by Irene Y.H. Ng, Jian Qi Tan, Mathews Mathew, Kong Weng Ho and Yi Ting Ting. Click here to access the article.

In our new article “The Importance of Considering Debt and Young Children in Activation: A Survival Analysis of Return to Welfare”, my co-authors and I highlight two key findings that we believe are new to the activation literature. 

The first finding is that the number of types of debt, rather than the value of debt, drives people’s return to benefit receipt. The second finding is that the presence of young children, rather than the number of children, also leads to a return to social security. Together, the two findings point to expense burdens and bandwidth tax as explanations for welfare recidivism. For debt, each additional debt takes additional space in one’s brain, such that it leaves few cognitive resources to continue coping without social security. Similarly, because infant and toddler children are more expensive and dependent, they require more mental resource from caregivers, such that parents of young children find it more challenging than parents of older but a higher number of children. 

Importantly, since employment status and earnings are controlled for in our study, that debt and young children lead to welfare return is not due to unemployment or earnings shortfall. Debt accounts and young children themselves have an effect. 

The bandwidth tax explanation is supported by two of my earlier publications that have similarly found that the number of types of arrears matter more than the value of arrears. In “Economic distress and health: A fixed effects analysis of low-income persons in Singapore”, the number of debts was more significantly associated to health and mental health than debt value. In “Reducing debt improves psychological functioning and changes decision-making in the poor”, more cleared debt led to greater improvements in cognitive function and anxiety symptoms. The value of debt cleared had smaller effects on cognitive function and no effect on anxiety symptoms. 

Thus, while earlier publications demonstrate the effects of debt accounts on health, mental health, and cognitive function, thus solidifying the bandwidth tax explanation, this latest publication shows a practical effect of the bandwidth tax: welfare recidivism. It completes the picture that the cognitive and mental health effects of bandwidth tax on low-income individuals have practical, adverse consequences. 

The activation literature has paid scant attention to debt intervention, and our findings suggest that it is time to do so. In Singapore, when my colleagues and I first started focusing our research on debt, there was reservation over debt relief, because indebtedness was attributed to individual failings, not life circumstances. However, the truth is that debt held by low-income households is due more to living on financial margins, such that they often do not earn enough to meet expenses. Thus, their debt tends to be in necessities such as rent and utilities. No wonder then that the bandwidth tax of debt exerts such a mental toll.

Therefore, the overarching policy implication of our findings relate to the design of programmes to better relieve the mental tax of debt and young children on low-income welfare applicants. Readers can refer to our article for specific recommendations. Here, I would like to end by suggesting further research along two lines of enquiry: (i) evaluations of debt relief and family support programmes as part of activation, and (ii) research on the effects of debt accounts on other life outcomes, e.g. career advancement or marital relations. 


About the author

Irene H.N. Ng is Associate Professor at the National University of Singapore.

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