In recent years, many social programs have sought to encourage out-of-work welfare recipients to seek and retain employment through the use of earnings supplements conditioned on work. Typically, such programs pay workers a financial incentive for each month of employment. Some programs condition the financial incentives on full time employment.  Others combine financial incentives with enhanced pre- and post-employment services intended to help recipients obtain and retain jobs. While there is strong evidence that such programs can increase overall employment, the crucial question of how these increases arise is not well-understood even in the context of well-designed random assignment studies.

This paper uses data from a recently-completed experimental program for out-of-work welfare recipients in Texas to examine the effects of a time-limited financial incentive coupled with post-employment services on recipients’ rates of entering and leaving employment. It presents  a rigorous analysis of employment entry and exit effects, using a fully-specified dynamic model of employment duration that accounts for non-random sorting into employment statuses through flexible specifications for duration dependence and unobserved heterogeneity.  Duration modeling is arguably an underused technique in program evaluation and can be applied to numerous outcomes ranging from drug treatment studies to studies of ex-offenders.

Our results extend the findings of the MDRC evaluation of the Texas Employment Retention and Advancement program.  Specifically, for the Corpus Christi site, short-term effects were due to both employment retention and employment entry but, over time (as the program ceased operation), the retention effects faded out but the employment entry effects persisted and grew.  For the Fort Worth site, there were smaller effects overall and less evidence of impacts that lasted much beyond the program operation period. 

The methodology utilized in this provides a unified framework that minimizes any biases due to non- random sorting into employment statuses.  In future evaluations, especially those that utilize both pre- and post- employment services as well as financial incentives, it is important to differentiate effects on employment entry from those on employment retention.  The methodology presented here may prove useful to future evaluations of such programs.